Pre-approved cards are the result of one bank who now has you as a customer, and sells
your name to another bank or a series of banks so they can offer you their credit cards.
Here's how it usually works:
Many smaller banks want to be credit card issuers but, because of limited facilities
for credit card processing, it is sometimes difficult for a smaller bank to cash in on the
credit card boom. What's been developed is an interconnect system where large banks will
process credit card applications and issue the credit cards for the little banks.
For example, let's say that Mini Savings & Loan wants to get in on the Plastic
Pursuit. However, Mini does not have the facility or the staff to process credit card
applications and issue credit cards. What Mini has to do is contract the service with Maxi
Bank. Since Maxi has several banks that they provide this service to, Mini Savings &
Loan is just a welcome addition to their roster of client banks for whom they process and
issue credit cards.
When you apply for a credit card at Mini Savings & Loan, your application is
actually forwarded to Maxim Bank who runs a credit check and, granting you have good
credit, issues you your choice of VISA or MasterCard with Mini Savings & Loan's name
on it. However, since Maxi is the issuing bank and since it has your credit on their file,
they can very well send you an application for their own credit card. They can also sell
your name to their other client-banks who can offer you their credit cards on a
pre-approved basis.
Another source that sells your name is the credit bureau. Because they can program
their computers to search for names of existing credit card holders with clean and healthy
files, they can provide issuing banks with a premium mailing list of people to whom the
banks can send pre-approved credit card applications.
