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Big Brother watching debit cards?

By Claes Bell · Bankrate.com
Wednesday, September 5, 2012
Posted: 5 pm ET

Whenever I write about the gradual obsolescence of cash, I always get a lot of reader comments about how they don't use debit cards and other cashless forms of payment because it allows the government to track their purchases.

Is Big Brother watching your debit cards? Maybe in Argentina. (Photo by Albert Bridge)

Is Big Brother watching your debit cards? Maybe in Argentina. (Photo by Albert Bridge)

I personally don't think the government cares that I bought a pack of diapers and two mangos at Publix last night, and I still think it's a little silly to get worked up about leaving a paper trail behind as we go through the litany of mundane purchases that make up most of our checking account statements.

But I could be wrong! Turns out, Argentina is now tracking the debit card purchases of its citizens for tax purposes. From Michael Warren of The Associated Press:

Legally trading pesos for dollars or euros has become ever more difficult as President Cristina Fernandez tries to keep dollars inside the country and bolster the Argentine peso's sliding value. And new rules taking effect this week are squeezing them still further by going after credit card spending.

Until now, travel has offered a limited exception to the currency controls first imposed last November: People up to date on their taxes and poised to cross a border, tickets in hand, can get permission to buy no more than $100 per person for each day abroad. The process is bureaucratic and intrusive, and many say their requests are rejected for reasons they don't understand.

Credit and debit cards provided a legal way out, enabling people to make purchases and get money while abroad. But now the government is cracking down there as well.

The new measures make using plastic inside or outside the country less affordable by charging 15 percent in taxes on all foreign purchases that appear on credit or debit card bills, plus a 50 percent customs duty on any goods from abroad that might be brought back to Argentina. Internet purchases on sites such as Amazon, eBay and the Apple Store are included, along with anything bought using online services such as PayPal.

Now, I doubt that we'll see the same thing in the U.S. anytime soon. Folks from whichever party not currently in power would freak out and denounce it as a massive power grab, invoking Orwell's "1984," Nazi Germany, etc., and lobbyists from payment firms like Visa would fight it tooth and nail.

But I do think we need to take a look at the privacy of people's financial transaction information, and who can or can't have access to it. Even in the absence of a vast government conspiracy to find out when you went to Chili's last week, corporations do track your purchases and use them to market specific products to you. And they offer the data to others for advertising purchases.

For instance, Charles Duhigg of The New York Times reported earlier this year that Target is so good at tracking customer purchases that it can accurately predict when a woman is pregnant and send out appropriate coupons. From the story:

For decades, Target has collected vast amounts of data on every person who regularly walks into one of its stores. Whenever possible, Target assigns each shopper a unique code -- known internally as the guest ID number -- that keeps tabs on everything they buy. "If you use a credit card or a coupon, or fill out a survey, or mail in a refund, or call the customer help line, or open an email we've sent you or visit our website, we'll record it and link it to your guest ID," (Andrew) Pole said. "We want to know everything we can."

Also linked to your guest ID is demographic information such as your age, whether you are married and have kids, which part of town you live in, how long it takes you to drive to the store, your estimated salary, whether you've moved recently, what credit cards you carry in your wallet and what websites you visit. Target can buy data about your ethnicity, job history, the magazines you read, if you've ever declared bankruptcy or got divorced, the year you bought (or lost) your house, where you went to college, what kinds of topics you talk about online, whether you prefer certain brands of coffee, paper towels, cereal or applesauce, your political leanings, reading habits, charitable giving and the number of cars you own.

(In a statement, Target declined to identify what demographic information it collects or purchases.) All that information is meaningless, however, without someone to analyze and make sense of it. That's where Andrew Pole and the dozens of other members of Target's Guest Marketing Analytics department come in.

Almost every major retailer, from grocery chains to investment banks to the U.S. Postal Service, has a "predictive analytics" department devoted to understanding not just consumers' shopping habits but also their personal habits, so as to more efficiently market to them. "But Target has always been one of the smartest at this," says Eric Siegel, a consultant and the chairman of a conference called Predictive Analytics World. "We're living through a golden age of behavioral research. It's amazing how much we can figure out about how people think now."

I don't know about you, but the practice strikes me as creepy, and I can easily imagine scenarios where purchase information could be used to hurt someone's career or finances. As more and more of our purchases are conducted with debit cards that carry personally identifiable information, I think we'll eventually need to decide if and when retailers and other businesses can track us based on our payment information, and what they're allowed to do with it.

What do you think? Is tracking consumers' purchases via their debit card OK for governments and corporations? Where should we draw the line?

Follow me on Twitter: @ClaesBell.

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2 Comments
Slolem
September 06, 2012 at 4:43 pm

yeah.. what a total joke. I'm sick of every government tracking everything we do. There will be a revolution and it's coming.

Ray
September 06, 2012 at 10:46 am

If you need privacy, forget about points, use cash. Think about what happened to the former governor of NY. What might not have happened had he used cash?