Are Pre-Approved Credit Offers Any Good?

Are Pre-Approved Credit Offers Any Good?

People are usually excited to get a new credit card, and rightfully so.  But just because you are pre-approved does not mean that’s the right card for you.  There are some things you can do before accepting enrollment offers that might turn the experience into an even happier one in the end.

Pre-approval is a technique that credit card companies use to replace members.  When members fall off, these companies seek out new customers to replace them.  You are generally solicited for membership through the mail.  Most everyone has received one of these direct mailers at their home.  The pre-approval is designed to elicit a positive response from the person receiving it.  It’s planned to make you feel special and excited to participate.  It is an impulse sale.

While the offer may be good for you, you’ll want to assess some salient points before signing on.

You’ll want to consider fees and interest charges.  Is there a membership fee?  Is there a bonus program and what is the transaction rate?  Are they offering you a low interest for balance transfer and then skyrocketing that rate after an initial period of time?  Is the penalty for late payments very high and will it affect your interest rate, causing subsequent purchases to cost you more even when the payments are made in a timely fashion?  Sometimes the first year annual fee is very enticing, but rises exorbitantly thereafter.  You need to consider all these fine-print possibilities before responding to this “generous” offer.

Many of these pre-approved offers come with hard to resist bonus programs.  You might get free airfare or cash back.  Wow, they want to reward you for using their card.  But is the reward worthwhile?  All of these great rewards probably are fee-driven.  You’ll probably have to join the program, and pay a fee to do so.  You may even have to continue to pay fees to remain in the bonus or rewards program even when the offer says ‘no annual fee’.  And, will you use the card often enough to do well with the rewards?  These programs often feature a minimum you will need to meet to qualify for the bonus program.  Does your purchase pattern make sense for this or will you need to spend more than usual on your credit card to redeem your rewards?

READ  Money Secrets Of The Amish by Lorilee Craker - Personal Finance Book Review - Shopping Secondhand

Most of all, please realize that a pre-approved offer is no way a promise that this company will actually issue you a credit card.  When reviewing the offer, you’ll find criteria you will need to meet to actually get the card.  If your credit rating has changed, the company may issue you a card with a higher interest rate that suggested in the bulk mailer.  They may tie additional fees to your membership for the same reasons.

So, don’t just accept your pre-approved offer on impulse.  Be smart and check out the company and make sure the offer is a good one for you.  This way, when you do get the card, you can safely feel excited about using it.