Even if you don't have a credit card, you've probably gotten a bunch of letters in the mail telling you that you're "pre-approved" for a great credit card deal. Some of these credit card deals are real, but many of them aren't what they seem to be or are outright scams. If you want to make sure you don't fall for these bad deals, here are some tips on the ins and outs of getting pre-approved for a credit card.
What does it mean to be pre-approved?
Even though pre-approval might mean you have a set amount and set terms with a lender in other situations, this is not the case with credit card pre-approval mail. This depends on the final credit checks. It just means that your credit score is high enough to meet the requirements for one of these cards. You aren't guaranteed any specific terms, and you aren't even sure you'll be accepted.
Why do these letters keep coming to me?
Most of the time, credit card companies send you these letters because your credit score meets their requirements for getting a card. Card companies are always looking for new customers, but sending letters to everyone would cost them a lot of money for not much return. Instead, they look at people's credit scores to find people who meet certain criteria. Whether you have good credit for high-limit cards or bad credit for the sub-prime market, you are targeted because they think you are more likely to take them up on their offer.
Are these deals true?
Many of these offers are not what they seem to be at first, but they are not technically breaking the law. They are giving you the option of "up to" a certain credit limit, but they are not saying that you are approved. Instead, they are saying that you have been "pre-approved" or "pre-selected." This means that they can change the terms of the card they send you and not technically be lying to you. Even though this seems morally wrong, it is your job to make sure the information is correct before you apply.
Common techniques used
Most of the time, these offers are not what they seem to be, and the card companies use tricks to get you to spend more money. Most of the time, these terms are in the fine print, but they know they can get away with it because most people don't read it. One common trick is to charge you a very high interest rate and put in the contract that you must transfer your entire balance from another card to the new one. This means that they put a balance on the card right away at a higher interest rate than you might pay now. Another common trick is to tell you your credit limit is "up to" a huge amount, but then give you a much lower number. For instance, they might offer you "up to" GBP10,000 but only give you GBP1,000.
Learn the rules
If you want to take advantage of one of these offers, you should make sure to read the fine print very carefully. But the best way to keep from getting caught is to just shred the offers and throw them away. Even with the same card issuer, you are much more likely to get a better deal if you ask questions and look around for the best deal.
