The usual process for getting a credit card is searching for an account with good terms, filling out an application and waiting for approval or denial. Pre-approved credit card offers remove some of the uncertainty because they come directly from card issuers and go to pre-screened customers who are very likely to meet the approval requirements.
A pre-approved credit card is a card obtained through a marketing offer. You do not seek out the card yourself; the bank sends the offer to you. The Federal Trade Commission explains that card issuers buy consumer information from the Experian, TransUnion and Equifax credit bureaus. They request mailing lists of people who meet specific guidelines, like a minimum credit score, and send out pre-approved applications to everyone on those lists. You go through a streamlined approval process if you redeem the offer.
Pre-approved credit cards often have very attractive terms. For example, a bank might offer you a very low introductory rate and balance transfers with no transaction fees to lure you away from your current card. You may get an offer for a no-fee cards that offers airline miles, reward points or other incentives for making charges. Read such offers carefully because they usually have limitations. For example, the Board of Governors of the Federal Reserve System advises that banks may not raise interest rates on new accounts for 12 months, but promotional rates only need to last for six months, as long as the time frame is disclosed to you in advance.
Your chance of getting a pre-approved credit card is high when you redeem the offer, but acceptance is not guaranteed, despite words like "pre-approved" or "pre-qualified" on the application, according to Fox Business writer Erica Sandberg. You get the offer because you meet certain criteria, like a particular credit score or income level, but the bank still considers your overall credit report and recent activity. Extremely high balances on other cards, a recent rash of late payments or other red flags may cause rejection. The bank is under no obligation to open the account for you, despite what its marketing materials imply.
Pre-approved credit card offers expose you to higher identity theft risks because criminals sometimes troll mailboxes and steal them to open fraudulent accounts. You are legally entitled to stem the flow of offers in your mailbox by opting out through a special website, Optoutprescreen.com All three credit bureaus stop selling your information for marketing purposes when you make a request through the website. You have a right to opt back in temporarily when you are searching for new credit cards.
- Federal Trade Commission; Prescreened Offers of Credit and Insurance; June 2008
- Board of Governors of the Federal Reserve System; New Credit Rules Effective Feb. 22; March 2010
- "Fox Business"; Got a Preapproved Credit Card Offer? Sorry, You May Not Get It; Erica Sandberg; September 2010
- IdentityTheft.info: How to Opt Out