Offers for pre-approved credit cards still find their way into many mailboxes. While these offers may be enticing to some people, they should be approached with caution. They are often misleading and are usually not the best credit card for those trying to save money.
Why people receive pre-approved credit offers.
The lenders offering pre-approved credit cards often get the names and addresses from major credit bureaus to include Experian, Equifax, Innovis and TransUnion. Under the Fair Credit Reporting Act, these companies are allowed to put people’s names on lists for these offers regardless of if those receiving the mailings requested them or not.
No guarantees of receiving a card
Just because someone has been pre approved for a card does not guarantee they will receive a card if they respond to the offer. Lenders are, in fact, using a bit of trickery with wording to encourage people to respond. Technically, “pre approved” can also be interpreted as “not approved yet.” While the wording is misleading since most people assume a different meaning, it is legal.
Pre-approved credit card offers are, in fact, a form of targeted mass marketing. Those who receive offers have not been approved to receive cards but only screened as potential customers. The issuers are frequently looking for those they think they can make the most money from, i.e. those who are likely to carry a balance rather than pay in full every month. However, these companies do not want to make bad loans and will reject any applicant they consider too much of a risk.
While the offers are made to sound enticing, those interested in applying need to remember that what is advertised is often not what they will get. The rates advertised are those set before approval and may be different after. Generally, pre-approved credit cards offer some of the worst deals overall if theyare not made to those who have the strongest credit. They can be expected to incur higher fees without the rewards or signing bonuses that other cards offer.
The downsides of applying
Even those who really want another credit card should not necessarily apply for a pre-approved card. There is only so much credit that any one person will be offered. If they get a pre-approved card, they may use up their available credit and get turned down for a better card they apply for later. Furthermore, once the application has been sent, the card issuer will inquire about the applicant’s credit history. This inquiry will remain on the credit report, and too many inquires over a short period of time can sometimes negatively affect one’s credit.
Alternatives to pre-approved credit cards
For those who use them properly, credit cards are a great convenience and can even help people better manage their money. Depending on one’s situation, a pre-approved credit card may be fine when other choices are limited. However, it is first necessary to look at the alternatives.
- Get out of debt and maintain good credit: It is probably not a smart move to get a credit card when one already has debt. By reducing personal debt first while maintaining strong credit, it is possible for those who need credit cards to get the ones with the sweetest offers.
- Shop around for the best deal: Check all possible sources from the local bank to online offers to find the right card. Offers with the lowest fees and highest bonuses are not likely to come in the mail but through research.
- Consider a secured credit card: For those who have not had the chance to establish credit, a secured credit card, in which the spending limit is set by how much is deposited in a bank account, could be the best way to get started. This will offer all the conveniences of a credit card and a chance to build credit.
Dangers of pre-approved credit card offers
The mailings of these cards often contain a lot of information that is invaluable to identity thieves. Therefore, these applications should be thoroughly destroyed and only mailed from a post office.
For those not interested in receiving these offers, there is an easy way have them stopped. By going to OptOutPrescreen.com or calling 1 (888) 567-8688, it is possible to have one’s name removed from these mailing lists for either a set period of permanently.