Since it's quite difficult to obtain a new credit card without a credit history check, many people get excited when they receive a preapproved credit card offer in the mail.
Most people don't even think twice about the offer and send in their "preapproved" application form, duly filled out. Unfortunately, they have no idea that the offer is really a gimmick used by credit card companies to get people to apply for a card with less favorable terms.
preapprove this
Credit card companies use tricky tactics to mislead people into thinking they've been "accepted."Think about it for a minute. If you really qualified for the credit card, you wouldn't get a "preapproved" form; you would get an automatic approval letter or, better yet, the actual credit card in the mail.
When it comes to credit card applications, there are two possible outcomes: approval or rejection. Therefore, "preapproved" is the equivalent of "unapproved." Do you see the linguistic confusion?
Everyone is basically preapproved for everything, as the term simply signifies the state one is in prior to being approved. So, technically, you were preapproved for a credit card the day you were born.
What's the catch?
who's fooling who?
Credit card companies have a lot of cash to lend, but they won't just give it away to anyone. First, each bank receives a list from credit bureaus of all those who fit the criteria specified by the bank. The bank then sends its preapproved offers with enticing terms.When you send in this application, the bank runs another credit check. If your credit situation has changed negatively, chances are you'll be offered a card with a lower credit limit and a higher interest rate.
What about the enticing "preapproved" terms? Well, those were terms set out before you were approved. But after reviewing your credit rating, credit card companies will adjust the terms to better match your needs (or theirs, as the case may be). You can bet that the readjusted terms will be less favorable than the ones originally offered.
get rid of it
If you receive a "preapproved" application in your mailbox, I highly suggest that you throw it away. If you already applied for a credit card and did not obtain the rate you wanted, cut up the card and return it along with a letter of explanation. The bank is likely to offer you a better deal.If you want a credit card, you don't have to wait for a bank to send you an invitation. By shopping around, you have a greater chance of finding a better deal than the one offered in the mail.
the best rates in town
The problem with shopping for a credit card is that you only know the exact interest rate once you open the account, which is pretty much the equivalent of buying a car without knowing its price.Therefore, before you make your final decision, do some research and make sure the credit card plan is best suited to your lifestyle. To this end, I recommend that you check out BankRate.com.
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