By John Campbell
Pre-approved credit card offers can sometimes be a classic example of bait-and-switch marketing. When it comes right down to it, pre-approval means little, if anything at all.
If you’re like most consumers, you probably get several of these pre-approved credit card offers in your mailbox every year. The better your credit is the more offers you’ll get and the better the offers may seem at first glance.
You may have seen many pre-approved offers promising a credit line “up to” several thousands of dollars. The credit card balance transfers you’ve been offered may promise “rates as low as zero percent.” These statements are carefully worded so that the credit card companies have flexibility in what terms they actually offer you. They never say exactly what you’ll get, just what you may be approved for. Thus, you’re pre-approved.
Receiving a pre-approved credit card offer in the mail is almost the same thing as having a salesman tell you, “You qualify for the opportunity to find out if you we’ll actually give you the best deal advertised.” All pre-approved really means is that you “may” be approved for the offer as advertised. It’s no guarantee that you’ll actually be approved for anything.
If you read the fine print attached to any pre-approved credit card offer you may see something along the lines of “terms and conditions are subject to change.” Once you sign up for a pre-approved offer, the terms of the offer could change drastically or not be what you expect when you finally get approved and get a new credit card in your name. You could even be rejected for the offer, even though you thought you were approved.
Getting pre-approved for an offer isn’t difficult. Before a credit card company sends out any pre-approved offers, the company will contact the three national credit bureaus (TransUnion, Equifax and Experian) and provide them with a list of consumers who, for one reason or another, are listed in the company’s marketing database. The credit bureaus then scour these lists and send the credit card companies an updated list of consumers who match a range of credit scores and other criteria. These types of inquiries may show up on a detailed credit report but will never be seen by other creditors or affect your credit score. If you match the minimum criteria established by the credit card company you’ll likely receive a pre-approved credit card offer in the mail.
When you first sign up for a pre-approved credit card offer, your credit will be checked directly by the lender who will be issuing you the credit card. If you have an excellent credit score and a low debt-to-income ratio you may actually qualify for the best possible deal from the credit card company you apply with. If your credit score has been lowered since the initial inquiry or your debt-to-income ratio isn’t at a certain threshold, the terms of the offer will likely be altered. The $10,000 line of credit you were expecting could suddenly become a $2,000 line of credit when you receive your card. The $2,000 balance transfer you requested could become a $500 balance transfer. Until you receive your new card and can look over the final terms and conditions, you won’t know what you’ll really be getting.
If you’re ever in doubt about what you may truly qualify for with any pre-approved credit card offer make sure to read all the fine print carefully. If the offer sounds too good to be true it very well may be if your credit isn’t exceptionally good. Whatever you do, make sure to ask lots of questions. If the credit card issuer can’t provide you with some concrete details as to what you’ll qualify for before you apply then you’ll probably be wasting your time if you sign up for whatever is being offered.
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John Campbell is the writer and editor of CashBuzz, A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.
