Ins And Outs Of Credit Card Pre-Approval
If you have a credit card, or even if you don't, you have probably received a stack of credit card letters in the post, telling you that you are ‘pre-approved' for a great credit card deal. Although some of these credit card deals are genuine, many are not what they seem or are even complete scams. If you know want to make sure that you don't fall victim to these poor deals, then here is some advice on the ins and outs of credit card pre-approval. What does pre-approval mean? Although in other areas pre-approval might mean that you have secured a definite amount and definite terms with a lender, depending on final credit checks, with credit card pre-approval mail it does not mean this. It simply means that you have a credit score that matches the criteria to let you apply for one of these cards. You are not guaranteed specific terms, nor are you even guaranteed to be accepted.
Why do I get sent these letters? Often, credit companies send you these letters because your credit score matches their criteria for card applications. Card companies are always looking for new customers, but if they simply sent out letters to everyone it would cost them a lot of money for little return. Instead, they search consumer credit ratings to look for people who match specific criteria. Whether this is a good credit rating for high limit cards or a bad credit rating for the sub-prime market, you are targeted because they think you are more likely to respond to their offer. Are these offers real? Although many of these offers are not what they first appear to be, they are not technically illegal.
They are offering you the opportunity of ‘up to' a certain credit limit, and they are not saying you are approved, only ‘pre-approved' or ‘pre-selected. This means that they can change all of the conditions of the card you are sent and they are still not technically lying to you. Although this does seem morally wrong, it is your responsibility to check the information before applying. Common techniques used These offers are often misleading, and there are certain tricks that the card issuers use in order to make more money out of you. Usually these terms are listed in the small print, but because most people don't look at this they know they can get away with it. One common trick used is to charge you a very high interest rate, but put a clause in the contract saying you must transfer your entire current balance from another card onto the new card. This means that they are putting a balance on the card straight away at a higher interest rate than you might currently pay. Another common trick is to offer you ‘up to' a massive credit limit, but then give you something much lower. For example, they might offer you ‘up to' £10,000, but only give you £1,000. Read the terms The only way to really stop yourself being caught out by these offers is to read the small print carefully if you are thinking of applying.
However, the best way to not get caught is to simply shred the offers and put them in the bin. You are much more likely to get a better deal, even with the same card issuer, if you make inquiries yourself and shop around for the best deal.
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