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Can your lifestyle hurt your credit? © Neil Beckerman/Getty Images

The Basics

Can your lifestyle hurt your credit?

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Mining for data

Known in the industry by a number of terms, including behavioral modeling, data mining and psychographic behavior analysis, the practice of mining internal credit card issuer databases for customer spending trends and other patterns is not new. Issuers have been analyzing data perhaps since the first credit cards were issued.

Representatives from the four top credit card issuers -- Bank of America, Citi, Chase and Wells Fargo -- declined to discuss details of how they use purchasing data internally. Many consider this highly proprietary information. A spokeswoman from a banking industry trade group acknowledged the practice is common.

"The issuing bank has the date of transaction, name of the merchant and the amount of the transaction that allows them to process that transaction," says Nessa Feddis, a senior counsel and vice president of the American Bankers Association. She says specific information about items purchased (that you bought a gallon of milk, for example) is not included in the data transferred from the merchant.

"As a general rule, the specific transaction information is not transmitted to the issuing bank," Feddis says. "They are going to know where the person used the card."

Keeping track

Tracking is conducted for four primary reasons:

  • Marketing. Issuers use past purchasing patterns as a basis for offering additional products. Someone purchasing airline tickets with a credit card may get offers of airline rewards credit cards or travel-related services from the issuer or an affiliate.

  • Fraud detection. Credit card companies monitor spending to detect unusual purchasing habits that could be red flags for fraud.

  • Risk management. Card users who continually go over their credit limits or exhibit unusual spending habits -- such as charging large amounts of merchandise on a card they had previously rarely used -- may be at greater risk of not paying their bills or filing for bankruptcy.

  • Law enforcement. Remember that TV crime show where police tracked a missing person or a killer using credit card transaction data? Law enforcement agencies can subpoena records from both the credit card issuer and the merchant to find out the time, date and place of a credit card purchase -- information that may be helpful in determining the last known location of a crime victim or suspect. The Department of Homeland Security also tracks terrorist activity by monitoring certain purchases.

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Massive databases of information

Millions of credit card users receive monthly statements detailing their spending during the billing cycles: The standard information provided includes the date of a purchase, the place of the purchase, including the name of the merchant, city, state, amount of the purchase and a transaction reference number.

Every transaction processed by the card networks (Visa and MasterCard) is assigned a merchant category code, a four-digit number that denotes the type of business providing a service or selling merchandise. The merchant category code for pawnshops, for example, is 5933. For dating and escort services, it's 7273, and for massage parlors, it's 7297.

The merchant category code is used, for example, to restrict health care spending on health-related credit and debit cards. Some health care flexible spending accounts allow users to make purchases only at pharmacies or merchants with medical-related services. Small business owners also use the codes to prevent employee abuse of company credit cards.

The merchant category codes, along with the names of the merchants, give credit card issuers a spyglass into cardholder spending.

A sampling of merchant category codes
CodeMerchant categoryCodeMerchant category


Bail and bond payments


Dating and escort services


Wholesale clubs (Costco, Sam's Club, etc.)


Counseling services (debt, marriage, personal)


Grocery supermarkets


Massage parlors


Automotive stores


Detective agencies


Wig and toupee stores


Tire retreading and tire repair


Drinking places (bars, nightclubs)


Gambling establishments


Fast-food restaurants




Drugstores and pharmacies




Beer, wine and liquor stores


Medical services


Secondhand stores


Child care services




Political organizations


Stores selling jewelry, watches, clocks and silverware


Court costs (child support, alimony payments)


Shoe repair shops

Find a complete list at

Continued: 'A pretty clear picture'

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