Banks have to track transactions for security, but they can also sell your purchase history
Financial institutions naturally collect a lot of information about you. When you open an account and become a customer at a bank, the institution will probably know your personal information, like your name, birthday, and address — and they also know where you shop.
There are consumer protections in place and ways to opt out of some tracking activity, but some transaction monitoring is unavoidable.
Why do banks track transaction history?
There are two main reasons why financial institutions perform transaction monitoring.
1. Fraud protection and spotting illegal activity
Tracking transactions is a large part of fraud prevention and protection, and it’s actually a regulatory requirement.
Banks must continuously analyze customer transactions to detect unusual or suspicious activity and monitor accounts for signs of illicit behavior, such as money laundering. There are various laws around this, such as the Bank Secrecy Act, often called an “anti-money laundering” law.
This tracking is also helpful for everyday people. Knowing where you normally spend, where you live and your average transaction amounts are all used to watch out for odd transactions and prevent fraud.
For example, if you were suddenly to drain your entire account balance in one transaction, the bank would most likely consider that suspicious if you normally keep a healthy balance. In response, the bank will probably contact you, ask if you’re the one who made the transaction, and if it wasn’t, start a fraud investigation.
2. Sell your spending history to third parties
This reason is less … preventive.
Similar to how websites use cookies to track your browsing history and create targeted advertisements, your bank history and spending habits can be sold to third parties for marketing purposes. And legally, banks can do this, as long as they aren’t selling your account numbers or “non-public” information.
One big player in this industry is Cardlytics, a company that primarily offers card-linked loyalty programs for many banks, including Bank of America.
Right on the homepage of the company’s site, it says, “Cardlytics commerce media platform transforms purchase intelligence into measurable sales through the largest card-linked offer network,” which is a convoluted way of saying it uses spending history to tailor offers to consumers.
Chase Bank does this, too. It has its own media business for it, named Chase Media Solutions, which launched last year. In the press release, the launch announcement says that this company allows brands to connect with “consumers’ personal passions and interests,” and in turn, consumers get personalized offers. In a nutshell, Chase sells its customers’ transaction data to brands for highly targeted advertising.
Can I opt out of a bank selling my transaction history?
In most cases, yes, banks let you opt out of some transactions and information sharing, but not all of it.
Some transaction tracking is required for anti-money laundering laws and fraud protections, but sharing your personal data for marketing or affiliate purposes can often be opted out of.
The Gramm-Leach-Bliley Act of 1999 prohibits a financial institution from disclosing a consumer’s non-public personal information, like your Social Security number, to third parties that aren’t related to the institution itself. That same act also requires financial institutions to disclose their information-sharing practices and to protect sensitive data.
Thanks to these protections, when you open a deposit account or get a loan at a financial institution, it must send you a privacy notice.
Each privacy notice is going to be different, so read them carefully to find what you can opt out of and how to opt out of it.
For example, one of my accounts is with Chase Bank. The screenshot I included is from my Chase app, where you can see how I limited information sharing and what Chase lets you opt out of.
Bottom line
Banks track your spending habits and balances for security reasons, but they might also be selling where you shop to affiliates to make some extra cash on the side. Luckily, banks have to let you know if they’ll share your information with others. Reading the bank’s privacy policy will let you know what they’re sharing and how to opt out of it.
