What Exactly Does Pre-approved Mean for You?

It can be exciting to see a bunch of credit card offers in your mailbox, all addressed to you that states you have been pre-approved for a great sounding credit card with a high credit limit. It can be very tempting to fill out every single one of the applications based on the promotional details but are credit card offers you have been pre-approved for all they are cracked up to be?

The first question that should come to mind is how on earth can you be pre-approved by the credit card company that has no information about your financial status? Well, the reality is that most of the credit card offers you receive are derived from information you have provided to other sources. Think about forms you might have filled out over the last few weeks or months. Perhaps you have signed up to receive information on a specific product or service or completed another application for a line of credit. Maybe you didn’t take the opportunity to look at the fine print on the form. Some of these forms are an information-gathering tactic, used by companies who want to sell you something. By filling out such forms, you are giving them your mailing address and some other important information the company’s marketing department craves.

From these forms, credit card companies can often determine your credit background. People who have a history of credit problems will find they receive a majority of offers from companies offering secured credit cards. Secured credit cards are a good way for a consumer to rebuild their credit. Secured credit cards require a deposit into an account and it helps limit your credit spending because you can not exceed the amount you have made in deposits when using the credit card. Secured credit cards will help you improve your credit score over time. However, not all secured cards are the same and any offer your receive in the mail should be looked at carefully so the terms and conditions are compared and completely understood. Typically, pre-approved secured credit cards will often carry higher interest rates that conventional credit cards and there are usually no additional incentives or rewards with secured cards.

Consumers with better credit scores and histories will likely receive pre-approval offers for conventional, non-secured credit cards. These offers too will require research and comparison because the fees, interest rates, and rewards will vary from card to card. Applying for just any credit card without looking at the whole package can be a big financial mistake. The cards that offer seemingly great rewards options may have higher than average interests rates.

While you may be pre-approved for a lot of different cards, it is your responsibility to sort through the piles of offers and decide which card is the best for you. Even in this unstable economic climate, there will still be consumers who opt to not research the cards and simply apply for every card offer they receive in the mail, whether they can afford it or not. Not only is this a big financial disaster waiting to happen, you are also having a negative impact on your FICO score by having too much credit. Additionally, if you are applying for a lot of different credit cards at the same time and get denied for credit, you will also be damaging your all-important credit score.

Remember that now is the time to start responsible credit card use practices by selecting the card that is right for you and not fall into the temptation trap to have it all or have the “best” cards. There is a lot of competition in the credit card industry but the only thing that should matter to you is what works best for you in your life.

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This entry was posted on Friday, February 13th, 2009 at 7:07 am and is filed under Choosing a Credit Card, Credit Card Advice, Credit Card Applications. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.