Does it seem like your credit cards are dangling coupons to your favorite shopping spots? It's no coincidence.
Faced with regulations that are shaving fee revenue, credit card companies are teaming up with retailers to make the most of your shopping vices, according to a report from Aite Group.
Credit card issuers are selling your purchase proclivities -- where you shop and how much you spend -- to retailers, which turn around and offer you eerily appropriate discounts through the issuer via text, email, mobile apps or online bank statements. If you cash in the bargain, the retailer kicks back a piece of the pie to the credit card issuer.
"It's the Amazon model," explains Aite senior analyst Madeline K. Aufseeser. "If you bought one book, Amazon recommends other books you might like based on that first purchase."
So who's participating in merchant-funded incentives? Some of the country's major credit card issuers, such as Wells Fargo, Citi, USAA, Sovereign Bank and Discover, according to a CNNMoney.com report Wednesday.
This new income-producing strategy is expected to explode over the next four years, displacing some rewards programs, which are more expensive to run and replacing revenue streams lost to new regulations, says Aufseeser.
The report forecasts card issuers will pocket $1.7 billion from these retailer incentives by 2015, up from a mere $100 million last year. During the same period, the group expects the number of credit, debit and prepaid cardholders offered these targeted discounts to grow more than ninefold to 467 million from 51 million.
"The retailer ends up with more and larger purchase volumes," Aufseeser says. "For the issuer, it engenders loyalty with customers, who either will stay with the card longer or spend more money."
But what about for the consumer?
The privacy-prone likely will wince at this targeted discounting. Fortunately, you can opt out of these programs. (Banks are required to offer this option.)
The CNNMoney.com report also noted that sensitive information such as names, Social Security numbers and account numbers are not passed on to the retailer. They stick with your issuer and any middleman who arranges the agreements with the retailer. Your individual shopping history is confidential too; you're just lumped into a category of people who spend more than $100 a month at Barnes & Noble, for example.
For everyone else, shop around before grabbing at the discount, recommends Ed Mierzwinski, consumer program director at watchdog group U.S. Public Interest Research Groups. Retailers may raise prices to offset the commission to credit card companies, so you might find a better deal at a different store, sans special coupon.
"Your bank knows a lot about you and is using data mining to predict the price you'll pay for the products that it thinks you want," Mierzwinski says. "Ask yourself: Do you want it, or are you just responding to a 10 percent discount offer?"
Tell me what you think. Do you want your purchase data sold in exchange for discounts?
Follow me on Twitter: @JannaHerron.