@Open123 wrote:
@CreditScholar wrote:Do you know to what extent the nature of your charges (i.e. specific merchants) determines how they profile you?
I know there were issues before about Amex analyzing the types of purchases you made fairly heavily, perhaps more heavily than any other lender, but I'm not sure if they've since continued the practice to the same extent.
I’m not sure if or to what extent the practice continues, but there had been ample data points from the past where we may infer that Amex considered purchases in certain stores and/or in certain zip codes to have a higher correlation of default risk. These could range from charges for an Attorney, bail bondsman, to suddenly switching charges from Wholes Foods to Target. I recall on one of their conference calls, they had mentioned taking a “surgical” approach to reduce the overall risk of their credit portfolio with advanced data analytics. While we don’t have specifics, there were highly publicized incidents where certain card members “claimed” to have experienced AA while shopping in Wal-Mart’s in geographical regions associated with lower incomes and falling housing prices.
Conversely, their risk models had viewed favorably purchases in, say, Post Offices, high performance tires, and premium pet food. According to the correlative risk models, those who sent mail in a Post Office, purchased expensive tires for their cars, and paid for higher quality pet food all had one thing in common—lower default rates. While I don’t have a copy, I did see literally virtually every purchase imaginable compartmentalized into either a low risk, neutral, or high-risk category.
Also, there was a modeling on “first” purchase. Some CC companies (Amex may have been one) used as a data point a card member’s very first purchase for potential future CLIs. There were certain “first” purchases that had a much lower correlation associated with defaults, such as Starbucks. Cash withdrawals and casinos obviously would have the highest correlation.
I’m not sure if Amex or any other Lender still use such models, but it wouldn’t surprise me if they did, especially in this era of big data. For Issuers we find valuable (Amex & Chase, in my case), it’s a prudent and easy enough to hedge and avoid charges that “may” be correlated with a higher default risk.
Oh, and by the way, even to this day, my first charge on every new or replacement CC has always been a cup of coffee at Starbucks!
PS - Not sure I may have placed it, but if I can somehow manage to unearth it, I can forward you a list of purchases/establishments statisticians felt showed a "statistically meaningful" correlation to default risk characteristics.
+1
If anybody is truly interested, you can use google to find plenty of articles from trustworthy news sources from when the news first 'broke' a few years ago (most are dated around 2008). Amex got some bad PR, and supposedly they eventually dialed-down the practice a bit.
Here's one link from NBC:
The thing to remember is that Amex got bad PR because they were actually open about using where card holders shopped in taking adverse action (they would actually 'admit' to it in the AA letter). It's likely other companies have been or already are doing the exact same thing, but are simply smart enough to not openly admit to it.
This being said, I want my cards to work for me, not the other way around. If I shop at Saks one day and Dollar General the next, is that my card issuer's business? Technically, yes, if they are extending me credit and I'm using their product, it is their 'business'. They are certainly allowed to establish their own parameters for judging the credit worthiness of their 'members', but I'm not going to allow this to impact my purchase habits. For me, having the freedom to use whatever card I want means more than possibly missing out on a hypothetical CLI that I really don't need, but of course we all have our priorities.
The way I see it is, I'm going to use my cards where I shop, with little consideration on how they "feel" about it. I really, really like getting 6% back on my groceries, but if they don't give me a CLI because they think folks who shop at Kroger are 'higher risk', well, as silly as that is, that's OK. That's their prerogative, just as it's my prerogative to find another card issuer as well if their product ceases to work for me.
I really like my Amex cards, and I enjoy the relationship, but "I gotta be me", and if that's ever not OK with them, I'll have to move on.
So far, it hasn't been a problem for me, and apparently hasn't been a problem for them, either. 
@Anonymous wrote:
I have the Delta card because I travel on Delta and its international mile share partners. I get offers from AMEX for their other products quite frequently but don't want any. AMEX is not a lender I want a relationship with, unless I have to. I hope Delta dumps them soon just like Costco did.
I wish amex would dump Delta bc they're a worthless partner. 
skypesos
never would i ever use MRs on a delta flight