Banks and pre-approved credit cards

[DeeBye]

For a long time, my wife and shared a Citibank Platinum Visa. We each had one in our own names. It got pretty ridiculous when RBC took them over and increased our interest rate from 8% to 20%, so we cancelled it and transferred whatever balance we had to my wife's employee credit card. She works for another Canadian bank and her interest is whatever the prime rate is.

This left me without a credit card for a couple of weeks. This was not a big deal because I rarely need a credit card. I think I've used one maybe twice in the past two years. I just like to have one for emergencies.

So I got a call from my bank, saying that I was pre-approved for a credit card with them. I had never previously held a credit card with my own bank. I was definitely interested because I don't like going out without a credit card, just in case. I let the sales guy drone on about the features and benefits of the card he was trying to sell me, until it came down to the yearly fee. I wanted a new credit card, but he was trying to sell me one with a yearly fee. I don't use a credit card nearly enough to justify paying $120 per year for it.

I told him this, and he suggested another credit card plan. It had a higher interest rate, but no fees. This was what I wanted, so I told him to sign me up.

He told me upfront that I was pre-approved for this card with a $6,200 credit limit. How does one get pre-approved for a credit card with such a huge credit limit? I was astonished. After a couple of more questions, which were limited to the exact spelling of my name and my address, the deal was done.

He then asked me for my gross income. Apparently this was to determine the exact credit limit I would be allotted. I'm not comfortable telling people how much I make, so I told the guy I make $15,000 per year. He paused for second, and said he would have to put me on hold. Damn, I thought, now he thinks I'm messing with him and I'll have to go down to my bank and apply for a credit card in person.

30 seconds after being put on hold, the bank guy says I will be getting my new credit card within 7-10 days. He also says that my initial credit limit will be $10,000 :wacko:

I was pre-approved for a credit card with a really high limit of $6,200, and I ended up getting a credit limit of $10,000 after telling him I only make $15,000 per year. Is this is as insane as I think it is?

(I plan on calling my bank to lower the credit limit to something reasonable for emergeny usage as soon as I get the credit card. $500-$1,000 is enough for me)

[Doc]

For a long time, my wife and shared a Citibank Platinum Visa.  We each had one in our own names.  It got pretty ridiculous when RBC took them over and increased our interest rate from 8% to 20%, so we cancelled it and transferred whatever balance we had to my wife's employee credit card.  She works for another Canadian bank and her interest is whatever the prime rate is.

This left me without a credit card for a couple of weeks.  This was not a big deal because I rarely need a credit card.  I think I've used one maybe twice in the past two years.  I just like to have one for emergencies.

So I got a call from my bank, saying that I was pre-approved for a credit card with them.  I had never previously held a credit card with my own bank.  I was definitely interested because I don't like going out without a credit card, just in case.  I let the sales guy drone on about the features and benefits of the card he was trying to sell me, until it came down to the yearly fee.  I wanted a new credit card, but he was trying to sell me one with a yearly fee.  I don't use a credit card nearly enough to justify paying $120 per year for it.

I told him this, and he suggested another credit card plan.  It had a higher interest rate, but no fees.  This was what I wanted, so I told him to sign me up.

He told me upfront that I was pre-approved for this card with a $6,200 credit limit.  How does one get pre-approved for a credit card with such a huge credit limit?  I was astonished.  After a couple of more questions, which were limited to the exact spelling of my name and my address, the deal was done. 

He then asked me for my gross income.  Apparently this was to determine the exact credit limit I would be allotted.  I'm not comfortable telling people how much I make, so I told the guy I make $15,000 per year.  He paused for second, and said he would have to put me on hold.  Damn, I thought, now he thinks I'm messing with him and I'll have to go down to my bank and apply for a credit card in person.

30 seconds after being put on hold, the bank guy says I will be getting my new credit card within 7-10 days.  He also says that my initial credit limit will be $10,000  :wacko:

I was pre-approved for a credit card with a really high limit of $6,200, and I ended up getting a credit limit of $10,000 after telling him I only make $15,000 per year.  Is this is as insane as I think it is?

(I plan on calling my bank to lower the credit limit to something reasonable for emergeny usage as soon as I get the credit card.  $500-$1,000 is enough for me)
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500 is good. **Agrees**

500 is enough to get you out of trouble... And not in to it.

[gekko]

Most of the information they actually use to determine what to approve you for has nothing to do with the income you say you make. They get a credit score on you and that pretty much tells them everything they need to know. Why they ask you questions such as income is beyond me. In other words, you weren't approved for $10k after saying you made $15,000 a year. You were approved for $10k after they got your credit score and discovered you have had previous credit and have not been a roach.

Another factor that undoubtedly worked in your favour was your lack of other credit cards. Most companies treat a customer's existing available credit against them; having 5 or 6 $5000 cards worries them, because they see how deeply in debt you could get and don't want to be 7th in line when trying to collect. The credit card companies certainly want you in debt, but not too much. You declaring bankrupcy certainly doesn't help their bottom line.

Even if you don't want a credit card with a big limit, having a good credit rating can be a very nice thing. Alot of people getting cell phones and credit cards then racking up and leaving huge bills don't realize that cell companies and credit card companies report these things to big credit bureaus. So if you rack up that $200 cell phone bill and forget about it, good luck getting a loan for a car or house down the road.

I share your bewilderment with these companies though. My grandmother keeps getting mail urging her to get these pre-approved credit cards with outrageous limites. She's 80 years old, doesn't drive, rarely leaves the house, and hasn't worked in decades.

I like using my mosaik master card because I get 1/2 % cash back, along with some extra bonuses, like extra warranty on most things, and some extra travel insurance and such. It's the basic version of the card, no annual fee, though the interest rate is high. I simply treat my credit card as another bill to be paid every month. So long as I pay it off every month, I get all my little extras free of charge. Just by putting my tuition on the card instead of paying cash, I get back about $25. Obviously nothing to get excited over, but it adds up.

gekko

[Occhidiangela]

30 seconds after being put on hold, the bank guy says I will be getting my new credit card within 7-10 days.  He also says that my initial credit limit will be $10,000  :wacko:

I was pre-approved for a credit card with a really high limit of $6,200, and I ended up getting a credit limit of $10,000 after telling him I only make $15,000 per year.  Is this is as insane as I think it is?
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I suggest you keep the high limit. You and your wife know how to handle money, so do it.

If you use the card now and again, and always pay it off before the balance is due, one of two things will tend to happen. They will either lower you credit limit, or other credit card companies will start sending you offers for reward miles/reward something, credit cards.

My mother in law has not paid a cent for air travel in seven years. She and my father in law use a miles reweard credit card for nearly all mandatory expenses: groceries, gas, electric bill, and always pay off the balance.

They have used the miles to travel to places they wanted to go. It takes a frugal and disciplined person to do this, but it works, since so many folks aren't as disciplined.

Occhi

[Maitre]

-- snip --
30 seconds after being put on hold, the bank guy says I will be getting my new credit card within 7-10 days.  He also says that my initial credit limit will be $10,000  :wacko:
-- snip --
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My wife and I have three credit card accounts between us. The one we use is the Shell MC that give rebates toward free gasoline. This card has a 3K limit, so we generally have space for any kind of emergency, even when travelling. We each have a card that is just ours that we've had since before we got married, usually only use these for gifts to each other so we don't have to see what the other spent, though we usually end up paying the bills together so it rarely works out that way. My old card has a ridiculous limit of about 15K. It does have some benefits for travel insurrance that are nice, but I never travel any great distance, unless it's for business.

The other thing that will get you tons of "pre-approval" letters is making a large purchase (car, house). The wife and I bought our first house last fall, and we get 3 pre-approval items a week between us. Before we moved, we'd get maybe one. As Occhi says, most people are not as disciplined with spending as they ought to be, but god nows the benefits are becoming clear to me. I didn't have to get a phone call declining my mortgage application. I don't walk into a store and worry that I'll end up with an 82 inch TV without realizing it. It's a matter of thinking how many weeks of groceries will I have to forgo in order to get something. Sort of like the Wendy's dollar menu comercial, but with boxes of pasta and frozen veggies instead of Jr. Bacon Cheese Burgers.

[ima_nerd]

The limits are generally ridiculous. My sister (a junior in college) has an $11,000 credit limit :huh: They want you to spend a lot so you can't pay it all off at once so you have to pay interest. Credit cards were created by Satan himself. Or perhaps he just made the credit card companies.

[Copadope]

I share your bewilderment with these companies though.  My grandmother keeps getting mail urging her to get these pre-approved credit cards with outrageous limites.  She's 80 years old, doesn't drive, rarely leaves the house, and hasn't worked in decades.
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That's why they invented QVC and the Home Shopping Network! :lol:

[kandrathe]

The limits are generally ridiculous. My sister (a junior in college) has an $11,000 credit limit :huh: They want you to spend a lot so you can't pay it all off at once so you have to pay interest. Credit cards were created by Satan himself. Or perhaps he just made the credit card companies.
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:: nod ::

The only time I ran up toward my limit on my card was while traveling extensively in Europe. Credit card companies do a better job in getting the best currency conversion rate. Then you get back home and pay it off.

It's also nice to have a buffer when on your way to Saskatoon, your engine fails, tire blows, and you end up spending the night in Esterhazy while Floyd fixes it.

[whyBish]

The limits are generally ridiculous. My sister (a junior in college) has an $11,000 credit limit :huh: They want you to spend a lot so you can't pay it all off at once so you have to pay interest. Credit cards were created by Satan himself. Or perhaps he just made the credit card companies.
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And here I was thinking that banks were just like any other business, and that it was public schooling systems that were designed by Satan himself, to not include anything in the realms of financial literacy. ;)

[whyBish]

I was pre-approved for a credit card with a really high limit of $6,200, and I ended up getting a credit limit of $10,000 after telling him I only make $15,000 per year.  Is this is as insane as I think it is?
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Those suck... ehm... customers are paying my bills, so I couldn't possibly comment :P

(Working for one of the five major banks and the Fed equivalent)

[Rinnhart]

You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store





It's the same scam that's been pulled on people for ages.

[ShadowHM]

It's also nice to have a buffer when on your way to Saskatoon, your engine fails, tire blows, and you end up spending the night in Esterhazy while Floyd fixes it.
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I think of my equally ridiculous credit limit on my VISA card as my inexpensive insurance against exactly those moments. Unlikely to happen? Sure.

But if it did......

[ima_nerd]

And here I was thinking that banks were just like any other business, and that it was public schooling systems that were designed by Satan himself, to not include anything in the realms of financial literacy.

Ah, so being like "any other business" makes it right. Gotcha.

[Rinnhart]

Ah, so being like "any other business" makes it right. Gotcha.
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An international business, it's 2006, and still closes with the market, for federal holidays, and on the weekend.

[whyBish]

Ah, so being like "any other business" makes it right. Gotcha.
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I have no idea what to say to someone that thinks business is inherently wrong.

[Rinnhart]

I have no idea what to say to someone that thinks business is inherently wrong.
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Self-interest capitalism is passé. :D

[jahcs]

Antoher thing to consider with credit cards and available balances is that when figuring your credit score they check your balance against your limit. If I remember correctly the magic number is around 30% of your available balance before it starts affecting your credit score. Stay below this and you're okay, go below and you lose some points.

I am away from home right now but when I get back (about a week) I can locate the correct information for folks that are interested.

[ima_nerd]

I have no idea what to say to someone that thinks business is inherently wrong.

I didn't say it was inherently wrong, it's just inherently dirty which I don't particularly like.