WHAT IS A PRE-APPROVED CREDIT CARD?

You've probably received junk mail proclaiming that you have been pre-approved for some type of a credit card or a loan. In these packets you'll receive glowing information about giveaway programs for those who apply, offers to transfer your balance that are hard to refuse, and super interest rates. These people are also going to play to your pride by telling you that you have been recommended for this special deal. These companies do everything they can to entice you to take their credit cards, but in the end, you could find yourself paying exorbitant hidden costs. Additionally, you may be wondering exactly what it means that you've been pre-approved and why you were chosen.

Pre-approved doesn't mean that you're actually going to be approved. Credit card companies get your name a variety of ways, such as by buying lists of names or from certain websites where you may have supplied information in the past. Therefore, this means that although they tell you you've been specially chosen, it actually means that you were on the list they bought, and you, along with thousands of others, are being offered this great deal. In reality, you'll be expected to apply for the credit just like anyone else, and the company will go through your credit history with a fine-tooth comb to make sure you're really someone they want. That's not quite as flattering as you thought, is it?

If you are employed and maintain excellent credit, you can expect to get a lot of credit card offers in the mail. Don't make the mistake at jumping for the first one you receive, because there definitely will be more coming. Companies curry favor with those who have great credit, because they are the least risk. Some of the offers you receive will probably be legitimate and may be worth investigating.

When your credit rating isn't so good, you'll still receive pre-approved offers, but they won't be as full of perks as those offered to people with great credit. You may find that after you complete the application process, they'll want to issue you a card provided you'll pay a deposit. This is done to make sure that they won't be taking a great deal of risk with you. The deposit will have to be paid before the card is activated. In addition, you aren't going to be offered the great interest rates that those with better credit will enjoy.

In a nutshell, take any mail you receive that says you've been pre-approved for something with the grain of salt. Most of these offers are nothing but unsolicited junk mail to be tossed in the trash.

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