There are many credit card companies which go on sending pre-approved offers to a selected group of customers. In fact you will find many of such offers in your daily mail. It is the business strategy of these companies to get new customers to replace those who leave.
Many people get excited with the idea that they have been already approved and it is just signing and mailing that letter of offer to get a new credit card. They think they are honored to get such an offer and it is a boost to their purchasing power.
Things are not that easy. While deciding to get a particular credit card, you’ll need to assess the overall value of their offer. Factors like total cost of the ownership of such card (interest and fees charged), quality of their bonus program, and the transfer rate are very important.
Deciding on the total cost of ownership – Sometimes the interest rate offered initially is very low for transfer of your old balance. However the interest charged after a period of time may be expensive. Also, interest for late payment may be exorbitant. Some offers look attractive because of very low annual fee for the first year. However the fees can dramatically rise from the next year. There may be fees for transfer of balance. The late payment fees, in addition to the interest on late payment may be imposed. All these fine prints may not be noticed easily on their glossy offer letter.
Making assessment of the bonus program – there are many programs which are customized by credit card companies, consisting of offers for airline miles, merchandise or cash back programs. Remember, there may be fees payable for and joining or continuing with these kinds of programs. This is possible even if the offer insists on $0.00 annual fee. Also, your spending pattern is important. You may not be able to make much of the bonus program if your spending pattern does not match with the offer.
Penalties for late payment – if you have a habit of paying regularly your entire balance at the end of month, then the penalties for late payment will not bother you. However if you are looking at the new credit card as a tool to make additional shopping, beware of the clauses providing harsher penalties for late payment.
About all, a pre-approved offer is not giving you any sort of guarantee that you would be issued a credit card. If the formal application shows some mis-matches with the set criteria of the offering company, you are still likely to be refused. If your credit status is worsened since the issue of the original offer, you may get a card with higher rate of interest or with harder terms than the ones mentioned in your offer.
It is entirely up to you whether or not to accept a pre-approved offer. However, it’s a good idea to do some online research on the company sending you such offer. Make sure that you are dealing with a reputed company and your credit history as well as your finances is not at risk.