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<ul class="summary-list"><li>If you've gotten really into credit card rewards in recent years, you're not alone.</li><li>Some Americans go to great lengths to maximize points, sign-up bonuses, and cashback.</li></ul>Aaryan Desai picked up a hobby during quarantine: <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/credit-cards/best-credit-cards">researching</a> <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/credit-cards/transferable-credit-card-points-best-rewards-to-earn">credit card</a> <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/credit-cards/ways-to-use-credit-card-points-beyond-travel">rewards</a>.The 20-year-old swipes as much as he can. Right now he's <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/credit-cards/how-to-book-free-travel-cheap-deals-credit-card-rewards">banking points</a> for a concert in October and a big trip after he graduates from Georgia Tech.Desai is part of a new generation of credit card users: young, perks-focused, and ready to maximize. Today's credit cards, he said, are like the coupon books of yore. The perks might not always be the right fit, but, if you figure out a good configuration, you can find some big savings.For Desai and other <a target="_blank" class="" href="https://www.businessinsider.com/credit-card-rewards-points-friends-fights-brunch-money-payment-venmo-2024-7">rewards hounds</a>, the realization that they can perform a sort of points arbitrage was a real hook."Just using the money that I would be using otherwise or just getting together with friends and that, 'hey, I can just put it on my card and you can Venmo me later,' opening the door to getting 80,000 points from Chase or 175,000 from American Express — it was a new opportunity," he said, adding: "That's what got me into it."If it seems like the whole country suddenly has credit card point mania, you would be correct: An <a target="_blank" href="https://www.ipsos.com/en-us/majority-americans-value-their-credit-card-rewards">Ipsos poll</a> of 1,081 adults conducted from April 31 to May 1 found that 71% of respondents have a rewards or cashback credit card, and 68% said that they prefer using their credit card because of the rewards and points that they can earn.The poll found that a fifth of Americans ages 18 to 34 use their rewards to pay for things they wouldn't be able to afford otherwise. Younger Americans are flocking to previously fancy cards like <a target="_blank" href="https://www.businessinsider.com/american-express-platinum-card-gold-gen-z-millennial-rewards-2024-6">American Express</a>, willing to shell out hefty annual fees in exchange for perks like <a target="_blank" href="https://www.coachella.com/amex">exclusive access to Coachella tickets</a>.The rewards are a big reason <a target="_blank" class="" href="https://www.businessinsider.com/credit-card-rewards-points-friends-fights-brunch-money-payment-venmo-2024-7">credit cards</a> have become a cultural juggernaut among young Americans. As costs rise and <a target="_blank" class="" href="https://www.businessinsider.com/millennial-subsidy-uber-airbnb-prices-surge-pricing-dynamic-2024-8">the millennial subsidy fades</a>, credit card rewards help a new generation live lifestyles they may not otherwise be able to afford: first-class flights, hotel rooms, and VIP concert experiences. It doesn't hurt that social media is full of videos and blogs that offer the tantalizing promise of free trips, luxury lounges, and fancy restaurants — if you can cobble together the right puzzle of points and cards without digging yourself into too much debt.<h2 id="124d8b83-ad11-40eb-84a1-249d4ffa65bd">Living the high life on credit card perks</h2>At first, 29-year-old Willem Van Eck thought the rewards game was a snake oil salesman's gambit. Cut to: He's stretched out in a first-class seat, a glass of bubbly in hand."Wow," he thought, "this actually is a scheme that you can leverage with the right flexibility and with the right research," Van Eck, a software engineer in the Bay Area, said.Credit card rewards work as an incentive to get customers to swipe more. They can come in the form of cashback — which means you get a partial refund for a given purchase in the form of a credit on your bill or a transfer to another account. Or they come as points, which are more nebulous but can typically be used as currency for future purchases. And then there are other perks like hotel credits, airline miles, gift cards, and upgrades like Van Eck's.For instance, the Platinum Card from American Express — often considered one of the <a target="_blank" href="https://www.businessinsider.com/personal-finance/credit-cards/chase-sapphire-reserve-vs-amex-platinum-card#fees">top cards for rewards</a> — will cost you $695 in annual fees. In return, you'll get five points for every dollar spent on flights and a point for every other dollar spent. On average, <a target="_blank" href="https://www.businessinsider.com/personal-finance/credit-cards/what-are-points-miles-worth-value#amex-membership-rewards">per BI's calculations</a>, an Amex point is worth 1.8 cents. Say you spend $5,000, $2,500 of which went toward flights; you'd net 15,000 points, which could equal around $270 — a significant chunk of the annual fee.In addition, many cards will also offer substantial sign-up rewards. The Platinum Card offers 80,000 points for spending $8,000 in the first six months of holding the card. Those 80,000 points alone could be worth twice as much as the annual fee.Taking advantage of this system requires diligence and restraint to avoid paying more in interest and fees than you gain in rewards. According to <a target="_blank" href="https://www.federalreserve.gov/econres/feds/files/2023007pap.pdf">a paper</a> looking at who this system hurts and benefits, borrowers who carry balances and businesses — which pay a fee on each credit card transaction — subsidize the fun for the rest of us.Pre-pandemic, Van Eck was chasing cards with high sign-up bonuses, like the Chase Sapphire Preferred card, because they allowed him to transfer points to airlines so he could book business or first-class seats. During the pandemic, he took note of the <a target="_blank" href="https://www.wsj.com/articles/airline-cards-lose-luster-as-coronavirus-persists-11606991400?mod=article_inline">beefed-up bonuses and short-term benefits</a> that companies were offering in an attempt to lure customers; his Delta card offered a $15-a-month dining credit, for instance. That's when Van Eck noticed that more of his Gen Z and millennial friends starting to become adept at navigating their benefits.Van Eck is very cautious of lifestyle creep and ensuring that cards are worth his while, especially amid high interest rates, inflation, and recessionary fears."I've seen most of my peers, including me, reevaluate the value proposition of the cards," he said. Every year, he goes through his list of cards to see which ones paid for themselves without him changing his behavior. If one doesn't, he'll cancel it.But not everyone is as prudent as Van Eck. In the high-paying tech industry where he works, Van Eck still sees people changing their habits to maximize rewards, which he doesn't think is smart. This could be why delinquencies have been on the rise in recent years, with the youngest borrowers leading the pack. After all, credit cards are fun to use. No, really. Contrary to the belief that we overconsume with credit cards because they ease the pain of spending, <a target="_blank" href="https://mitsloan.mit.edu/experts/how-credit-cards-activate-reward-center-our-brains-and-drive-spending">research finds</a> that their bigger appeal is that they make our brains feel like we're getting a reward. All that stands between you and access to that first-class airport lounge are a few taps or swipes.<h2 id="0f454fca-2571-4637-a3e5-c54130cda971">Nothing good lasts</h2>Credit card companies aren't just giving away rewards for free.As Lulu Wang, an assistant professor of finance at Northwestern's Kellogg School of Management <a target="_blank" href="https://insight.kellogg.northwestern.edu/article/who-pays-generous-credit-card-rewards#">finds</a>, many businesses will pass on their costs to customers. For example, say you use a 1% cash back rewards credit card at your favorite local coffee shop on $100 worth of coffee for you and your friends. The shop pays a 2% fee on the transaction — $2 — to your card issuer. Then, your card issuer would use some of that 2% fee to give you your 1% back. To cover their fee, the shop might raise their prices."In some sense, when you benefit from those rewards, you're taking that money from some mix of the merchant and other cash and debit card consumers out there in the economy who are then not benefiting from those rewards," Wang said.Perks aren't always a great deal for everyone. Will Springer, a 41-year-old in Indiana, uses his Chase Sapphire Preferred and Amex Platinum cards primarily for perks like travel insurance and car rentals. Since he lives in a more rural area, an Equinox gym membership benefit is moot, and he can't really use the Uber benefit offered — he sometimes converts it into food delivery credit for Uber Eats.Other loyal credit card point users say you can't bank on your favorite perks sticking around. Brandon Zemel, a 32-year-old music producer in Las Vegas, puts pretty much everything on a credit card. He has two cards, the Chase Sapphire Reserved with a higher annual fee that's more travel-catered, and the Chase Freedom Unlimited, which has a fairly flat return on points. He said his travel card shaves hundreds of dollars off of his expenses, and he loves to use his points to get himself onto seat upgrade lists.But Zemel recently lost a hugely useful travel benefit: a "<a target="_blank" href="https://www.forbes.com/advisor/credit-cards/chase-sapphire-reserve-card-ending-priority-pass-restaurant-benefit/">priority pass</a>" that could be converted into a $28 dining credit for both him and a guest."It seems to be a thing these days that every year, two years, three years, these companies devalue their product or their perks provided by their product," Zemel said. "And I guess to some extent it's to be expected, but it does kind of remind you that the things that you currently enjoy are not necessarily going to be here long term."As Zemel has seen during his time as a cardholder, the rewards craze has basically "grown exponentially," propelled by popular blogs and TikTokers. That can also dim the appeal of previously exclusive perks, like overcrowded airport lounges."People got really used to anyone with a pulse basically having some kind of access to the lounge at the airports," he said. Now, Delta has <a target="_blank" href="https://www.cnn.com/travel/delta-ceo-bastian-skymiles-changes/index.html">recognized</a> that it had too many elite cardholders — leading it, in some cases, to restrict access to <a target="_blank" href="https://www.businessinsider.com/personal-finance/credit-cards/delta-sky-club-credit-card-access">lounges</a> to higher spenders.It's what Wang says is an example of "<a target="_blank" href="https://www.huffpost.com/entry/what-money-cant-buy_b_1442128">skyboxification</a>" — an increasing stratification of life among haves and have-nots, like a baseball stadium that's divided between crowds in the stands and richer fans in box seats."I can totally understand this looming dread that society is getting splintered into those who have access to this kind of stuff and those who don't," Wang said.I can relate to this sentiment. At a music festival this summer, I learned that my Chase Sapphire credit card would let me skip the line and access an air-conditioned tent with free water.However, when I arrived I learned a hard truth: I actually needed the card one tier above mine to get in. For one brief moment, as I gazed at the sparse crowd inside, I thought about applying on the spot. But I ultimately decided it wasn't in my best interest to incur a higher annual fee and open another line of credit.And yet, as I stood among the packed and sweaty masses, waiting nearly an hour to get food and water, I felt haunted by the skybox appeal. Would a new credit card do anything positive for my finances? Most likely not. Would it make me feel like a VIP at this event? Definitely. Maybe I'll try to get the Sapphire Reserve before next year's festival.Are you passionate about your credit card rewards? Have you gotten into debt trying to play the points game? Contact this reporter at <a target="_blank" href="mailto:jkaplan@businessinsider.com">jkaplan@businessinsider.com</a>.

Welcome to credit card points mania

<ul class="summary-list"><li>21-year-old Skylar Griffin has four credit cards, including and AmEx Gold and Platinum.</li><li>She got her first credit card as a freshman to build up her credit score and kept a strict budget.</li></ul>This as-told-to essay is based on a transcribed conversation with Skylar Griffin, a 21-year-old college student in Georgia. Griffin financial claims have been verified with documentation. The following has been edited for length and clarity.When I was a child, my mom often shared financial advice. She told us never to cosign for someone's loan and don't buy anything unless we could buy it twice.On several occasions, she advised us kids never to get a credit card unless we were responsible enough to pay it off each month.She didn't want us to struggle financially like she did as a single parent.In high school, I started watching YouTube videos about finances. I saw financial struggles firsthand, and I didn't want to be in that position as an adult. The videos taught me I'd need to build up my credit score to buy a car or a house or if I might need a loan.<h2 id="102ef261-a63c-412a-8936-6e2d5bc894d4">I got my first credit card before going to college</h2>In July 2021, I was preparing to study business management at Columbus State University in the fall. Without my mom's knowledge, I ordered a Bank of America student card. It was a Visa card with no annual fees. My mom wasn't happy. I reassured her I'd done my research and could handle the responsibility.During college, I worked at a call center during the school year, paid internships in the summer, and received refund checks because my scholarship was more than school costs. I also earned a bit of money doing social media content.My first card had a limit of $500. I would buy little things here and there, making sure I had enough in my checking or savings account to pay it off each month. I'd marked all the due dates in my calendar, and I was never late for a credit card payment. There were temptations to buy new clothes or tech, but I always fought it.<h2 id="fc7cfef9-313f-436d-be60-a1a46519f707">Getting an AmEx for the travel points</h2>I kept using the Bank of America card throughout my freshman and sophomore years of college, but in April 2023, I decided to take out an Amex Gold card as well.I'd heard about travel credit cards through watching financial advice videos online. If I used this card for buying groceries or dining out, my two main expenses in college, I would get four times the points to use on travel. Although I wasn't traveling much, I planned to travel. At the time, the card had a $250 annual fee, which was worth it for the points I felt.I only used my card for things I needed or had saved for. I never bought things just to earn points.In March 2024, I took a big leap and opened an Amex Platinum credit card. It comes with a high price tag — a $695 annual fee — but I thought the benefits outweighed the price. Because it was another Amex card, all of my points were added to the points earned from the Amex Gold.I only use this card for booking flights and hotels because this is what I get the highest points for. With the card, I get five times the points when booking flights and hotels, a $200 yearly airline credit, and a $200 yearly hotel credit.When I stay at Marriott or Hilton, I get 'high status' and often get my room upgraded. But my favourite perk is the CLEAR Plus membership which gets me through TSA quicker at the airport.I knew I was planning some big trips in 2024 to Japan and New York, and then a cruise to the Bahamas, so planned to make all my travel purchases on the Platinum. Since getting an Amex, I've been able to fly to Japan, New York, and Miami for free in 2024.With this card, I accessed airport lounges on the long trip to Japan and was part of the President's Circle with Hertz Car Rentals, so I was guaranteed a car upgrade when I rented a car to get around the country.<h2 id="ec2f29ef-d145-470e-972f-0e160d4e0cd5">I took out a fourth credit card so I could earn points for other purchases</h2>In June 2024, I decided to take out another Amex card — the Amex Blue Business Plus. This card means I can earn points paying for things like gas, that don't earn me points on my other cards.There's no annual fee, and I could only take it out because I'm considered a sole proprietor. I own a Mercari shop where I resell vintage clothes I find at flea markets.I only use my Bank of America card when Amex isn't accepted. I never use a debit card unless I'm pulling cash out of the bank.Even though I am confident and comfortable using credit cards, I still don't spend anything that isn't in my checking or savings account. I never base a purchase on the money that I'm expecting in my account, because you never know how finances could change.I put all my due dates in my calendar and aim to pay each of them off earlier than required. Sometimes, I feel the urge to overspend. But then I remember the interest rates on my cards, and I snap back to reality. Paying high interest because I can't afford to pay my bill in full is not worth the momentary satisfaction of shopping.In addition to all the benefits I've received when traveling, my credit cards helped me raise my credit score to 755.<h2 id="1abacec9-c073-4582-ac5e-15c3908118fc">I never stop learning about finance</h2>I think college students should consider getting a student credit card with no fee. They have low limits and can help start building a credit score. However, if you're impulsive or have poor spending habits, I wouldn't recommend it.My mom now says she's proud of how I manage my finances. I've always found personal finance interesting and the concepts easy to understand, but it takes dedication to stay on track financially. I never stop learning to make sure I'm doing what's best for my financial future.

I'm a college student who pays nearly $1,000 in annual fees for 4 credit cards. It's worth it for good credit and travel perks.

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Worried about your <a target="_blank" href="https://www.businessinsider.com/personal-finance/credit-score/what-is-a-credit-score">credit score</a>? Maybe you weren't before, but now that I mention it you may be wondering when the last time you checked it was. Even if you're pretty sure it's fine, the topic is often enough to <a target="_blank" href="https://www.businessinsider.com/financial-therapist-talk-about-anxiety-money-2023-3">cause a moment of panic</a>, a sinking feeling followed by an "Oh God, what if something's happened?"That little three-digit number is a big deal in our financial lives. It serves as a sort of grade for how you handle money. An A gets you approval for an apartment and a decent rate on your car loan; an F gets your rental application turned down and makes your car insurance more expensive. You might not have even realized it, but your credit report <a target="_blank" href="https://www.businessinsider.com/why-cleaning-up-your-credit-can-help-you-land-a-job-2013-9">could even make a difference in whether you land your next job</a>.The anxiety around credit scores is palpable. It's also lucrative. Credit bureaus, startups, and even one-man operations can make a lot of money by playing into people's fears about their credit. They offer services that monitor credit scores and alert you when yours changes, or they say they can help you repair your damaged credit — for a price, of course. Many of these costly solutions do not work as well as promised or deliver much, if any, bang for your buck."The credit-scoring companies have figured out how to profit on the anxiety of consumers with credit watch and credit monitoring and all of these add-on programs," said Aaron Klein, a senior fellow in economic studies at the Brookings Institution, a nonpartisan think tank. "When companies find a way to profit off of anxiety, they have an incentive to create anxiety."What these companies won't tell you is that the best things to help ease your credit-related worries are cheap, even free. You can check your credit regularly at no cost from a lot of sources — your credit-card company likely tells you your score, and you can access your report weekly free of charge too. Freezing your credit also doesn't run you anything. It's important to be aware of your credit score, but you don't need to obsess over it — or let marketers convince you to pay for a bunch of stuff you don't really need because you're panicked.Around the time of the Super Bowl, I noticed that the Kansas City Chiefs tight end Travis Kelce was appearing in ads for Experian, one of the big three bureaus responsible for keeping track of everyone's credit scores. I <a target="_blank" href="https://www.businessinsider.com/travis-kelce-experian-tv-commercials-nfl-taylor-swift-super-bowl-2024-2">decided to write about it</a> and, in the process, created an Experian account. The company has been hounding me ever since. I get near-daily emails that range from run-of-the-mill product offers and "credit alerts" to nerve-racking warnings that my information may have been part of a data breach. When I click for more information, lo and behold, I'm confronted with a paid service. For $25 a month, I can sign up for "Experian CreditWorks Premium," which includes quarterly credit reports, credit monitoring, and identity protection. Once I decline that offer, which is kind of tricky, I can also find an offer to "lock" my credit for $5 a month. It's similar to a credit freeze, which blocks creditors from accessing your credit file, but can also do things like notify you if someone tries to access your Experian credit report. Here's the thing, though: A lot of the services it's offering are already free."There's no reason ever to pay for credit monitoring," said Chi Chi Wu, a senior attorney at the National Consumer Law Center. "There's no reason to pay for a credit score or pay for service for the credit score."In Wu's view, Experian is an especially bad offender — not just for its suite of likely unnecessary products but because, as part of its standard agreement, the company makes customers agree to mandatory arbitration, meaning you don't get to sue if Experian has a big screwup later. In an email, a spokesperson for Experian said that the company is "committed to financial inclusion" and that its free membership has tools to help consumers improve their financial health. "Millions of members find value in having Experian as their financial co-pilot helping them improve, manage, and protect their financial profile," the spokesperson said. They did not address the arbitration agreement. But Experian is hardly the only company out there selling credit-related services that drain consumer dollars. The credit-monitoring and identity-theft-protection industry, according to IBISWorld, is worth about $5.4 billion in annual revenue. The growth of the industry makes sense — in this day and age, data breaches are constant, and a fraudulent ding on your credit report or someone opening an account in your name can be an enormous headache. Guarding against that outcome seems like a small price to pay for a lot of people, except that paying any price above $0 may not actually be worth it.A <a target="_blank" href="https://www.nclc.org/wp-content/uploads/2022/09/IB_Credit_Monitoring_Arbitration.pdf">2022 brief</a> from the NCLC described credit-monitoring bundles as often "expensive and ineffective" and argued that they failed to meaningfully benefit consumers. It noted that most identity theft takes place in existing accounts, meaning monitoring services that alert consumers to newly opened accounts miss it. They also often fail to catch fraud related to medical services or tax refunds. And even when they do catch identity theft, they do so after the fact."Some people might be like, 'Well, I'd rather pay and not deal with the time,'" Wu said. "But the thing is those products aren't all that effective."A <a target="_blank" href="https://www.gao.gov/assets/gao-17-254.pdf">2017 report from the Government Accountability Office</a> was pretty negative on the whole monitoring and identity-theft-protection business, too, saying it's just not clear how helpful a lot of this stuff is. The report also looked at identity-theft insurance and noted that while it covered expenses related to dealing with the theft, it generally excluded actual financial losses. While credit monitoring falls into the waste-of-money category, other credit-related services can cross over into potentially predatory territory — for example, credit-repair operations. The idea behind these services is pretty simple: Credit reports often include some mistakes that can ding people's scores. So, for a fee, the companies will dispute a bunch of items in hopes of boosting the score. This may improve people's reports temporarily while the disputes are being investigated, but since the firms are basically disputing anything negative, when they lose, everything goes back to how it was, and the customer is just out more money."They're basically charging people with the false promise that they're going to be able to fix their credit reports and credit scores permanently when they can't," said Sarah Chenven, the CEO of Working Credit, a nonprofit that helps people build credit.Credit-repair companies often target people with lower incomes and people desperate to improve their credit reports and scores. Gen Zers and millennials, who <a target="_blank" href="https://www.creditkarma.com/insights/i/state-of-debt-and-credit-report#average-credit-scores">tend to have lower credit scores</a> than older generations and may not have extensive credit files, may be more likely to find themselves looking at a credit-repair service to get negative items off their reports or at some sort of credit-building service to just help them develop a record. Credit-monitoring companies can really appeal to anyone worried about their credit and identity theft. Some of these businesses also make money by marketing various financial products to people — a well-off boomer might get one type of credit-card offer, a struggling student another.The companies also don't do anything people can't do on their own — if there's an error, you can and should dispute it yourself. In fact, credit-repair agencies can be less effective than the average person at getting mistakes wiped from their credit histories because, as Andrew Pizor, a senior attorney at the NCLC, explained, the law says that credit-reporting agencies have to respond only to dispute letters directly from consumers. Credit-repair businesses try really hard to make it seem like disputes are from consumers, and the agencies try just as hard to sniff out whether that's going on."Most of the letters that you're paying for are going into the garbage," Pizor said. He added that if your dispute letters are going unanswered, you don't need a repair service — you need a lawyer.Federal regulators have gone after several companies accused of playing it fast and loose with the way they approach consumers. In 2017, the Consumer Financial Protection Bureau settled with TransUnion over charges related to how it was marketing its products, including credit monitoring, and ordered it to stop deceptive practices. In 2022, it sued TransUnion, accusing it of violating that order. In 2005, it dinged Experian for marketing free credit reports that weren't so free. Last year, the CFPB entered into a $2.7 billion settlement with a ring of credit-repair brands accused of illegally collecting fees for their services. Over a decade ago, the Federal Trade Commission and 35 states reached a $12 million settlement with LifeLock after alleging that it had made false claims about its identity-theft-protection services.These companies and credit-related services aren't necessarily evil. A significant part of the issue is that the ecosystem is a mess. Our credit-reporting and -scoring system is outdated and confusing, and so are a lot of the businesses that have sprung from it. Even the seemingly good products and services out there are a sign of the deep rot at the core of the whole system. Credit-building loans, which are loans designed to help people without much credit history build some, <a target="_blank" href="https://www.consumerfinance.gov/data-research/research-reports/targeting-credit-builder-loans/">can help people get on better financial footing</a>, even if there is usually some cost involved. Immigrants and young people in particular can benefit.Companies such as Credit Karma that let you access a lot of your information easily and for free make it so your credit score isn't such a mystery. The downside there is that they make their money by giving your information to a bunch of third-party financial products and taking a cut if you sign up for one of them. For consumers, the whole thing feels like a maze. It's tough to separate the good actors from the bad and to understand the trade-offs at hand. It's not always clear what you're signing up for, whether you need it, or what you're going to wind up paying."The credit system and the financial system, and I hate to sound a little preachy, but it's a black box," said Ryan Steckler, a vice president of product and general manager at Credit Karma. "Given that situation, we're in the business of empowering our consumers by giving them access to the same data those financial institutions have."It would be neat to be able to say that some concrete help is on the way, but the truth is we're stuck with some not-so-fun realities around credit scores for the foreseeable future. As screwed up as the system is, it's probably not going anywhere anytime soon, <a target="_blank" href="https://www.investopedia.com/terms/c/cash-flow-underwriting.asp">even though there are better alternatives out there</a>.There is this sense of existential dread around credit scores. A negative one can really drag people down. An impaired record makes loans more expensive, makes accessing certain financial products impossible, and may even put your next apartment or job out of reach. Klein, from the Brookings Institution, has recently been conducting focus groups with low-income consumers about their financial knowledge and concerns. He's been shocked at how much credit scores have come up."I was very surprised at the attention to detail folks of more modest income have on the impact of financial products and choices on their credit scores," he said. "The more I thought about it, the more I realized this focus is based on experience. At some point, their low credit score has negatively impacted their lives."Frederick Wherry, a Princeton sociologist who leads the Debt Collection Lab, an initiative focused on understanding debt collection, added: "As soon as we are asked about our credit scores, or in a moment when we can't get something we need or we get it at too high a price, that's when we realize that this thing has been hanging over our heads." It's unwise to bury your head in the sand, ignore your credit score, and hope for the best. But you don't need to obsess over it, let alone spend a bunch of money on it. If you're not in the market for a house or apartment or in need of a new loan, you can freeze your credit for free, meaning no fraudsters can take out a loan in your name. Under federal law, the bureaus have to give you one free credit report a year, and since the pandemic they've been letting people access their reports for free once a week. If you see something weird on your report, you can dispute it on your own. And you really do not need to be checking that much — once a month or once a quarter is fine, kind of like your 401(k)."If you have a credit score over 720 or 780, stop worrying. Don't be obsessed with getting an 800 or 820," Wu said. "This is not your SAT score."If you're in trouble, there are nonprofits out there that can help you figure out what to do, for little or no money."If you've got bad credit, if your credit score is low, where I'd start is with a nonprofit credit counselor," Pizor said.If you want to sign up for identity-theft protection or credit monitoring, fine. But those services aren't a fail-safe, so you'll want to walk in with your eyes wide open. The credit experts I spoke with were very wary about credit repair across the board. The next time you start to worry about your credit score, take a beat. Not to get too woo-woo here, but really, there's only so much you can control."I mean, the magic bullet is building a better system," Wu said.<a target="_blank" href="https://www.businessinsider.com/author/emily-stewart">Emily Stewart</a> is a senior correspondent at Business Insider, writing about business and the economy.

The best way to fix your credit score? Ignore it.

Best Business Credit Cards of January 2024

Most people have, at some point in their lives, made an <a target="_blank" href="https://www.businessinsider.com/millennial-regret-buying-house-remote-work-travel-airbnb-buyers-remorse-2024-1">"oops" purchase</a> — you buy a thing and almost immediately regret it. In the age of online shopping, such purchases are <a target="_blank" href="https://www.businessinsider.com/impulse-spending-retirement-delayed-2024-5">easier than ever to make</a>. They are not, however, easier to reverse. Sometimes, you can quickly cancel an order, but oftentimes, the window to do so is so tight that you end up missing it.I recently found myself in such a situation. I bought yet another inane thing I really do not need that I will not name because it is slightly embarrassing. Before anything had shipped, I reached out to the seller to call the whole thing off. Unfortunately, I was denied. Annoyed, mostly at myself but also a little bit at the seller, I had a sinister thought: What if I file a dispute with my credit-card company? I could try to initiate a <a target="_blank" href="https://www.businessinsider.com/personal-finance/what-is-a-chargeback">charge-back</a>, say the shipment was taking too long or I'd ordered it erroneously, and maybe get my money back. Perhaps I could even get to at least try the thing I was pretty sure I didn't want, but hey, if it was free. To be clear, I did not do this, and I don't know whether it would have worked. But I seriously considered it. One of the best perks of my credit card — the ability to dispute a transaction to get a refund — had almost turned me into a bit of a jerk. Without knowing the term for it, I'd weighed engaging in first-party fraud, colloquially known as "friendly fraud," an increasingly common phenomenon where customers, accidentally or intentionally, dispute legitimate transactions as fraudulent with their credit-card issuer or bank.A credit-card charge-back happens when a consumer sees something they don't like or recognize on their statement and asks the bank to look into it. The bank then investigates the claim and decides whether to issue a refund — under federal law, a consumer can't be on the hook for more than $50 for an unauthorized charge. The merchant can respond, too, if they have proof that the transaction was fine. The bank plays the umpire and decides what to do with the money — maybe it takes it back from the merchant and gives it to the customer, maybe it makes the consumer cough the money up, after all, or maybe it pays out both parties and eats the cost itself."Charge-backs are a huge problem for many merchants. That's not something they can just sweep under the rug," said Oscar Bello, the chief sales officer at Chargeback Gurus, a company that helps merchants navigate charge-backs and manage disputes.There are plenty of legitimate reasons to file disputes and initiate a charge-back, first and foremost, for a transaction that was made by a fraudster, not the consumer. There are other fair explanations, too — there was a billing error, the product or service wasn't delivered as promised, the transaction wasn't authorized in the first place.Then there are charge-backs that can toe the line, ethicswise, or even tip into fraud by the cardholder. People lie and say they didn't get a pair of shoes delivered, even though they did, or they say the shoes came damaged, even though they were fine or had a tiny bit of damage but were still plenty wearable. Perhaps they cancel a restaurant reservation and dispute the cancellation fee, even though the penalty was listed plainly on the restaurant's website. Or a person paid to have their car fixed up and then said the workmanship was shoddy. In those instances, the customer is engaging in fraud or crossing a questionable line, but it can be hard for credit-card issuers to tell what actually happened. It can be quite the ordeal to trace whether a shoebox shipped in the mail wound up in the buyer's hands, let alone for a bank to decide whether all the work an auto-repair shop did was necessary and good.There's no "silver bullet" for figuring out who's in the right in every instance of a consumer dispute, said Domenic Cirone, the vice president of acquirer solutions at Kount, a fraud-prevention company owned by Equifax. And as much as artificial intelligence is helpful, he added, you often need people to sift through the data and complexities. And, he said, most consumers are well-meaning.Charge-backs and friendly fraud aren't new issues, but they're ones <a target="_blank" href="https://www.businessinsider.com/retailers-lost-millions-in-organized-online-refund-fraud-scheme-2023-11">exacerbated by e-commerce</a>. It's a lot easier to say that the sweater you got at the Gap never arrived than it is to claim you bought it at the store and, I don't know, forgot to take it with you or suddenly realized once you got it home that it sucked. A 2023 report from Ethoca, a Mastercard-owned platform that helps merchants handle fraud and disputes, said charge-backs in the US could reach $15.3 billion by 2026, more than double the $7.2 billion in 2019. Much of that is friendly fraud: The report cited a statistic from the data-analytics company Datos Intelligence that 75% of all the fraud digital businesses see is first-party fraud.Beyond the <a target="_blank" href="https://www.businessinsider.com/retail-enters-new-normal-ecommerce-brick-and-mortar-2022-11">e-commerce explosion</a>, some other factors have made <a target="_blank" href="https://www.businessinsider.com/free-shipping-free-returns-online-shopping-companies-charging-expensive-amazon-2024-2">friendly fraud more commonplace</a>. Consumers are increasingly using disputes for service-related issues — a product showed up damaged, or a service wasn't up to snuff. Inflation and economic pressures may also make the prospect of disputing a charge more appealing.What's more, people are constantly <a target="_blank" href="https://www.businessinsider.com/banks-cashless-world-disaster-economy-business-fintech-cash-crypto-2022-6?">paying through digital transactions</a> that are really hard to keep track of. Perhaps they <a target="_blank" href="https://www.businessinsider.com/subscription-services-forgotten-cost-consumers-payments-2022-6">don't remember making a purchase</a>, or their <a target="_blank" href="https://www.businessinsider.com/teen-spends-life-savings-tips-protect-money-2024-3">kid put something on their card</a> and didn't tell them, so they mark the charge as fraudulent even though it wasn't. Last year, I almost committed accidental friendly fraud against an airline because I forgot I'd paid to check my bag and tried to dispute the charge before realizing it."It's really quick and easy to check out, which is great because we love that as consumers. That leads to a lot of transactions," Robert Painter, the vice president of global channel sales at Kount, said. "The old adage, more money, more problems, right? So in addition to that, there's confusion."Of course, what's happening here on the end of consumers is not always confusion — sometimes, it's taking advantage of the system. Kevin, an entrepreneur who asked me to keep his identity protected because he was worried his business partner would get mad at him for talking to the press, has lost thousands upon thousands of dollars and endless hours on what he believes are frivolous and often fraudulent disputes. One of his gigs is selling tickets for a swamp tour near New Orleans. According to Kevin, people who go on the tour have disputed charges because they claim they didn't see enough alligators. Or customers of his auto-transport company, which he recently sold, disputed claims because their vehicles arrived a day or two later than desired or, in one case, because a driver didn't speak "good" English. Essentially, some people are using disputes as a review system, and if they don't give the experience five stars, they tell the credit-card company they want their money back. Kevin has won charge-backs before — he recently succeeded in pushing back against a cancellation claim after customers agreed to move their tour time but then backed out at the last minute. More often than not, however, he loses, and regardless, the whole thing is a huge time suck."Customers now, what we found post-COVID, are very trigger-happy on the dispute system," Kevin said.Kevin is not above using questionable dispute tactics as a consumer himself (he recognizes the irony here). He recently successfully disputed a $200 charge from a golf course after being told he couldn't change a tee time.The ability to dispute transactions is generally a <a target="_blank" href="https://www.businessinsider.com/credit-card-travel-alert-fraud-detection-american-express-visa-chase-2024-5">nice benefit of credit cards</a> and one that most consumers use as a last resort once they've tried to talk to the merchant (if they can get ahold of them). Still, it's weird that Citi or Amex or whoever ends up playing arbiter in charge-backs because the business incentive is to prioritize the customer over the merchant. It's hard to feel bad for big businesses that might lose money on a transaction that barely registers on their records, but for smaller businesses, this can really be a strain.In some cases, there's a pretty clear line between what is fraud and what's not, what's a legitimate charge-back and what isn't. Your online order never arrived, and the customer-service number never picked up: legitimate. Your order arrived and you claim it didn't: fraud. Right or wrong, many cases never get litigated out to the end, anyway."Not every merchant is equipped to fight," Bello of Chargeback Gurus said.There's some gray area, too. If you place an order and it arrives in 12 days instead of the 10 days promised, you might very well win in a dispute. Is that really fair? Mmm.I do not know whether my dispute on the mystery item would have been approved. (It was some stupid health supplements I saw online, OK?) But I wouldn't be shocked if it did. I've never disputed a purchase before, and my credit-card company would like to keep me happy. I do not think I would have felt particularly bad about initiating a charge-back, either, since <a target="_blank" href="https://www.businessinsider.com/supplements-vitamins-bad-or-good-health-2017-8">the supplements industry is unregulated and scammy anyway</a>. That doesn't mean it would have been the most awesome thing for me to do.<a target="_blank" href="https://www.businessinsider.com/author/emily-stewart">Emily Stewart</a> is a senior correspondent at Business Insider, writing about business and the economy.

One of the nicest perks on my credit card is making me a jerk

The Best Credit Cards With Primary Rental Car Insurance of 2024

<ul class="summary-list"><li>I spent a year saving up credit-card points, then used 33,000 miles (plus $5) to <a href="https://www.businessinsider.com/quit-corporate-job-moved-buenos-aires-2024-4">move to Argentina</a>.</li><li>For the next seven months, I continued to rack up points for <a href="https://www.businessinsider.com/san-carlos-de-bariloche-argentina-little-switzerland-south-america-photos-2023-12">smaller trips around South America</a>.</li></ul>The idea to move from New Jersey to Buenos Aires came to me one afternoon while watching the <a href="https://www.businessinsider.com/diego-maradona-dead-at-60-reports-argentine-press-2020-11">Diego Maradona</a> (famed Argentine soccer player) biopic series on Amazon Prime. I had only ever visited once before for a three-month backpacking trip, and I always knew I wanted to go back.As a daughter of Dominican immigrants, relocating to a <a href="https://www.businessinsider.com/moved-to-spain-from-us-better-work-life-balance-2024-1">Spanish-speaking country</a> and exploring a largely unknown place at my own pace was a dream. But <a href="https://www.businessinsider.com/surprising-things-moving-to-ireland-from-us-2022-2">moving abroad</a> — like cooking meat in an asado — is a slow and steady process. I allotted myself one year to prepare, save, and, most importantly, rack up credit-card points to help soften the financial blow. Here's how I did it. <h2>I started by signing up for a new card with a hefty bonus offer</h2>I've been <a href="https://www.businessinsider.com/things-to-know-before-booking-trips-with-miles-points-expert">using credit-card points to fly</a> around the world on a budget for years, so I knew the biggest bang for my buck came from <a href="https://www.businessinsider.com/personal-finance/credit-cards/best-current-credit-card-signup-bonuses">credit card sign-up bonuses</a>.At the time, the <a href="https://www.businessinsider.com/personal-finance/credit-cards/capital-one-venture-x-rewards-credit-card-review">Capital One Venture X card</a> was offering 100,000 miles, or $1,000 in travel credit, after spending $10,000 within the first four months. It was a huge deal. Typically, cards might offer two times the miles on every dollar spent — this was five times that.Once approved, I immediately used the card to pay for all of my regular bills, day-to-day purchases, and other travel bookings. I even lent the card to trusted friends, who then reimbursed me for their purchases in cash. Simultaneously, I used my existing <a href="https://www.businessinsider.com/personal-finance/credit-cards/best-credit-cards-for-united-airlines">United Airlines credit card</a> to book flights for my family members. We use the airline frequently, which meant I was continuously adding to my cache of miles. Within a year, I had enough to book a one-way United flight to Buenos Aires for 33,000 miles (plus $5 in taxes).<h2>My points took me all around Argentina — and into other South American countries</h2><div type="image" title="busy pedestrian street in argentina" height="2071" width="2762" msid="113466362" hostid="261" sizebytes="769046"></div>By the time I touched down in Argentina, I had long surpassed the entry rewards on my Capital One card. I kept regular bills such as phone and streaming apps on it to continue racking up rewards, but it was finally time to focus on the next phase of the plan: Spending the points.Unfortunately, I couldn't use them for my rent, but luckily, my fully furnished apartment only cost me $650 a month. Instead, I used my points to cover things like my daily food and activities (about $300 a month) and pay for all my trips around South America. As a freelancer with a very flexible schedule, I intended to explore as much of Argentina as possible. But I also wanted to visit Brazil and Chile — especially since I had to leave at least every three months to keep my visa active.Since I wasn't sure how long I wanted to stay, I didn't <a href="https://www.businessinsider.com/cheapest-countries-where-you-can-buy-citizenship-or-residency-2022-8">apply for formal residency</a> in Argentina. Instead, I used the 90-day tourist visa limit as an excuse to visit other nearby countries. This process proved to be simple; I once crossed into Chile by car and returned to Argentina with a new visa start date hours later.Capital One provides a portal to purchase flights, but local carriers usually offer cheaper rates on their own websites. Because of this, I've found the best way to use miles is to retroactively cover the cost of purchases made on other platforms.Using this system, I was able to cover my flights to Bariloche, El Calafate, Iguazu, Mendoza, Ushuaia, Rio de Janeiro, and São Paulo. Occasionally, I had enough to pay for my Airbnb or hotel there, too.<div type="image" title="world cup celebration in argentina" height="1250" width="1667" msid="113466368" hostid="261" sizebytes="409316"></div>I learned cultural nuances, ate my body weight in steak, and adapted my Dominican American Spanish to the Argentine accent. One of the highlights of my seven months abroad was celebrating <a href="https://www.businessinsider.com/video-argentina-france-world-cup-highlights-2022-12">Argentina's World Cup win</a> at the Obelisco Buenos Aires and chanting the national song alongside 5 million local fans. At each location, I swiped for activities and food and used those newly accumulated miles to book the next trip. It was a constant loop feeding itself. <h2>The move only ended up lasting 7 months, but it was an incredible experience</h2><div type="image" title="people lounging in a natural pool in south america" height="1248" width="1664" msid="113466364" hostid="261" sizebytes="397422"></div>Instead of squeezing Argentina's major highlights into a rushed and complicated tour, I visited seven cities over a seven-month stay. This slow travel style saved me a ton of money — especially since I didn't <a href="https://www.businessinsider.com/used-travel-credit-card-reach-elite-status-airline-2024-9">fly back and forth to the US</a>. My time in South America offered me a new perspective on migrating. I respect my parents for completely uprooting their lives in the 1980s with no internet or common language. Unfortunately, unlike them, I wasn't able to do it for the long haul. Although I have since returned to <a href="https://www.businessinsider.com/new-jersey-to-puerto-rico-biggest-culture-shocks-2024-9">New Jersey</a>, I continue to use credit-card points to fund my travels. They don't pay for everything, but they make massive undertakings (like moving abroad for seven months) more seamless than ever before.

I lived and traveled abroad for 7 months using credit-card points. My stash of miles meant I barely had to pay anything out of pocket.

<ul class="summary-list"><li>The credit card debt for young Americans has grown at a faster pace than other generations.</li><li>More than one in three millennials and Gen Zers have a subprime credit score below 600</li></ul>Americans are in the midst of a <a target="_blank" href="https://www.businessinsider.com/credit-card-debt-interest-rates-consolidation-economy-recession-soft-landing-2024-2">credit card crisis</a>, and nobody is being hit harder than millennials and Gen Zers.Since the Federal Reserve Bank started raising interest rates in 2022 to fight inflation, the credit card debt for millennials and Gen Z has increased at a higher rate than other generations, according to data published by <a target="_blank" href="https://www.creditkarma.com/about/commentary/millennials-and-gen-z-rack-up-credit-card-balances-amid-sky-high-interest-rates">Intuit Credit Karma</a> on March 1. The study examined the anonymized credit scores of 41 million customers and anonymized credit card balances for about 80 million people in March 2022 and February 2024.The average credit card balance for millennials — who are between the ages of 27 and 41 — has risen 62% since March 2022, with average outstanding balances growing from $2,000 to $3,300.Meanwhile, the rate of increase has been slower for Gen Zers, who are between the ages of 18 and 26. However, their average credit card debt is more than twice that of millennials, growing 50% in two years, from $4,500 to $6,700."Those who are unable to manage credit responsibly could have a difficult time taking out other loan products down the line, like an auto loan or mortgage, which could hold them back from achieving key financial milestones like buying a home," Rich Franks, head of Lightbox, which helps people learn more about the types of credit they would be approved for, at Intuit Credit Karma, told Business Insider.And the credit these consumers receive would likely come with higher interest rates and costs, making it harder for younger consumers to build wealth, Franks added.<h2>Credit scores are falling for young Americans</h2>The soaring credit card debt has coincided with falling credit scores for these younger groups of consumers.In February, more than one in three millennials and Gen Z Americans had a subprime credit score — below 600, according to Intuit Credit Karma's data. The percentage of millennials with subprime scores grew from 28% to 34% since March 2022. The rate for Gen Zers grew from 25% to 33% in the same period."It's fairly normal for young people to borrow a lot during the early years of their careers, and we certainly see that happening right now with Gen Z and millennials," Franks told Business Insider. "However, we hope to see — and to some extent, are seeing — millennials shifting into the phase of their lives where they're saving and building wealth, though that's been difficult with sustained inflation, rising home prices, and high-interest rates."Franks added that this could become a bad loop for the economy if young consumers curb their spending.One of the issues facing younger Americans is that they use credit cards more often than older generations.According to a <a target="_blank" href="https://www.forbes.com/advisor/credit-cards/credit-cards-trends-by-generation/">study commissioned by Forbes Advisor</a> and conducted by market research company OnePoll published in February, 36% of millennials and 30% of Gen Zers reported using a credit card at least once a day. No other generation was above 20%. Additionally, 34% of millennials reported missing a credit card payment in the previous 12 months, the most for any group. The rate for all ages combined was 22%.There are growing concerns that the <a target="_blank" href="https://www.businessinsider.com/interest-rate-cuts-federal-reserve-bank-when-rent-costs-housing-2024-3">Federal Reserve Bank</a> won't start cutting interest rates in the coming months and will instead choose to keep them higher for longer. If that happens, credit card debt will likely keep growing, and credit scores for young Americans could keep dropping.Americans in their 30s are far more likely to seek <a target="_blank" href="https://www.businessinsider.com/credit-card-debt-interest-rates-consolidation-economy-recession-soft-landing-2024-2">credit counseling</a> than other age groups.<div type="image" title="Number of people seeking debt counseling and average volume of debt." height="767" width="1079" msid="108351984" hostid="261" sizebytes="39970"></div>Franks noted that whether young Americans seek help or do it themselves, the most important step is to know everything about their finances."Whether working with a certified professional, using an online app, or doing it yourself, the best way to get started is to know where you stand," Franks said. "From there, you can make a plan for how you want to allocate your money to achieve your financial goals."

The credit card crisis is worse for millennials and Gen Zers

<ul class="summary-list"><li>Visa and Mastercard settled a dispute with US retailers over credit-card swipe fees.</li><li>The settlement could ultimately affect credit-card reward programs.</li></ul>One of the great American pastimes — using your credit card to accumulate points — could be about to change.On Tuesday, <a target="_blank" href="https://www.businessinsider.com/visa-mastercard-lawsuit-settlement-credit-card-fees-checkout-2024-3">Visa and Mastercard settled with US retailers</a> over a long-standing dispute tied to credit-card swipe fees.The crux of the issue is interchange fees, which networks such as Visa and Mastercard charge merchants for processing their transactions. Under the agreement, which still needs to be approved by the courts, these fees would be lowered and capped for five years.So what does that have to do with your sacred stash of points?Even though the networks set interchange fees, the card issuers (banks such as JPMorgan Chase and Bank of America) get the lion's share of the revenue. <a target="_blank" rel=" nofollow" href="https://www.bloomberg.com/news/articles/2024-03-26/visa-mastercard-reach-30-billion-swipe-fee-deal-with-merchants">Bloomberg</a> reported that last year, JPMorgan took home $31 billion of interchange and merchant-processing income.Again, you ask, what does that have to do with my points?Well, a good chunk of that revenue is spent by banks encouraging you to use their fancy cards. And the best way to do that is via points and rewards. Cards with better rewards and cash-back economics typically charge higher interchange fees.Which gets us back to Tuesday's settlement. Merchants have to accept all types of credit cards from Visa and Mastercard under an "honor all cards" rule. But now, they'd be able to charge consumers more depending on the type of card they're using.Suddenly, the cash back you get from your Chase Sapphire Reserve doesn't seem as enticing when paying a premium on the bacon-egg-and-cheese sandwich at your local bodega.It's not likely that banks will completely punt on rewards. David Morris, a principal analyst for payments at eMarketer, said the card programs were too important for banks to stop engaging those customers."They can make allowances of their own in terms of the kinds of rewards, adjusting the rewards accordingly. These are highly profitable programs, so there is some flexibility here for the card companies to be able to make some adjustments along those lines," he said.Morris acknowledged that some changes in consumer behavior might occur as a result, "but that would discount the levers that these credit-card issuers do have to be able to ensure that they are providing the card value that premium cardholders expect."Merchants, especially retailers, don't seem pleased with the settlement. The National Retail Federation, which represents chains including big-box stores and supermarkets, said it "amounts to pennies on the dollar" toward their costs. And the Retail Industry Leaders Association called it "a mere drop in the bucket."Both trade groups expressed support on Tuesday for the Credit Card Competition Act before Congress, which would require large banks to offer multiple payment networks for processing transactions through their credit cards.While many small businesses already charge an extra fee for those paying with a credit card, David Silverman, a senior director at Fitch Ratings, said most major retailers wouldn't pass the interchange costs directly to consumers."These retailers have been absorbing costs across any number of cost functions," such as labor, he said.It's not yet clear what impact the settlement will have. The agreement hasn't yet been approved, and time will tell how merchants and banks handle the changes.But the points game can be one of fine margins, and a change to interchange fees could have ripple effects for rewards programs.Don't be surprised if it starts taking a lot longer to rack up the points required for your next getaway.Correction: March 27, 2024 — An earlier version of this story misstated a detail from a Bloomberg report. Bloomberg reported that JPMorgan alone took home $31 billion of interchange and merchant-processing income last year, not that the biggest US banks took home this sum.

Credit-card points might be entering a new era

In mid-March, a scammer in California tried to buy $150 worth of <a target="_blank" href="https://www.businessinsider.com/trying-wingstop-first-time-review-photos-2022-9">Wingstop</a> using my debit card. Aside from being impressed at the sheer size of the order, I was relieved because Citibank, which issued my card, declined the transaction on the spot and alerted me to the fraud. In minutes I was able to shut off my card, heading off any more purchases by the scammers, and order a new card. All's well that ends well.When I went to Buenos Aires in April, I figured I might <a target="_blank" href="https://www.businessinsider.com/personal-finance/why-was-my-credit-card-declined">run into a similar situation</a>. Sure, the banks say you don't have to call ahead when you travel anymore, but I assumed I'd still have some purchase flagged as potential fraud, as had happened in past trips abroad. Miraculously, everything went off without a hitch. I don't know how JPMorgan Chase knew that I would spend $200 on Botox in Argentina, but it did. (No, I didn't book my flight on the same card, and whatever, <a target="_blank" href="https://www.businessinsider.com/botox-injections-fillers-plastic-surgery-gen-z-social-media-filters-2024-5">everybody gets Botox now</a>.)It's great that banks and credit-card companies are getting better at discerning which payments are fraudulent and which are legit. Many people have some horror story about having their credit card stolen or having their own legitimate transactions flagged as suspicious. And it's nice not to have to spend 20 minutes on the phone before a vacation explaining where you're going and when. Credit-card fraud protection is still far from perfect, but there's no denying that the technology is improving. On the flip side, it's also kind of wild to consider just how much financial institutions must know about you to make the right calls.I was curious about how it all works — and, frankly, a little creeped out. So I reached out to some credit-card companies and academics to learn more. Why don't people have to alert their credit-card companies about travel anymore? And, more broadly, just how have banks gotten so good at figuring out what's normal about our spending habits and what isn't?The Federal Trade Commission receives thousands of card-fraud complaints each year. The Nilson Report, which tracks the card industry, says payment-card fraud resulted in $33 billion in losses worldwide in 2022 and $13.6 billion in losses in the US. As such, credit-card issuers and banks are keen to do what they can to spot fraud. They want to keep their customers happy, and, more importantly, they want to stem their losses. In the US, the major credit-card issuers and banks <a target="_blank" href="https://www.businessinsider.com/personal-finance/credit-card-lost-stolen-what-to-do">generally have a zero-liability policy</a>, which means that when a customer gets scammed, the organization, not the customer, has to eat the cost.Years ago, whether a transaction went through was based on things like whether a physical card was present, whether you had enough money to make the purchase, and (if the cashier wanted to look) whether your signature on the receipt matched the one on the back of your card. In some cases, the cashier may have even asked for ID or called the bank to verify the funds. We've come a long way from those bad old days by using the same tools that power most innovations: data and computers. Credit-card companies and banks know a lot about us — where we shop, when we spend, and how much we're usually willing to pay for things — and they're getting better and better at turning that knowledge into action. While it's <a target="_blank" href="https://www.businessinsider.com/generative-ai-exaggeration-openai-nvidia-microsoft-chatgpt-jobs-investors-markets-2024-3">all the rage to talk about newfangled forms of artificial intelligence</a>, fraud detection owes a lot to machine learning, a field within AI that's been around for years. A bunch of data gets dumped into computer systems, and algorithms figure out patterns and relationships. The algorithms create decision trees to predict the likelihood of different outcomes and identify what may be considered normal or fishy. It's not that your credit-card company knows that you, specifically, would blow a bunch of cash on A and not on B — it knows that customers with your profile are in the "likes A" camp and not the "likes B" one."It's looking at what's happening that is very much out of the ordinary for your general behaviors," said Tina Eide, an executive vice president of global fraud risk at American Express. "And when I talk about general behaviors, it is generalized, right? It is not down to the specific purchase or to the specific merchant." Eide added, "The models are evaluating a trillion dollars' worth of transactions a year."The machines know more now than ever. Mike Lemberger, Visa's regional risk officer for North America, said that over the past five years the number of data points people generate with their credit cards has grown tremendously. People are increasingly using cards over cash. And they don't just have a physical card they're pulling out at the store — they've got their card credentials in their Amazon account, Netflix account, iPhone, etc. The more purchases the card issuer can analyze, the more accurate the fraud detection will be."Visa, we don't have consumer information — that's your financial institution that has that — but what we have is this triangulation of all these data points," Lemberger said. "We can create more and better scores, layer on top of that machine learning and AI abilities, and it becomes a much, much more powerful predictor, which we then feed into all of our partners to say, 'Hey guys, if you want to make the best decisions, here's a whole bunch of really good information.'"Visa isn't going to block your card directly, but it'll alert your bank that your purchase looks suspicious or that fraud has been detected at the merchant you're dealing with.This all seemed pretty simple until I talked to Yann-Aël Le Borgne and Gianluca Bontempi, a pair of researchers at the Université Libre de Bruxelles in Belgium who <a target="_blank" href="https://fraud-detection-handbook.github.io/fraud-detection-handbook/Foreword.html#authors">work on machine learning and card fraud</a>. They emphasized the vast scale of this fraud-detection technology. Companies and their algorithms are ingesting millions of transactions and creating so many decision trees to categorize certain activities that it can defy human logic, they said. Basically, the computer may be right that your transaction looks funky even if it's made in your home city at a fairly innocuous vendor, or it may be right that the transaction is fine even though it's made in a faraway place — but when humans try to figure out what did or didn't sound the alarm, nobody will really be able to pinpoint why."Machines can consider many more features, and at the end of the day it's not clear if all those features have meaning for humans," Bontempi said. "Humans are used to working with two, three features, at most five features, while machines can work with hundreds of features. So there are really different levels between what a machine can do."There are human-written rules, which are generally interpretable, and there are machine-written rules, which can be a black box. They're more accurate, but they may be harder, if not impossible, for people to reverse engineer. And banks may be using several different algorithms, making this even more complicated. Data scientists are the ultimate decision-makers, but the information they're dealing with is based on highly complex tech. When I explained to experts my somewhat embarrassing wings-versus-wrinkles conundrum and asked what may have triggered one alert and not the other, they offered up different explanations. Eide, from American Express, said that even though I hadn't booked my trip to Argentina with the credit card I used to buy the Botox, something else had probably tipped off the system that I was there. I realized I'd also bought a package of spin classes in Buenos Aires on my phone with the same card. I had also paid for a meal in the city. Lemberger, from Visa, emphasized that it's about all the data and spending patterns and said that given my spending patterns, the Botox likely matched my profile more than the massive delivery order."I hate to say this to you, but at the end of the day, all these data points build personas. Just like in marketing somebody would use personas to market to you, we're using that same technology to protect you," he said. "And the fact is that we use those data points to not just secure you but the whole ecosystem."At some point it occurred to me that the supercomputers that credit-card companies and banks are working with could know more about me than I even know or understand about myself."It's probable that the exact reason why a transaction caused your card to be blocked has no straightforward interpretation," Le Borgne said.I also asked whether there was a big difference in credit-card protections and debit protections and was told not really — maybe banks will be a little more restrictive about credit because they're technically lending you money that's not limited by your actual cash balance. I also asked if companies don't worry about preclearing travel because they don't care as much about losing money to fraud anymore, to which the answer was a hard no."At the end of the day, somebody's got to pay for the fraudulent activity," Lemberger said. Credit-card companies will give you your money back if you're a victim of fraud, but they'll find another place to recoup that money, <a target="_blank" href="https://www.businessinsider.com/credit-card-late-fees-cap-swipe-mastercard-visa-jpmorgan-rewards-2024-4">just as they always do</a>.Instinctually, I am not a technology-is-awesome person — if the AI really is going to kill us, I feel like we should unplug it. I'm not super freaked out about the privacy stuff, but I also don't love the idea that AmEx and JPMorgan and Citi have me so pegged. But it's cool that companies really are making fraud detection better, especially in a world where fraudsters themselves are constantly getting better. I don't want to be like "Yay, banks!" but maybe here the answer really is a little "Yay, banks!" At least that's the case until the next major data-privacy breach, at which point I will regret everything.<a target="_blank" href="https://www.businessinsider.com/author/emily-stewart">Emily Stewart</a> is a senior correspondent at Business Insider, writing about business and the economy.

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