Living with credit, New products

New card preapproval tools bypass wide APR ranges

Kelly Dilworth

One of my pet peeves when comparing credit card offers online is that APR ranges are so wide these days that it’s next to impossible to guess which APR you’ll get once you apply. Some credit card offers, for example, advertise maximum interest rates that are at least twice the size of a card’s lowest rate, while most offer ranges as wide as 7 percentage points or more.

The extra-wide ranges have made me reluctant to apply for cards for which I haven’t already been preapproved for since I’m afraid I’ll receive a much higher APR than I expected. That happened to me last year when I applied for a Discover it Miles card and was shocked to receive a 21.24 percent APR, despite having good credit.

I was pleasantly surprised then to find out recently that I don’t have to wait to receive a preapproved offer in the mail. A growing number of card issuers are offering preapproval online – no hard credit check required.

Earlier this month, Discover became the latest card issuer to offer preapproval-on-demand.

“When consumers are searching for a new card, they want a quick and easy way to understand which card offers they qualify for without impacting their credit scores,” says Ryan Scully, vice president of marketing at Discover.

Unlike most online preapproval services, which simply request your name, address and the last four digits of your Social Security number, Discover’s new tool asks for the same information you’d provide in a real credit application, such as your income and monthly rent or mortgage bill.

In exchange, it provides a list of preapproved offers, complete with a single personalized APR for each card. Discover’s previous card matching tool would match applicants to cards that they’d likely qualify for, but wouldn’t provide a personally tailored APR.

Most other major card issuers also offer some kind of online preapproval tool, but only some will tell you what interest rate you’re likely to get once approved.

For example, when I used Bank of America’s preapproval tool to search for a low rate card, it still gave me such a wide range of potential APRs for its lowest rate card, the BankAmericard Mastercard, that I had no idea whether the plain vanilla card would actually offer me an affordable rate. The card’s APR starts at 12.99 percent and maxes out at 22.99 percent – a 10 percentage point difference!

The same thing happened when I searched for a card through U.S. Bank.

Discover, Chase and American Express, on the other hand, all gave me single preapproved APRs, making it easier to decide whether that American Express Blue Cash Everyday card that I’ve had my eye on for a while was worth an application – or if I should go for a lower rate card from Chase.

I was also pleased to see that Discover was now willing to offer me a significantly lower rate than I received the last time I applied for a Discover card.

CreditCards.com also offers a preapproval tool through its CardMatch service. When I tried it, I received preapproval offers from Capital One, detailing single APRs for each potential card. I was also matched with several other cards, but they didn’t offer tailored rates.

The preapproval tools that are currently available online aren’t perfect. They typically ask what kind of credit card benefits you’re interested in, such as cash back, miles or low interest, and then only offer cards in that category. That makes it tough if you’re interested in a variety of potential cards and would like to see more offers from the same issuer.

Personally, I would rather type in the card I’m interested in and see if I’m preapproved rather than have the issuer pick a list of potential cards for me.

You also have to navigate between several different websites in order to see a full range of the cards you qualify for and what terms you’ll likely be offered. Also, you may not get as generous of a promotional offer as you would if you waited for a preapproved offer in the mail.

That said, the latest batch of preapproval tools are a welcome change from the past when card applicants who applied online were often in the dark about what rate they likely would receive. The new tools make comparing cards much easier for cardholders who plan to carry a balance and are concerned about their APRs.

I only wish more card issuers would offer online preapprovals with single APRs. Then, the increasingly wide APR ranges that issuers are advertising these days wouldn’t be such a big concern.

See related: Preapproved vs. pre-screened card offers: a big difference, How preapproved offers affect credit

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