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Banks are selling your shopping history

Banks have another idea to make money, and strangely enough, this new tactic might even save you a few bucks.

By Stacy Johnson Aug 19, 2011 12:09PM

This post comes from Brandon Ballenger at partner site Money Talks News.


By now, you're probably familiar with local discount-of-the-day sites like LivingSocial, Groupon, and their many imitators. You may even subscribe to a few and get regular deals sent to your inbox and phone.


Guess what? Banks are ready to get in on the action and offer you some bargains too. But here's the interesting part: They don't need to target you by vague geography. By virtue of your credit and debit card purchases, they have insider info -- like where you shop, how much you spend, and how often.


Learn more from Money Talks News founder Stacy Johnson in the 90-second video below, then read on for more details. 

Banks aren't exactly selling your personal shopping details. But through third parties, they're starting to partner with retailers to offer you deals based on your purchase history. For example, if you regularly pay with plastic at Walgreens, your bank might partner with Rite Aid and include a 20%-off Rite Aid coupon with your online credit card statement. You get a discount for trying a new drugstore, and the bank gets a commission from Rite Aid for every coupon that gets used.


It's a potentially lucrative business: By 2015, banks could be raking in up to $1.7 billion a year by helping merchants target shoppers, according to Boston-based research firm Aite Group. They also believe this kind of "merchant-funded incentive" could replace traditional debit and credit card rewards programs.


But right now this tactic is still in its infancy -- Wells Fargo, Citibank, and Discover have already launched programs, and others will follow this fall, according to CNN -- there are bound to be unanswered questions.


For instance, what if consumers make a purchase assuming they will get a discount or credit but it doesn't show up on their credit card statement? With whom do they take it up: the store, the bank, or the third-party company that acts as the middleman? How do people concerned about their privacy opt out? (You are opted in by default.)


If banks do uncover a new revenue stream by using your personal shopping information to offer customized deals, it could be win/win. With a new source of income, banks might feel less pressure to raise fees for services like checking accounts. And you save money with discounts and other offers.


But forgive us if we're a little skeptical. Given how banks handled the swipe fee issue by raising consumer fees months before the new rules even went into effect, we take any new sources of bank revenue and consumer "benefit" with a rather large grain of salt.


If you've been thinking of shopping for a new bank, here's a quick primer:

  • Look locally, not nationally. Big banks have more overhead, more investors, and more levels of management that separate them from the average consumer. Smaller local banks may offer better deals, especially as they try to lure away megabank customers and establish themselves.
  • Check out credit unions. Even better, turn to a nonprofit, community-based financial service. They generally have better savings and loan rates and charge lower fees. You may be eligible to join a local credit union through your job or based on the community where you live. Look them up at the Credit Union National Association and compare fees.
  • Break the news to your bank. Let your bank know you're ready to walk out on them over crazy fees. Until you leave, you have some leverage and might work something out. Big banks are never going to care more about you than when you're about to leave.
  • Get a switch kit. If you do switch, your new bank or credit union probably has a package of paperwork you'll need to transfer your direct deposit and tell your debtors that your money has moved. At a credit union, they may even offer to do this paperwork for you. For free.

More on Money Talks News and MSN Money:

Aug 19, 2011 1:52PM
But, but, but, it's not their information to sell! Jeesh, if your bank account is not private information, what is? America, are you being stalked?
Aug 19, 2011 3:03PM
If they are selling this to retailers then that brings to question,   are they going to start selling it insurance companies so that the companies can charge more if you buy say beer or cigarettes, or .........?  also, what about drug companies. If you buy heart meds, diabetis meds, or some other required medication, will you be charged more for insurance?  Oh,  big brother is definately watching you... he is!
Aug 19, 2011 3:26PM

Its why I started paying CASH for (almost) everything - none of their friggen business what I buy, at what cost, from where or how often.


Orwell must be smiling (or frowning I suppose).

Aug 19, 2011 6:36PM
420now doens't know what he/she is talking about.  I dumped banks a few years back for credit unions and will never go back.  Better rates, lower fees and staff that actually works for you.
Aug 19, 2011 5:11PM
420 must be a paid bank troll. I also can take out as much as I want, when I want. I have been with the same Credit Union for 28 years now.
Aug 19, 2011 3:54PM
@ lazy k.  They've been selling our names to insurance companies for years; in some instances, they own the insurance company and just hand your info over.
Aug 19, 2011 3:27PM
@ 420: I have to disagree.  My credit union will let me take up to $1000 at a time out of the ATM and if I need more I can go in and get as much cash as I like.  The only time I've had a hold placed on a check is when it was an out of state check.  And it was a couple days.  Didn't hurt me because it wasn't the only money I had in the account. 
It costs $5 to open a savings account, checking is free, there is a one time fee of $35 for bounced checks, returned checks, or NSF AND the first one is always free.  There are no monthly services fees.  NO fees to use any other ATM (the ATM owners may charge but the credit union does not).  As long as you have had the minimum balance in your account at some point in the last 30 days, there are no fees for being under the minimum.  And if you haven't, the fee is $2/month.
Aug 19, 2011 2:51PM
ANd credit unions are no better you cannot take out more then $500.00 per day cash. ANd if you want more then that you will be given a money order for the rest of the cash, then get charged $5 or 10 for the money order.   What about the holds I deposited over $3600.00 on Monday and they put a hold on my funds till thursday, even thoough I had 15K already in that account.   CLOSED my account and went back to a regular bank. ANd COMMUNITY banks are the best!
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