Pre Approved Credit Cards - Be Careful!

Many credit card companies mail out offers for Pre Approved Credit Cards by the ton. Chances are good that if you have a bank account then you already get some of these in your mailbox every single week, maybe even from the same lenders every single week.

It is important to understand that pre-approval just means that the bank or financial institution has found your name on a mailing list next to some facet of credit underwriting they find moderately desirable. Maybe you are in roughly the right income level. Maybe you’ve had a savings account for a certain number of years, an auto loan that you’ve been paying more or less on time, or maybe you are a recent home buyer. None of this means the credit card company will actually give you any of the pre approved credit cards if you respond.

Bulk mail depends on volume to be profitable. Out of every bulk mailing, if 3% of the mail sent provokes a response it is considered a successful ad campaign. So these offers for  pre approved credit cards are sent out to lots of people. Reports have been made of dogs and small children receiving these offers, as well as people who are long deceased.

You can opt out of pre-approved credit card offers by going to the website https://www.optoutprescreen.com/?rf=t and following the instructions there. Optoutprescreen.com is managed by the major credit reporting agencies Experian, Equifax, and TransUnion.

You have a choice of opting out of the offers for five years by filling out the form at the website and electronically submitting it or you can opt out permanently by printing a form, filling it out, signing it, and mailing it in. For people who want to receive these offers and are not getting any, there is also an option to opt in.

A good article on the pitfalls of accepting pre-approved credit card offer and specific things to watch out for is available at http://www.foreignborn.com/self-help/credit_cards/5-precautions.htm.

In general, if you need or want a credit card or another credit card, it is much better to shop around yourself and find one that meets your needs instead of randomly accepting a pre-approved credit card offer you get in a piece of junk mail.

Twice a year, the Federal Reserve publishes a list of the credit card offers, terms, and conditions currently being offered by various financial institutions and credit card companies. You can view this list at

http://www.federalreserve.gov/pubs/shop/survey.htm

Look for a card with a low interest rate and no annual fee, and read all the terms and conditions carefully before applying. If your credit is less than ideal, watch out for application fees, processing fees, and required credit insurance, which can end up costing you more per year than the available credit on the card.

If you are attracted by perks such as frequent flyer miles, cash back rewards, and points that you save for merchandise, make sure hidden fees and/or a high interest rate isn’t off-setting the value of these perks. Often frequent flyer credit cards have very high interest rates compared to other cards.