Credit Cards

I Got a Credit Card Offer in the Mail. Now What?

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Perhaps you just received a credit card offer in the mail, or were handed one in the airport, or at the cash register in your favorite store. So now that you have this offer, what should you do with it?

You may not come by credit card offers every day, but there is no shortage of them. The credit card industry is extremely competitive, and customers with good or excellent credit are in the driver’s seat when it comes choosing a new card offer. (You can see your credit data, including two scores, for free on Credit.com.) So take the offer you have, and do some basic research to find out if it is competitive and meets your needs. Here is what to look for.

The Schumer Box

The marketing material included with a credit card offer will be filled with all sorts of big claims about their benefits. To help consumers cut through all of this and compare offers, the government requires that the terms and conditions on every credit card application appear in a clear, simple format, commonly called a “Schumer Box.”  The Schumer Box is named after Sen. Charles Schumer (D-NY) who spearheaded the rule, and it even sets standards for the size of the type so banks can’t bury the important terms in the fine print.

The Schumer Box contains a lot of information, but the highlights will include the card’s annual fee, grace period, its interest rate for purchases, and interest rates for other transactions such as balance transfers, cash advances, and the penalty interest rate applied when payments are missed.

Incentives for Signing Up

Credit card issuers are so eager to attract new applicants that they commonly offer valuable incentives for signing up. These offers can include interest-free promotional financing on new purchases and/or balance transfers, points or miles in a rewards program, or discounts on store purchases. In general, credit cards marketed to those with the best credit, and those that have the highest annual fees, will offer the most valuable rewards.

Nevertheless, applicants should always be careful not to focus too much on near-term rewards at the expense of higher interest rates and fees. For instance, credit cards that offer rewards will almost invariably have higher interest rates than similar cards with no rewards program. If you carry a balance month to month, the rewards may not be worth a higher APR.

What If You Are ‘Pre-Approved’?

In many cases, card issuers will mail applications out that are labeled “pre-approved,” but what does that mean? It only means that your name, along with thousands of others, was purchased by the card issuer because you fit the general credit profile of the type of person it is hoping will apply. Notwithstanding, recipients of these offers must submit an application, which can still be declined. This is most likely if the applicant’s income or credit history has changed significantly since the card issuer initially acquired its list.

Finally, Evaluate Yourself

Even if you have reviewed the offer’s terms and conditions, and found it to be competitive, you have to ask yourself if this is the best time for you to apply for a new credit card. First, consider if this credit card will offer something that your current cards do not. In addition, cardholders should consider that applying for several credit cards in a short time will have a small, temporary impact on their credit scores. If you want to see how inquiries are currently impacting your credit, you can check two of your credit scores for free every month on Credit.com. Further, if you plan to apply for a mortgage or other major loan, you shouldn’t make new applications for credit until you close on your loan.

Credit card applications are everywhere, but it is up to you determine which, if any, you should submit.

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