Is Being Pre-Approved for a Credit Card Just a Sales Tactic?

by : Jon Francis

Congratulations! You've been pre-approved for the best credit card that UK lenders have to offer. All four of them. Or six of them. Or... how many offers was that in your post box this last week? If you return the applications to all the offers you get in the post each month, you'd soon find yourself up to your elbows in plastic - assuming that you passed the final approval for the cards for which you applied.

But wait - didn't the envelope say that you are pre-approved? Doesn't that mean that all you have to do is accept the offer and they'll send it to you? In a nutshell, no. In reality, you are being invited to apply for a credit card for which you meet preliminary conditions. Whether you actually qualify for the deal that's offered through the mailing is another story - one that you'll find in the fine print of the offer.

Ah, yes, the fine print. That's where you'll find all the terms and conditions of the actual offer. These days, that offer can range from nearly a guarantee that you'll be granted the card described to little more than a hidden sales package for something you'd never buy under other conditions. That's why it's vital to read all the fine print, and compare credit card offers BEFORE you apply.

But... doesn't pre-approved mean that you've already been approved for the offer that's being made? Actually, no. Pre-approved, or pre-qualified, is a finance term that essentially means 'at first glance, you look like our kind of people'. The credit card companies generally have a standard 'ideal customer' to whom they pitch their best products. That standard customer will earn a certain income and meet a few other criteria. Until you actually apply for a credit card, UK issuers can't actually look any deeper into your credit history than a quick surface look. If you meet their standards on that quick survey, they'll send you out an invitation to apply with them, quoting the best rate for which they think you'll qualify.

If you respond to their invitation and actually apply for a credit card, you are giving them permission to run a full credit check on you, and the final decision, including the APR and the actual card that you'll be offered, will be based on that check. By signing the application, you are agreeing to be bound by the terms that they offer you. It could mean that you end up with the best rate that the company offers - but there are also some very shady offers out there. If you're not careful, you could end up agreeing to pay a hefty cash membership fee for the right to purchase a few things from one or two shops.

Our best advice is to ignore the 'you've been pre-approved' notices that show up in your post box. Instead, if you're serious about getting the best credit card for your circumstances, make a visit to an online comparison site to compare the products you'll find on offer there. You'll be able to compare online and choose the best credit card from the many that are represented there.