We all get those offers in the mail: “YOU’VE BEEN PRE-APPROVED…!”
Yes, there’s something flattering about opening up that thick envelope with your shiny new card already inside, but before you opt in, do your research!
Is the interest rate fixed?
That attractively low APR printed in huge font on the application may not be the one you receive when you get your card in the mail.
Check the fine print! That interest rate may be available to “qualified applicants only.” Or, if the interest rate is variable, which is true of most credit cards, it may have changed by the time they’ve processed your application.
Also worth checking out- Many credit cards offer a 0% interest rate for the introductory period. Again, read your fine print to find out how long that period is, and what it will be afterwards.
To find out what your APR will be, you’ll have to call the credit card company, and they aren’t usually keen on giving up this information.
Some people apply for cards, make purchases during the 0% intro period and pay them off before it ends. After that, they stop using the card. They don’t close the account, they just set it aside. This can boost their credit by getting approved for a card, making payments on time, and owning a card with no balance. And they can pay off their purchases without paying interest. This little trick is not recommended for those with less than sterling self control.
What happens if my credit card is lost or stolen?
Some credit card companies offer better protection against fraud than others. Many guarantee you’ll owe nothing if you meet a few simple parameters, so it’s worth finding out if this new card is one of them.
Does the company monitor activity and shut the card off if there is unusual activity? Depending on your lifestyle this could be either helpful or hindering.
Can my purchase history be used against me?
Speaking of monitoring activity… Some credit card companies may uses your purchases to asses how much of a risk you are to them.
So let’s say you use your card to purchase marriage counseling sessions and then book a hotel room on the other side of town. Your APR could suddenly go up.
Sound like an invasion of privacy? Yeah, we think so too, but as of right now, it’s totally legal.
To find out if the credit card company uses this practice you’ll have to call them. You probably won’t find this in the fine print. And the customer service rep you’re connected with may not know either. You’ll more than likely have to ask to be connected to a supervisor.
How to phrase the question? Say, “Can my transactions be used in determining my credit risk?”
Be honest with yourself.
Before you drop that application in the mail, ask yourself: Why do I want this credit card? What will I really use it for?
In today’s debt-laden society, it’s all too easy to suffer from credit obesity. If you’re going to use the card to live beyond your means, it’s not worth it. You may end up paying triple the sale price on all these items once you’ve paid off the bill.
And remember, when it comes to these little pieces of plastic, the devil’s in the details. So read your fine print!
