From a Q&A with a VISA fraud prevention agent on reddit:

Some years ago, someone wrote a paper claiming he could get the age, gender and race only from the credit card purchase history. It worked very well. Today, with your full purchase information, we can even “guess” your income range, number of dependants and even weight. We have a statistical profile of every customer. We can even calculate the odds you eat at McDonald’s today, considering you ate there once every X days. 98% of the time, this model is very accurate.

One drawback is that it requires a lot of information. That is why it takes a few years and then, we are fully able to track you. In many cases, we compare the profile calculated from your purchase history to who you really are (and you thought they asked your income for credit validation) to further improve our models, and track fraud, most of all. It’s so sophisticated that if you order products a person in your group never ordered, your card will get automatically locked.

As I’ve mentioned previously, “I’ve always loved reading and learning about data mining and its applications”—this is no exception.

From this Q&A I also discovered the Luhn algorithm.

Our irrationality toward money and inability to fully visualise the impact of distant events is how credit card companies thrive and many bank balances suffer.

That’s the conclusion one draws after reading this article from Time that looks at a number of studies showing that we fail miserably in making logical decisions about money when we use credit cards rather than cash.

As a species we’re just really bad at understanding costs that come later on. Instead, we assign a disproportionate amount of importance to what’s immediate and tangible. […]

Once we’ve got our card in hand, our behavior becomes riddled with irrationalities. In one experiment, Drazen Prelec and Duncan Simester of the Massachusetts Institute of Technology found that people were willing to pay twice as much for basketball tickets when they were using a credit card as opposed to paying cash. Credit-card spending just doesn’t feel like real money. In another study, Nicholas Souleles of the University of Pennsylvania and David Gross of the consultancy Compass Lexecon calculated that the typical consumer unnecessarily spends $200 a year in interest payments by keeping a sizable stash of cash in savings or checking while at the same time carrying a credit-card balance. In our heads, the two don’t line up.