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Facts about pre-approved credit cards

Credit cards can be a great help when you are short on finances. However, there has been cut throat competition among credit card vendors to lure as many customers to buy their credit cards. Each one of us receives phone calls and email offers for credit cards with 'low interest rates' from numerous banks on a daily basis. Some of the banks even promise lifetime free credit cards. But, does that mean that you should opt for them or outright reject them? There can actually be a completely different route based on extensive research and evaluation of your needs.

Pre-approved credit cards attract a number of customers due to a sense of speedy release attached to them. However, is it actually possible that the banks would allow their low interest pre-approved credit cards without running any background checks? Even more importantly, do you actually need a pre-approved credit card? Careful consideration needs to be made before going for any credit card offers because they are ultimately, a form of debt which can also cause temporary damage to your CIBIL score. If you do not know the answers to these questions or are unclear about the concept of a pre-approved credit card, keep reading.

The article explains the concept of a pre-approved credit card and then provides some facts about it. It also tries to explain when to get a pre-approved credit card.

What Is a Pre-Approved Credit Card?

Now, the question arises, what is all the buzz about? A pre-approved credit card is offered by banks and other credit card providers. However, even if you have received an email regarding one, they will not simply allot the card to you. This move is done by the banks and credit card providers just to attract customers by evoking a sense of privilege in them. The feeling that people regularly apply for credit cards, but do not receive them, is at the root of this psychological marketing gimmick. If you have received an email from a bank or credit card provider, it simply means that they have the records of people who are eligible due to their CIBIL scores falling in the correct range.

The email is simply an automatic bait that is used by these financial institutions to lure gullible customers. Irrespective of the pre-approved credit card email, you will have to separately apply for the card in the case you decide to go for it. The bank or provider will then run a second term of tests for your credit history. In the case they do not find it to be appropriate, they will not only reject your credit card application, but will also bring down your CIBIL score temporarily. Therefore, you will be thrown back even more from the point where you started, if your credit card application is rejected.

Facts About Pre-approved Credit Card

As you now know, things can take a pretty unexpected turn if you get involved in a pre-approved credit card process. Here are some facts about pre-approved credit cards that will show you why it is necessary to give it a lot of thought before you apply for your own.

  • The offers such as lifetime free credit cards or low-interest credit cards are actually only for a limited initial period and are just marketing gimmicks to trick the customer into buying their products.
  • The waiving off of the annual fee for credit card is also not what the customer thinks a 'lifetime free credit card' means. This is just a temporary discount and the credit card is never permanently free.
  • The banks keep raising their annual percentage within the range of 36 to 40 per cent. There is no difference if the other rates are low, because it is up to the bank to provide competitive rates to stay at the top of the game.
  • There are various types of scam that you might get tangled in when the expiration date comes too close. For example, not only would the vendor not provide correct contact information, they might also deter from clearly stating their terms and conditions. They might also ask you to pay large amounts of money before they even release the card to you.
  • If the application you provide to the bank for the pre-approved credit card is rejected, it will have a huge impact on your CIBIL score.

When to Get a Pre-approved Credit Card?

After knowing the reality of pre-approved credit cards, it can be understood that the banks and credit card providers make great use of the sense of 'easy access to money' to trap customers like a fly in honey. However, it does not mean that you cannot or should not get the credit card. In the case you successfully pass the second term of tests of your credit history by the bank, you will be completely eligible to receive your credit card. Although, it is necessary to consider a number of aspects before heading out to get one.

Firstly, you need to consider whether you actually need one. If you really require a credit card and have a great CIBIL score, then you should definitely apply for a pre-approved credit card. However, if you already have outstanding debts in your other credit card, you will only be falling deeper into the dark well of debt. Therefore, you should refrain from applying for a pre-approved credit card.

Next, you should consider whether you can afford to have a pre-approved credit card. This is important because even after all the projected offers, there are various kinds of fees and interests that comes with the package and you must be completely able to make these payments. In case there is even an ounce of doubt, do not apply for a pre-approved credit card as it will only push you deeper into debt. If you are just attracted to the credit card offers and don't actually need it, do not go for it. If you already have a credit card and are not happy with their interest rates, reward systems or annual fee, then you should apply for a pre-approved credit card. However, you must make sure to read the terms and conditions of the new card before applying for it and ensure to clear off the balance on the old card, if any.

Since an inactive credit card also deeply affects your credit history, it is very important that you get one, if you have actually been using it and kept repaying your credit dues on time. And do not forget to consider each and every fact related to the specific pre-approved credit card that you are interested in before applying, such as their policy documents, customer reviews, and more.

FAQs

What are pre-approved credit cards?

Pre-approved credit cards are nothing but credit card offers auto-emailed by the banks and credit card providers to people who have acceptable level of CIBIL scores to receive a credit card. They constantly email people who might be interested to expand their customer base.

What happens when I apply for the credit card?

When you apply for the card, the bank or provider will run another term of tests and evaluate your credit payment history. Therefore, even after having received the email, you must formally apply again. Your application will be accepted only after you successfully pass the second round.

Do pre-approved credit cards have impact on my CIBIL score?

Definitely. If you already had an outstanding balance on your credit card or have not repaid your loans, the second assessment round conducted by the bank will take a huge toll on your CIBIL score. Not only will the bank reject your application for the credit card, but this process will also cause great damage to your CIBIL score.

Should I get a pre-approved credit card?

You will need to evaluate your needs and your credit standing before you decide to get one. You should check out your own CIBIL score if you don't know it yet. Then, you should clear off any outstanding balance. However, most importantly you should be clear about the terms and conditions of the card. If you don't really need it and are just attracted by the offer, it is recommended not to apply.

How do I pre-approved credit card?

In case you have decided to get a pre-approved credit card, you just need to make an application with the bank regarding the card. After they do the necessary background testing, they will contact you about the progress. If everything is successfully verified, you will receive your card.

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