"What Does Your Credit-Card Company Know About You?"

This Sunday, the New York Times Magazine is running a fascinating article by Charles Duhigg about the complex behavioral and psychological strategies credit card companies use to profile and engage their customers – and ultimately encourage them to pay their debts.

The article focuses on the credit card companies' "customer advocates" – the people on the front line talking to consumers about their debt – and how collection and counseling is often wrapped up in one conversation:

“We are the ones who let them know that there’s always a brighter tomorrow,” she told him. “That’s how we get paid back.”

Duhigg also looks at the way that customer profiling has changed in the past decade, and how credit card companies correlate consumer behavior with responsible payment behavior. 

His data indicated, for instance, that people who bought cheap, generic automotive oil were much more likely to miss a credit-card payment than someone who got the expensive, name-brand stuff. People who bought carbon-monoxide monitors for their homes or those little felt pads that stop chair legs from scratching the floor almost never missed payments. Anyone who purchased a chrome-skull car accessory or a “Mega Thruster Exhaust System” was pretty likely to miss paying his bill eventually.

As the credit card landscape changes, will we start to see different models for how credit card companies offer credit to consumers? Will the traditional measures that determine a credit score become less important than these new micro-predictors? Will consumers start to change their behavior and pay cash for their chrome-skull car accessories to avoid being profiled in this way? These are fascinating things to consider. This article is great read for anyone who has a relationship with a credit card company.