Pre-Approved Credit Card Offers: What's the Catch?
The Truth About Pre-Approved Credit Cards
Every day, people open their mailbox to find it flooded with all sorts of stamped goodies, from birthday cards and bills to sale flyers, catalogs, and special pre-approved offers from a multitude of credit card companies. Often, they get so excited about these "customized" promotions that they fail to question exactly how "special" the offer really is or how it came to rest in their mailbox.
How Credit Card Companies Find You To Send Pre-Approved Offers
Although individuals must meet certain criteria to be considered for such pre-approved credit offer, they are by no means the only ones receiving the pre-approved credit card application. In an effort to maintain and increase growth, credit card companies will buy lists of individuals who meet their criteria from the three major credit monitoring bureaus and then target those folks with a mass-mailed promotion in hopes of signing up new customers. And although most of the individuals who respond will indeed receive a new credit card, their pre-approved status is no guarantee.
Pre-Approved Really Means "Maybe"
When someone returns a completed, pre-approved credit card application to a credit card company, a credit check is run on the individual. Ultimately, it's this credit report — rather than the pre-qualifying criteria — that will determine whether the person receives a credit card. For example, credit card companies often refuse to issue even pre-approved credit cards to people who have insufficient income, poor credit history, or a low credit score or who owe a significant portion of a credit line on another card.
It's important to read the fine print and between the lines of any offer or contract, including those from credit card companies. For instance, language like "as low as" and "up to," which are often seen in pre-qualified credit card offers, are not "promise" statements when it comes to the interest rate that you'll end up with or the credit limit that you will receive.
When Pre-Approved Is a Pretty Good Thing
Depending on your financial circumstances at the time, a pre-approved credit card offer can be worth your consideration. For example, if you get an offer for a card with a lower interest rate than the card you currently have, it can make sense to to fill out the credit card application form and, if you're accepted, to transfer the balance to the new card and save a few dollars every month. Similarly, if you're still in the process of building credit history information and you manage your new card wisely, a pre-approved credit card can offer you a step in the right direction.
Getting Off the List
All these pre-approved credit card offers carry a certain risks. For example, the offer may be stolen from your mailbox, and the new account can be open on your name without your consent. This may lead to identity theft fraud. If you're someone who has no desire to apply for a new or another credit card and you therefore don't want to receive pre-approved offers, you can take advantage of a clause in the Fair Credit Reporting Act (FCRA) that grants consumers the right to take their names off the pre-qualified lists. Consumers can either write a letter to the three major credit bureaus —Equifax, TransUnion and Experian — or use an automated service (1-888-5-OPTOUT) that the credit bureaus employ.