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The Chase Freedom Lifestyle Index: Finding a Story Amid Data

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In terms of credit card offers, Chase Freedom is one of the most popular. This is the card that was selected by expert personal financial bloggers to win the Fourth Annual Plutus Award for Best Credit Card Offer, most likely due to its cash back program, a sign-up bonus, and the strength of the Chase brand in terms of consumer credit cards.

All those late fees and interest charges go to pay more than just the rewards for customers who use their credit card wisely by paying off the balance in full each month. They also help support Chase’s internal consumer research. Every quarter, Chase collects aggregate data related to the spending habits of the Chase Freedom cardholders.

Chase BankChase, like every credit card issuer, knows exactly where and when you spend your money. Your purchase patterns form a unique fingerprint, and whether you know it or not, your credit card issuer probably knows more about you than you know yourself. But when Chase pulls together patterns from across all credit card users, the personal information, like your name or your address, is left out. All that remains is this fingerprint, and as long as it remains combined with other fingerprints, the data analysts have no way of knowing who is attached to the data.

The purpose of this data collection is to determine trends in consumer spending. This can be valuable information for retailers who want to forecast their business performance over the coming months and years. From a consumer perspective, it can be interesting to note changes in the public’s spending behavior. An increasingly number of companies have access to this type of information. When we track our finances on software like Mint.com, or follow financial experts’ advice to use credit cards for spending rather than carrying cash, we willingly share something very personal — our spending habits — with companies that can profit from that information.

By using your credit card, you’re granting permission to various entities to use your data for their own benefit, and whether you’re fine with this concept or not, it’s good to be aware of it. All this data, coming from millions of consumers in the United States and billions of transactions each year, contributes to this new concept of “Big Data.” Big Data is the new monster, kind of like “Big Government,” that threatens to infringe on the private lives of American citizens.

Data sets are meaningless until they are interpreted, and the Chase Freedom Lifestyle Index is one approach to analyzing the consumer data collected from Chase Freedom cardholders. To engage people in sharing information, data can be boring. Stories are more interesting. Stories that come from data and its analysis resonate with people. When we say that the data indicate that there is a “continued strength of Do-It-Yourselfers who might be buying a home or remodeling their current residence,” as the latest announcement from the Chase Freedom Lifestyle Index does, homeowners can relate to it.

It doesn’t particularly matter that the analysis may be only one way of interpreting the data, and that it may be influenced by either a bias of preconception or simply a story that Chase wanted to tell and now has some numbers to back it up. The announcement goes into some detail. Spending at home improvement stores is up only four percent over the past year, but spending at craft stores increased 91 percent over the same time period. There may be more data behind the conclusion Chase is making, but with just the information presented, I’m not sure I would agree with this particular conclusion.

Why would spending at craft stores increase 91 percent? I’ve shopped in these stores, assuming craft stores include retailers like Michaels Arts & Crafts and AC Moore. Their clientele does not seem to include people looking to buy a home or remodel their residence. Craft stores cater to people working on smaller projects, the Pinterest crowd, perhaps. Artists, gardeners, elementary school teachers, yes. That’s one type of “do-it-yourself.” Tearing down drywall, installing your own kitchen cabinets, and building your own deck are all other do-it-yourself activities, but are activities that aren’t served by craft stores, and for the most part, represent a different selection of consumers.

The nearly doubled increase in craft store spending could simply be attributed to the growing popularity of smaller projects, inspired by the Pinterest culture, but also be related to an increase in prices at these stores as retailers react to the increasing demand.

Chase’s announcement contains a comment which struck me as weird: “Perhaps a sign of calm before the holiday shopping storm, consumer electronics spending continued to decline, dropping 7 percent compared to Q3 2012 and 11 percent compared to Q3 2011.” Of course, if you offer a statement with a qualifier like “perhaps,” you remove all responsibility for having to make an accurate analysis.

Here we have evidence of a lowered level of spending in the electronics category, but rather than extrapolate this pattern of decreasing spending into the holiday season, the analysis makes the assumption that either the decreasing spending is an anomaly, or that we can expect an anomaly once people start spending for the holidays. Chase already has an expectation for holiday spending, and regardless of how the electronics category has been shown to perform in the third quarter, the analysts weren’t about to let those data get in the way.

Also in the press release, Chase offers this statement: “The data suggests [sic] that consumers are recommitting to resolutions and self-improvement goals set forth earlier in the year, evidenced by year-over-year spending increases on books (+6 percent), sporting goods (+5 percent), and lessons and classes (+3 percent).” Have you recommitted to your resolutions and goals in July, August, and September? What were the goals you set for yourself earlier this year? Is this a fact or just a story, an interpretation of why spending in these categories may have increased?

J.P. Morgan Chase is not a non-profit organization working on behalf of the consumer. They have no obligation to release their data and allow others to analyze it. The company has a story to tell and will use data to tell that story at the same time they use the data to determine what strategic changes they can make to their business to better generate profit for shareholders. The two stories, one public and one internal, that come out of the same data sets, may not be identical. I’m not saying this company or any other is using data to mislead the public, just that data can be used to support almost any story you’d like to tell.

Photo: Flickr

Published or updated October 31, 2013. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 4 comments… read them below or add one }

avatar Don 4435634

Not to mention that Chase skews its own data by altering the spending patterns of Chase Freedom cardholders with their quarterly promotions. For instance, in the 3rd quarter (ending Sep 30), every gasoline purchase I made was put on the Chase Freedom card, because it offered 5% cash back. After 9/30, I went back to using my Southwest Visa (also from Chase).

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avatar Luke Landes ♦127,371 (Platinum)

That’s an interesting point. When the government conducts consumer data through surveys, data must be “seasonally adjusted” before it can be analyzed. The quarterly rotating 5% cash back categories influence the spending consumers place on the Chase Freedom card to some extent, and I wonder how that influence is factored into the methodology. Just the fact that a card might be used for only a portion of spending must result that Chase can’t assume they have complete spending data — unless the influence is seen as just a small percentage among a general cardhoding populace who are much more likely to just use the same card for everything.

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avatar DonnaFreedman ♦2,442 (Dollar)

I’m a Chase Freedom cardholder as well, and I agree with Don: You’re likely to see increased spending in certain categories if you make it profitable to the consumer to use your card in those ways.
And data can certainly be interpreted a lot of different ways. During the recession I would have assumed the 91% increase in craft store shopping as a sign that people were making rather than buying holiday gifts. Now I just assume that it’s because Pinterest has exploded.

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avatar Ceecee ♦796 (Dime)

I agree with Don and Donna. I’m more likely to use the Freedom Card for gas when that’s a bonus category…..same with drugstores or certain department stores. I don’t recall craft stores as being in the bonus category anytime recently, so that doesn’t explain that odd increase. I’m surprised at the increase at craft stores…..I thought that crafting peaked about six or eight years ago.

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