Finance Globe

U.S. financial and economic topics from several finance writers.
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Evaluate Credit Card Offers Before Applying

Credit card companies want your business. You can tell by the number of credit card offers you receive in the mail – that is, if you haven’t opted out. It can feel like an honor, having credit card issuers chase you for your business, but before you get too puffed up, consider who's doing the chasing and why they're chasing you.

The credit card offers you receive are based on the credit cards each issuer thinks you qualify for based on information they've prescreened from credit bureaus. For example, a card issuer may ask the credit bureaus for all consumers with a certain amount of outstanding credit card debt. The credit bureau sends back a list of consumers meeting that criteria. In turn, the card issuer may offer those consumers a credit card with a great balance transfer deal.

Credit card offers are enticing. The details are phrased in such a positive way, even if the “benefits” are mediocre at best. Before you get lured by the fancy language, realize there are more credit cards out there than the ones pitched to you and some may be better than what you’re being offered. To make sure you're getting the best deal possible, you have to look around at other credit cards and figure out whether the deal you’re being offered is a good one.

When you evaluate credit card offers, consider the credit card pricing, credit limit, and any benefits and perks of the card. For example, compare promotional interest rates and lengths of promotional periods along with fees and when they’re charged. If the credit card has a reward program, see how the rewards stack up against similar reward programs. There’s often a trade off, even with similar credit cards.

For example, one credit card may let you earn high percentage of rewards, but charge an annual fee. Another similar card may lack an annual fee, but let you earn rewards at a lower rate. In a situation like this, you have to decide whether it’s worth it to pay the annual fee. For some cardholders, it’s not.

Keep in mind that the credit cards you qualify for are based on your credit history – the better the terms, the better credit history you’ll typically need to be approved. So just because there are better credit cards out there, that doesn’t mean you’ll get approved for the best of them. When you’re evaluating a credit card offer, you have to compare it to credit cards geared toward people with your credit profile, i.e. credit cards for excellent credit if you have a credit score in the mid to high 700s or greater.

Don’t get too excited about your prescreened offers because they’re not a sure thing. “Prescreened” might mislead you into thinking that you’re guaranteed approval for the credit card you’ve been offered. You could quite possibly be denied the credit card. Once you apply, the card issuer will do a more detailed check of your credit history and include a consideration of your income. Something in your credit history or the amount of money you make could lead to a denial.

Note that if you're denied because of your credit score or something in your credit history, you're entitled to a free copy of your score or the report that was used in making the decision. If you're really interested in getting a credit card, that information will help you better choose the next card you apply for or to improve your credit so you can qualify for a better card.
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Monday, 14 October 2019

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