Avoid the chrome-skull car accessory

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[Credit card] companies began running tens of thousands of experiments each year, testing the emotions elicited by various card colors and the appeal of different envelope sizes, for instance, or whether new immigrants were more responsible than cardholders born in this country. By understanding customers’ psyches, the companies hoped, they could tell who was a bad risk and either deny their application or, for those who were already cardholders, start shrinking their available credit and increasing minimum payments to squeeze out as much cash as possible before they defaulted.

The exploration into cardholders’ minds hit a breakthrough in 2002, when J. P. Martin, a math-loving executive at Canadian Tire, decided to analyze almost every piece of information his company had collected from credit-card transactions the previous year. Canadian Tire’s stores sold electronics, sporting equipment, kitchen supplies and automotive goods and issued a credit card that could be used almost anywhere. Martin could often see precisely what cardholders were purchasing, and he discovered that the brands we buy are the windows into our souls — or at least into our willingness to make good on our debts. His data indicated, for instance, that people who bought cheap, generic automotive oil were much more likely to miss a credit-card payment than someone who got the expensive, name-brand stuff. People who bought carbon-monoxide monitors for their homes or those little felt pads that stop chair legs from scratching the floor almost never missed payments. Anyone who purchased a chrome-skull car accessoryor a “Mega Thruster Exhaust System” was pretty likely to miss paying his bill eventually.

Martin’s measurements were so precise that he could tell you the “riskiest” drinking establishment in Canada — Sharx Pool Bar in Montreal, where 47 percent of the patrons who used their Canadian Tire card missed four payments over 12 months. He could also tell you the “safest” products — premium birdseed and a device called a “snow roof rake” that homeowners use to remove high-up snowdrifts so they don’t fall on pedestrians.

Testing indicated that Martin’s predictions, when paired with other commonly used data like cardholders’ credit histories and incomes, were often much more precise than what the industry traditionally used to forecast cardholder riskiness. By the time he publicized his findings, a small industry of math fanatics — many of them former credit-card executives — had started consulting for the major banks that issued cards, and they began using Martin’s findings and other research to build psychological profiles. Why did birdseed and snow-rake buyers pay off their debts? The answer, research indicated, was that those consumers felt a sense of responsibility toward the world, manifested in their spending on birds they didn’t own and pedestrians they might not know. Why were felt-pad buyers so upstanding? Because they wanted to protect their belongings, be they hardwood floors or credit scores. Why did chrome-skull owners skip out on their debts? “The person who buys a skull for their car, they are like people who go to a bar named Sharx,” Martin told me. “Would you give them a loan?”