Rumor: Supermarket reward cards pose privacy risk

Are supermarkets sharing the info you provide for your loyalty cards with other entities and using it for discriminatory pricing practices?

TRUE: And some are working to make consumers aware

There’s an unexpected twist to those supermarket reward cards that offer you deals and steals: an invasion of privacy, says Paul Stephens, director of policy and advocacy for Privacy Rights Clearinghouse.

"They’ll track your purchasing history and, depending on their terms of policy, they may share or sell that information to outside companies," Stephens told MSN News.

The Blaze and both reported on the issue, saying people offer private information — including Social Security numbers — to get rewards cards, so there's potential for use of this information that customers don't expect.

Related: Are store loyalty cards worth it?

"They may see that you only buy prices on sale, and they may see that someone else doesn’t care about sales," Stephens said. "So they may decide to charge the person that doesn’t care more."

Stephens, whose website offers an online fact sheet detailing what information consumers should provide to merchants, says he’s run tests with cards that proved stores use them in discriminatory pricing.

Stores also have a documented history of sharing information with law enforcement and government agencies: In 2005, supermarket chain Safeway provided information it received from a loyalty card to help in the arrest of a fireman suspected of arson.  

Though several companies have turned away from loyalty cards, major chains like Safeway and Kroger still use them. Neither company could be reached for comment.

While these practices might be insidious, they aren’t actually illegal. writes, "Since none of these organizations are covered entities under the Health Insurance Portability and Accountability Act (HIPAA) rules, there is no restriction on what those stores that issue loyalty reward cards can do with your information."

"We just want to make consumers aware that this is happening," Stephens said. "They may want to reward those stores that decide not to take your information and give everyone the same low price."

Related: Tips on customer loyalty cards

Related: Saving and budgeting tips from MSN Money



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