What Do Credit Card Offers Say About You?

An MIT study finds companies target offers based on your financial identity.

What do your credit card offers say?

It’s no secret that these days companies target advertising to who you are and how you shop. For instance, if you visit a certain store’s website, then ads on other sites appear for that store. What isn’t well known is that even credit card companies target mail offers to who you are as a consumer and a borrower. In other words, your financial profile largely determines what kinds of offers you receive.

A study by 2 MIT professors examined more than a million credit card offers received by consumers from 1999 to 2011. They then analyzed the marketing materials included in the offers and compared them to the financial standing of the people who received them. The results show targeted advertising that go way beyond basic blanket offers that you might assume get made.

  • If you’re financially stable with a history of making sound financial choices:
    • You receive credit card offers that highlight reward programs
    • They also feature aspirational images like tropical islands and high-end vacation destinations
    • Offers also have more upfront fees and interest rates, but fees were generally lower
  • If you’re not as financially stable and your finances have been a bit shaky:
    • Your credit card offers focus on low interest rates
    • The offers also feature complex rewards programs, which many times equated to higher fees and rates overall

“It makes sense to target credit card offers to a person’s financial profile because it’s just better business. It’s also better for the customer because they’re seeing cards that suit their needs,” says Gary Herman, President of Consolidated Credit. “However, if some companies are targeting less financially savvy customers with confusing offers, that’s a different story. If you receive an offer that’s overly complex, then the rewards may not be as rewarding as they appear. And that company may not have your best interest at heart.”

Targeted offers still don’t indicate a need for the card

Herman reminds credit card users that most offers are better left ignored, even if they happen to be targeted to your financial lifestyle.

“You should never open a credit card account unless you have a clearly defined need for that card,” he explains. “Reward programs are great if they’re structured around a specific purpose in your budget, but if you’re making up reasons to earn rewards, you’re not making the best decisions when it comes to credit.”

In other words, a new gas credit card may be all well and good, but if you already have a system in place in your budget to cover fuel costs without it then even the best reward program may not be good for your bottom line. Many reward programs foster what’s known as “purchase acceleration” where you spend money on credit just to earn the next reward.

“Rewards should only be earned on purchases you were already intending to make,” Herman affirms, “and purchases should only be put on credit when you have a defined plan to pay off the debt quickly. Otherwise those rewards are quickly offset by interest charges.”

For more information on how to use credit cards strategically, visit Consolidated Credit’s Credit Cards 201 Guide. It can show you how to balance rewards against interest charges and help you understand how many cards you really need at any given time.

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