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A recent article from CNN reveals yet another way banks and credit card issuers make money: by selling information about your shopping habits.
Although this may seem a little like a breach of your privacy at first, the banks have taken measures to protect their customers’ privacy.
And they might not be the only ones who benefit from the sale. Some of these programs will save you money, too.
What Banks Are Doing
A couple of banks and credit card companies such as Wells Fargo and Discover have started allowing retailers to send their customers targeted ads. This may be in the form of a text message, an ad on your bank statement, or a coupon sent to your email.
When customers see the ad and decide to make a purchase, banks get a cut—usually around 3 or 4%. An even larger cut goes to an intermediary who helps set up the deal.
So far in 2011, banks have made millions of dollars by selling details about customers’ shopping habits. CNN quotes a projection by Aite Group that puts the 2015 figure at 1.7 billion. Whatever the figure does end up becoming, it’s clear that this system is growing in popularity.
According to the companies, no personally identifying information is disclosed.
Banks give intermediary companies customers’ purchase information attached to a code. Retailers that wish to target banking customers tell the intermediary the type of customer they’re looking for, and the intermediary finds customers that meet the criteria and gives the bank the corresponding codes.
The bank then looks up which customers each code corresponds to, and send them the targeted ad or coupon.
Although your information is protected, some banking customers still may not like the idea. If you are one of those people, you have the option to opt out of the program, and you won’t receive any targeted ads.
Most customers have chosen not to opt out, however; either because they like it, or because they don’t realize they can.
Can the Sale of Your Personal Information Be a Good Thing?
With all of the limitations on fees (thank you CFPB!), banks have started looking for new sources of revenue.
When banks lose money, that usually means they pass it on to the customer. Interest rates go up, and they find ways to tack on new fees. Free checking accounts, once everywhere, are getting harder to find, with many banks requiring minimum balances of hundreds or even thousands of dollars.
If banks find another way to make money, they don’t have to get so much from the customer anymore. That means your rates don’t go up, or at least not by as much. It also means fewer hidden fees.
Besides that, some of the programs aren’t just ads.
While seeing an advertisement while you’re trying to pay your bills online may be annoying, getting a free coupon to your favorite store isn’t. Discover’s program is likely to be well received, too: it offers cashback rewards to participants.
If these programs can save us a little bit of money while keeping our information out of the hands of shady companies, I’m all for them. If you have the willpower to say no when you get a coupon for something you don’t need, you can benefit from targeted advertising, too.