Friday, January 30, 2009
Credit cards "shopper profiling"
Credit card companies are always finding new ways to charge you more money. But according to this report from Good Morning America yesterday, they've found a really, really nasty way of late.
They're profiling you by watching where you shop. The story goes like this: you have great credit and a high credit limit. They can't touch you and under normal circumstances don't have a reason to mess with your interest rate. But what if they could find a way to tie you to other people who don't have good credit, sort of consumer guilt-by-association?
Credit card companies have found that way: they're looking at where you shop, and if you use their cards at the same places as people who don't pay on time that becomes justification to cut your credit limit. If you know anything about credit you know that a big piece of your FICO score is the percentage of your available credit that's already in use. If you've got a $2,500 balance on a $10,000-limit card and the company cuts your limit to $5,000 because you shopped at the same store as Jane Deadbeat, all of a sudden that ratio jumps from you using 25% of your available credit to 50%. Your credit score falls and poof: higher interest rates.
What can you do about it? Not likely much at this point: the practice is shady as all hell but still legal, just like insurance companies using your credit rating to push your rates up. You could switch to another card, but closing accounts also hurts your score and who's to say the new card isn't doing the same thing? My best suggestion: call up your card issuer and see if they're engaging in the practice. If anyone gets good answers, let me know and I'll post them here.