Preapproved Credit Card Offerings Stuff Mailboxes Fine Print Shows Most Hide Pitfalls From Unwary

They fill Lesli Riggins’ mailbox weekly. “They go from the mail to the garbage can,” she says flatly.

Preapproved credit card offers.

Riggins, 35, wishes they would just go away. But they won’t.

According to Bankcard Holders of America, consumer mailboxes were flooded with more than 2.5 billion credit card solicitations last year.

The card offers can be a godsend or a nuisance, depending on which card you obtain and how you use it.

Take Riggins. The Lexington, Ky., resident eventually settled on a preapproved credit card offer from Chase Manhattan.

When the deluge of other offers continued, she called Chase and asked whether it would lower the interest rate.

It did.

“It worked, they didn’t want to lose me,” Riggins said, pleased with her victory.

Other consumers rotate the debt off several cards onto a new card with lower interest rates.

Although it can be tricky, some consumers consolidate their debt and bounce from credit card to credit card with low introductory interest rates, said Ruth Susswein, executive director for Bankcard Holders of America.

But Susswein and other credit card experts warn that “teaser” rates don’t last forever and say the long-term solution is to find a card with a good permanent interest rate.

Consumers who use this as anything more than a stopgap measure might be making a key financial mistake, said George Pierce, a Lexington financial planner.

“It all has to do with getting control,” he said. “People shouldn’t play the credit game. Don’t carry a balance.”

If you are considering a credit card offer, especially one that comes in the mail, here are a few tips to consider:

Even before you tear open the envelope of a credit card offer, don’t fall for the “preapproved” printed on the outside.

“That is misleading,” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group in Washington.

Sometimes even people with good credit histories are rejected because they have accumulated so much credit on other cards that issuers get skittish about extending any more, he said.

Consumer advocates say one of the biggest mistakes people make is falling for a card because it boasts a large credit limit or a low interest rate.

“It may say preapproved for $5,000 or $10,000, but the fine print (on the application) may guarantee just $200 or $500,” Susswein said.

And the low introductory interest rate is just that. Enough to entice consumers to sign up for a card, but the permanent rate explained in the fine print is what consumers need to look for.

Some card offers also tout their “no annual fee” status. But Mierzwinski said many credit card issuers are vying for customers and one marketing tactic is to boast of no annual fee. At the same time, they tweak other conditions to boost profits.

In some cases, credit card companies reduce the interest-free grace period - the time from when you make a purchase to when interest starts to accumulate. Grace periods of 30 and 25 days are sometimes thinned down to 20 days.

Consumers must also determine how the balance is calculated. Most common is the “average daily balance” method.

Avoid the “two-cycle average daily balance” calculation. “You pay interest on top of the highest calculation of your balance,” Mierzwinski said.

Beware the strong-arm tactics of some credit card issuers who use “risk-based pricing,” which penalizes consumers if they increase the amount of debt they owe on other credit cards.

According to Bankcard Holders of America, issuers using risk-based pricing are Citibank, Discover, Household, Chase, Wachovia and AT&T Universal Card.

Late fees are going up. Typical fees used to be $10 or $15, but some issuers now slap you with a $20 fee, Susswein said.

If you plan to bounce your debt from card to card, try to get a card with a low introductory interest rate that lasts at least one year. And if you dump a card, cancel it. Otherwise it shows up as available credit on your credit report.