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Pre-Approved Credit Card

Companies use pre-approved credit card offers are a popular method of gaining new business.

Having several credit cards accounts open can affect the bearer's credit rating. [©Jupiter Images, 2010]
©Jupiter Images, 2010
Having several credit cards accounts open can affect the bearer's credit rating.

Pre-Approved Credit Card

People receive pre-approved credit card offers in the mail almost daily. Some of these offers come with the promise of having a credit card after a five-minute phone call with the financial institution, or by filling out a quick online application over a secured network. People are often confused about what a pre-approved credit card actually is and what it means to be pre-approved.

What Is a Pre-Approved Credit Card?

Credit card companies are competing for customers with good credit and who use their credit cards responsibly, making payments on time. Because of this competition, financial institutions are constantly monitoring credit information and sending out pre-approved credit card offers to people who they feel will make good credit card users. When someone receives a pre-approved credit card offer, they must fill out an application before they actually receive the card.

These pre-approved offers will state the terms of the credit card, such as a low interest rate on balance transfers or no interest charged on purchases for a certain amount of time. The pre-approved credit card offer will also usually include a statement about the credit limit that the customer will be approved for, depending on the information given on the application. These pre-approved credit card offers also state that people who make late payments or make purchases above their credit limit may lose the benefits of the offer. The offer should tell a prospective credit card user how long he will have to make a payment on purchases before he is charged interest.

When people receive pre-approved credit card offers in the mail, they often ignore them and throw them away. Identity theft often occurs with these pre-approved offers. Identity thieves take offers out of mailboxes or trash cans, pretend to be the person listed on the application, and receive a credit card in someone else's name by changing the address on the account. Pre-approved offers, applications, and credit cards should be shredded before disposal if they are not going to be used.

How Does Someone Get Pre-Approved?

Credit card companies spend money to mail out pre-approved credit card offers and applications, and so they will often target people whom they think will be more likely to fill out the applications and take their offers. When a company is ready to do a mailing, they look for credit information. They may send a list of requirements to the three major credit bureaus: Experian, Equifax and TransUnion and collect names and addresses of people who meet these minimum requirements. Another thing the companies may do is use a marketing database to collect names of potential customers, send these names to one of the credit bureaus, and send offers to the people who have good credit according to one of the credit bureaus.

Financial institutions are not always looking for people with good credit. They may be looking for customers with slightly damaged credit who may be willing to pay high interest fees or an annual fee to establish credit and fix their financial problems. In this case, the credit card companies would send pre-approved offers without good benefits to these potential credit card users.

When people view their credit reports, they may see that a bank or credit card company is listed that they do not have an account with. Next to the name of the company, it will say promotional, which means that a credit card company checked out the credit history of this consumer. It does not mean that he was offered a card or accepted a pre-approved offer. When creditors are checking out people's credit scores for major purchases such as a house or vehicle, or credit card companies are approving applications, these promotional items do not show up since they were not initiated by the person.

What Does Pre-Approved Actually Mean?

When someone receives a pre-approved credit card offer, it does not mean that he will automatically get a credit card from this financial institution, or he may not get the particular credit card that is being offered. What it actually means is that the credit card company has collected financial information on a person. Based on this collected information, he qualifies for the credit card.

However, he still has to fill out an application and answer all the questions. These answers may differ from the information that the credit card company was able to collect on him. He may not qualify for the credit card that he was originally pre-approved for, and then his application will be denied. He might qualify for a lesser card with this bank or company, which may or may not be offered to him at that time.

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