You’ve burned out two shredders in the last year. It’s starting to feel like harassment. But they just keep on coming.
Is this your “reward” for having great credit?
Business Insider reports that credit card companies mail out over 3 billion offers a year. Those numbers are rising.
At this point, you’re just tired of shredding. Or maybe you’re seriously concerned about the number of trees they had to chop down to send you pre-approvals over the years.
Either way, it’s time you learned why you get so many offers for pre-approved credit cards. Once you learn the secret, you can stop this madness once and for all.
Let’s take a look!
How Did You Get into This Mess?
Normally, when you think about a financial mess, you think of loads of debt, late payments and collectors breathing down your neck.
But you’re probably in a different kind of mess. Every day, your mailbox is loaded to exploding with pre-approved credit cards mailings.
18 months no interest. No annual fee. Only 2% on balance transfers. Double rewards on Ubers and restaurants.
Get $200 when you spend $1000 in the first 90 days. You know the stuff.
If you’re getting these kinds of offers, you have very good or excellent credit.
That means you have a 700+ (very good) or a 750+(excellent) credit score also called your FICO score.
This isn’t based on how much money you make or what you have in savings.
You achieved this rare and sought-after status by:
- Establishing credit (loans, credit, etc.)
- Making your payments on time every time
- Keeping your debt to open credit under 30%
- Not over-zealously applying for credit
- Applying these smart habits for 5-7 years
Pat yourself on the back. You’re a cut above. Fewer than 20% of the US population have a FICO like yours.
The average credit score fluctuates, but is around 690 on a scale of 300 to 850. As the average score goes up and down, what lenders consider very good or excellent also changes.
You might also find yourself on the other end of this scale. You may have really bad credit, below a 659. In this case, you may be receiving a different kind of offer:
- Pre-approved credit cards that help rebuild credit
- Consolidation loans
- Small no collateral loans with high interest rates
- Debt relief services
These kinds of offers are often less frequent. But they’re just as annoying.
They become a constant reminder that you are, or were, spending more than you were making. Although, some of them may be helpful as you work to become debt free.
The Pre-Approval Process
Whether you’ve got amazing credit or bad credit, how do these companies find out about your personal financial situation? Why do they target you? Let’s take a look.
The Data-Collection Process
This can happen in two primary ways.
In one instance, you’re already on the company’s radar. You may have submitted a past application or made another inquiry. You may have other accounts with them.
They start doing regular credit checks on you through one or all of the 3 major bureaus:
These companies keep track of your credit history and debt ratios. They collect your balance and payment information from current lenders.
When you pay something on time, the company you have the loan with lets the credit bureaus know. When you’re late, 30, 60 or 90 days, they also let the bureaus know. If you go bankrupt, that becomes a huge blemish on your report.
The bureaus don’t share your exact information with the credit card companies.
But they do share enough information for a screening process to occur.
These are called “soft checks” because you didn’t request them. A soft check doesn’t impact your credit score. A “hard check” can only be authorized by you and does impact your score.
If you pull your report, you can get a list of the banks that have pulled your credit recently. But the list won’t be all-inclusive for a very important reason.
Big data is big business. A credit card company will pay a lot of money for a list of people who are likely to take them up on offers for pre-approved credit cards.
The 3 main credit bureaus, and other smaller ones, frequently sell lists of highly-qualified leads to banks.
“Highly qualified” means that your credit report demonstrates a strong likelihood that you’ll bite when you get offers for pre-approved credit cards.
The Screening Process
With the data provided, credit card companies are able to put you into categories based on your credit score bracket.
Pre-approval may sound like a sure deal. But it’s really just an acknowledgment that you very likely qualify for the pre-approved credit cards.
If you choose to apply, they’ll ask for your income and do a hard check to make sure you’re really a good person to lend to.
Now you know why you’re getting them. But why do they waste so much paper sending offers for pre-approved credit cards through the mail?
Isn’t that very last century?
There’s actually a very good reason for this.
Direct Mail Marketing
With the invention and wide usage of the Internet, fewer businesses are using your mailbox as a marketing tool.
Just for the record, a mailbox is that box on a stick at the end of many residential driveways. You remember the one.
As internet marketing took off, more businesses found reaching people through the mail to be lest cost-effective. On top of that, it’s wasteful.
They stopped doing it.
That’s fewer magazines, fewer catalogs, fewer pamphlets, coupons and flyers.
With fewer people reaching you through the mail, this opened up a competitive advantage.
Some — usually huge companies — found a way to cost-effectively market through the mail. As they did, they discovered that consumers were much more responsive to their mailings.
Less mail meant they were more likely to be seen and opened.
The Environmental Impact of Direct Mail
According to the EPA (Environmental Protection Agency), over 4 million tons of junk mail end up in our mailboxes each year.
Just for a little perspective, 4 million tons is approximately the weight of over 2 million blue whales. That’s the largest animal known to ever have lived on earth.
It’s bigger than a commercial jet.
Around half of this waste ends up in landfills. The other half is recycled.
What to Do with Offers for Pre-Approved Credit Cards
First of all, are you looking for a new credit card? If you have really good credit or need to rebuild credit, some of these offers may be really appealing.
Be sure to read the fine print. Unless you have very bad credit or it’s a “luxury card”, you usually shouldn’t have to pay annual fees.
Low interest rates may only be introductory, and there may be other “fine print” concerns.
If you’re not interested, always shred the offers. Identity thieves can target you if they get their hands on an offer. On top of providing some personal information, it also gives them a sneak peek into what kind of credit you have.
How to Stop Pre-Approved Credit Cards
Whether you’re just fed up with all the offers or you don’t like the idea that credit bureaus sell your information to banks, you can opt out.
It’s really simple. It’s like the Do Not Call list. If you opt out banks can no longer target you. The credit bureaus will no longer share your information unless you authorize it.
If at any time you change your mind, you can return to the same website to opt back in.
How to Find Pre-Approved Credit Cards
If you’re like many people these days, you’d prefer to stop being bombarded with offers you don’t want. Instead, you’d like to research on the Internet for cards that meet your needs.
It’s very easy to Google and find sites that help you search. Or you may want something through a certain bank. In that case, you can go straight to their site to find the best cards for you.
They’ll usually ask for your approximate credit score and what you’re looking for. They’ll then show you the options that you likely qualify for.
This is basically the same as pre-approved credit cards. You’re just getting them online when you want them instead of through the mail.
If you’re getting overwhelmed with offers, know that your suspicions are correct. You are being targeted.
Credit bureaus are selling your information to banks. Banks then lump you with many other people into categories. They send offers that will most likely appeal to you.
Since so many businesses have turned away from direct mail marketing, mail credit card offers have become even more lucrative for the banks targeting you.
While it’s nice to get personalized offers, it can become a hassle to safely dispose of this many offers. On top of that, it’s a huge strain on the environment.
Opting out may be your best option.
For more tips, hacks, and everything you need to know to save your dollars, follow the Save Your Dollars blog.