What is a Pre-approved Credit Card?

While credit cards have become very popular, they often come with various deals, approvals, and other caveats that separate one credit card from another. But despite these differences, many are often confused as to which is the best credit card for them.

If you have been on the hunt for a new credit card, or if you are just casually browsing, you may have come across the term pre-approved credit card. Surely, it did make you wonder – what exactly is a pre-approved credit card? Where did the credit card pre-approval come from? In this blog, we will break down what makes the pre-approval credit card concept so attractive and whether you should get yourself one.

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What does the pre-approved credit card mean?

A pre-approved credit card is an offer extended by a financial institution or credit card issuer to a potential customer, indicating that the customer has been pre-selected based on certain criteria and is likely to be approved for the card. These offers are typically based on a preliminary review of the individual’s credit history, income, and other relevant financial information that was already available to the bank or lender.

Read more: What are some of the credit card rules in India?

How does the credit card pre-approval work?

Unsure about how you got a pre-approved credit card when you did not apply for one? Here is how it works:

Data collection by the lending agencies

Credit card issuers collect data from credit bureaus and other financial institutions. This data includes your credit score, payment history, outstanding debts, and other financial behaviours.

Screening process

Using this data, the issuers create a list of individuals who meet their initial eligibility criteria. This process involves a ‘soft inquiry’ on your credit report, which does not affect your credit score.

Pre-approved credit card offered

If you meet the criteria, you receive a pre-approved credit card offer via mail. This offer will outline the card’s terms, benefits, and instructions on how to apply.

Read more: What is credit appraisal?

What are the biggest benefits of getting a pre-approved credit card?

Pre-approved credit cards come with several benefits that make them an attractive option for consumers. Here are some of them:

Instant approval when you apply

Since the issuer has already done a preliminary check, the likelihood of getting approved is significantly higher compared to applying for a card without any pre-approval.

More targeted offers

Pre-approved offers are often tailored to your financial profile, which means you might receive cards with better interest rates, higher credit limits, or more attractive rewards programs.

Pre-approved credit cards offer convenience

Receiving a pre-approved offer saves you the time and effort of researching and applying for multiple credit cards. The issuer has already done the legwork to find a card that suits your needs.

Less effect on your credit score

The initial screening for pre-approval involves a soft inquiry, which does not affect your credit score. It’s only when you accept the offer and formally apply for the card that a hard inquiry is made, which can have a minor impact on your score.

Read more: 10 ways to increase your credit card limit quickly

How to get the pre-approved credit card offer?

If you decide to accept a pre-approved offer, follow the instructions provided in the communication. This typically involves filling out a short application form and submitting it to the issuer. After submitting the form, the issuer will perform a hard inquiry on your credit report to confirm the information and finalise your approval. Once the credit card is approved, you will get it at your registered address within 7-12 business days.

Therefore, pre-approved credit cards can be quite convenient if you want a new credit card. The best advantage is that your chances of approval are much higher than a regular credit card application. But, before you zero in on a pre-approved credit card, make sure that you are aware of all the terms and conditions. The interest rates offered on the credit card, if there are any processing fees or hidden charges and more.

Hopefully, this blog will help you get a new credit card easily.