Pre-Approved Credit Cards - Advantage or Evil?

By: Anne Sparks
Submitted: 2007-09-25 12:13:56
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In the century of plastic money and 'buy-before-you-earn' principle of living banks and card companies fight to the bitter end to get hold of another bite of consumers' loyalty. But at the same time they won't lend their money as simply as it may seem. Generally, the bank accepts a list of potential credit card applicants. After a bit of sorting, the bank sends pre-approval letters to those who are likely to apply.

In practice, if you make a credit card application for the pre-approved offer, the bank makes another inquiry on your credit which can sometimes result unfavorably. But this is not the only reason why one should feel dubious about pre-approvals. Let's consider the matter to get the priorities right.

1. There are numerous preapproved credit card applications to be found in your mailbox daily.

You can look through many credit card offers by different banks, it enables you to watch the trends in the credit card market and makes it easier to find a card for your needs. On the other hand, you can get confused in the masses of paper, overlook the important correspondence or apply for too many credit cards, being unable to resist the temptation.

2. You receive pre-approvals in the form of common letters, they are delivered right into you mailbox.

It is easy to read the preapprovals and compare the terms they offer, but it is also risky to receive them, as some people can get access to your mailbox and apply for a credit card using your identity (in most letters you only have to put your signature, other blanks being filled out already). In this case the card can be delivered to the address one indicates and you will receive only statements.
Besides, you can be careless enough to throw these letters away, without tearing them to pieces, thus they can be found by criminals and used as described above.

3. All the letters say you were pre-approved for credit cards, so you don't have to worry about denials or credit check.

In cases, when the letter says you were pre-approved and contains a card, you were really approved by the bank and you can use the card (though the terms implied can be not very advantageous). In other cases, when you have to fill out an application, there is no guarantee that you will be issued the card. To tell you more, there is a possibility of your credit score being damaged. Before sending a pre-approval to you, the bank get a list of people to whom they can send letters. This is a soft inquiry, and you credit score is not influenced. As you fill out an application (for which you are not yet approved, actually), you credit score is checked for a second time, and this is a hard check, as it is made on your request this time. If you happen to be disapproved, your credit score will get lower.

The above one is the most serious danger a pre-approved letter can cause.

There are several rules a wise consumer should stick to. Do not be sure you are universally approved, if you receive pre-approved credit card applications. They are sent to those with no credit history even. Know your credit history, before application. Do not apply for a card by an unknown bank; do not apply for too many cards. Destroy all the letters thoroughly instead of simply throwing them away. Opt out from getting pre-approvals, if you do not need them.

And, finally, go and search for a good credit card on your own, it will bring better results that looking through tons of colorful paper.

Article source: Expert Articles