What does your Credit Card company know, and When did they Know it?

I found this NYT article very interesting, and scary. If you use your credit card as often as I do, I suppose that they would know quite a bit about you. For example, this week I received a letter from Discover Card (which I often use).  The letter advised me that DC was extending their 1% cash back offer to 2% for purchases made at military exchanges and commissaries between Memorial Day and Labor day for me.
 
How did they select me to send this letter to? Could it be that they know that I occasionally charge things at military exchanges and commissaries?  
 
How much more do they know about me?
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Put another way, credit-card companies are becoming much more interested in understanding their customers’ lives and psyches, because, the theory goes, knowing what makes cardholders tick will help firms determine who is a good bet and who should be shown the door as quickly as possible.
Luckily for the industry, small groups of executives at most of the large firms have spent the last decade studying cardholders from almost every angle, and collection agencies have developed more sophisticated dunning techniques. They have sought to draw psychological and behavioral lessons from the enormous amounts of data the credit-card companies collect every day. They’ve run thousands of tests and crunched the numbers on millions of accounts. One result of all that labor is the conversation between Santana — a former bouncer whose higher education consists solely of corporate-sponsored classes like “the Psychology of Collections” — and the man from Massachusetts. When Santana contacted the man last month, he was armed with detailed information about his life and trained in which psychological approaches were most likely to succeed.
http://www.nytimes.com/2009/05/17/magazine/17credit-t.html?_r=1