Stern Advice: Who's putting ads in your bank statement?

WASHINGTON, March 2 (Reuters) - What if you went to your online bank statement and saw a message like this: "Hello, shoe lover! Here's 15 percent off the hottest spring styles!" Would it make you happy to get the discount, or uncomfortable because somebody at your bank knew you had a weakness for strappy sandals?

Get used to it, because banks are quickly adopting new marketing techniques that target specific interests. They are using third-party technology companies to pitch specialized offers at debit and credit-card customers. The offers are based on the shopping habits of those customers.

Consumers could benefit if the deals on their favorite products become easier to access and substantial enough to be worth cashing in. But there are risks too, and they aren't necessarily on the privacy front. Savvy marketers could optimize their offers so you actually stop seeing the deals that would put the most cash back in your pocket.

Strategies are still evolving: Regions Bank recently signed up with Cardlytics, a transaction marketing company, to crunch transactions of their debit-card holders and send them offers that fit their spending patterns. Regions customers will see what's available when they sign into their online checking accounts. If they accept an offer, it will automatically link to their debit card. When they make the purchase, they will automatically get the lower price or other benefit specified in that offer.

Another company, Clovr Media, is taking that transaction even further. Consumers who opt in to their service will see ads based on their spending patterns show up in their e-mails, Web browsers and cell phones.

"We want to make it so any ad can be linkable to a consumer's chosen payment vehicle," CEO Tom Burgess said in an interview.

These new marketing techniques are taking hold for a few reasons, explains Jim Bruene, editor of Online Banking Report. Card issuers, earning less on everything from late-payment fees to interchange payments from retailers, say they can no longer afford the generous cash-back rewards their cardholders have grown accustomed to. At the same time, companies ranging from fast-food eateries to airlines are finding they can win new customers if they are able to troll transaction lists and cherry-pick the people they want to target in marketing efforts.

To be clear, in most (but not all) cases, it's not the marketing firm that is working with the consumer lists, but the bank itself.

"Your card issuer probably knows more about you than any other business or company you do business with," says Paul Stephens of the Privacy Rights Clearinghouse. "The so-called transcript of your purchases is an absolutely amazingly complete dossier on you as a person."

Companies operating in this space believe that consumers will be happy with the new deals. A survey by BillShrink, another company working with card issuers to embed ads in statements, found "94 percent of consumers would use a credit/debit card that offered them in-statement rewards and money-saving recommendations over a card that did not."

"We addressed the consumer demand for daily deals and improved upon the experience by delivering in-statement personalized savings and rewards based upon where people already shop," the company said.

A key issue for consumers is whether this kind of targeting will ultimately shut them out of the best offers. Marketing firms seeking to optimize their sales pitches might aim them only at customers who aren't already spending money with them. Hypothetically, if Burger King were to offer discounts only to customers who had used their debit cards at McDonalds.

Instead of ushering in a new golden age of deals, this could be the beginning of the end for coupon divas and others who have figured out how to maximize their rewards the old-fashioned way.

Here are some tips for keeping your own rewards maximized.

-- Opt in, or not, selectively. Don't bank with a company that automatically enrolls you in a program like this, suggests Stephen Brobeck of the Consumer Federation of America. It's crucial that consumers be given the option of not participating. As for him, "I personally would not choose to opt in," Brobeck said in a recent interview. "I try to keep my life very simple.

-- Beware differential pricing. It already exists in everything from airline seats to hospital beds to college credits. But how are you going to feel when you pay one price for a car or a new suit or a hamburger and your neighbor gets a better deal that you never got to see? As companies become more savvy about embedding targeted offers in your credit card and bank statements, you'll find it harder to stay ahead of them. One option: Use more than one credit card in your family and mix up what you use them for.

-- Who's got your data? In many of these cases, your credit card issuer is holding your valuable data, and controlling who sees which ad. But "you have to look at the privacy policy of the financial institution that issued your card," says Paul Stephens of the Privacy Rights Clearinghouse.

-- Don't be reward driven. Consumers shouldn't peg their shopping behavior to any unsolicited offers, regardless of how they arrive. "Do not respond to marketing," he said. "Wait until you've decided that it is time to buy something, and then go out and do objective research." (The Personal Finance column appears weekly. Linda Stern can be reached at linda.stern(at)thomsonreuters.com) (Editing by Gunna Dickson)