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Sometimes it seems like the only mail that’s being delivered is bills and “pre-approved” credit card offers. The advertising pitch on the envelope is usually pretty tempting too. Outrageously low interest rates, double or triple the normal rewards, and exceptional balance transfer terms.
How did they know to pre-approve you for their fantastic offer? In these difficult economic times, these offers may seem more and more appealing, but it’s usually best to rip up those letters and chuck them in the trash.
Pre-Approvals for Everyone
If a credit card company has your name and mailing address, consider yourself pre-approved. Whether you’re actually approved for the offer that the credit card company promoted in the first place will depend on your credit profile. Once you sign the application and send it back to them is when they actually pull your credit reports.
The credit card companies are under no obligation to offer you the “pre-approved” terms that you thought you would be getting. They can deny you, or perhaps even worse, offer you a lower credit limit with significantly higher interest rates. Classic bait and switch.
Doing Your Homework
If you are in the market for a credit card, it’s highly advisable that, just like with any other financial investment, you do some research before agreeing to the first card that comes your way. Sites such as BankRate.com will list competing credit card rates and all associated fees.
Also, your bank may be a good place to establish a line of credit. Often banks that have done business with you over the years will be willing to offer reasonable rates to make sure that all of your finances are running through them. Of course this will only work if you’ve been mature and responsible in your dealings with them. Don’t expect a credit card offer from a bank if you’re missing 3 mortgage payments a year with them.
Preying on the Financially Weak
Credit card companies make money when their borrowers are paying ridiculously high interest rates. As a result they’ll often prey on those who are involved with credit repair, debt relief or perhaps are rebounding from a recent bankruptcy.
Typically these consumers are having a hard time establishing credit and see a “pre-approved” offer as their chance to start creating a positive credit profile. The credit card companies will ultimately approve borrowers for low amounts and make money on incredibly high service fees and interest rates. The end result is that the lender makes money, while the borrowers continue to reproduce their bad credit habits.
Ditching Pre-Approvals Entirely
The credit bureaus themselves will allow you to opt out of many solicitations. If you contact the bureaus directly, you can get them to stop selling your information for the sake of pre-approved offers for up to five years. It may not stop all of the offers from coming in, but it’s a good start.
Just like everything else in these difficult financial times, you’re going to have to work if you want to improve your financial standing. These pre-approved credit card offers are meant to get you hooked before they pull the carpet out from under you and give you a card that’s more suitable to their terms.
Ultimately, the choice is up to you as to how to handle these solicitations, but you’re much more likely to get a credit card that’s right for your needs if you put a little effort into it yourself. Spending an hour or two researching a card that fits your financial situation could save you hundreds or thousands in the long run. Isn’t an hour of your time worth it?