How do credit card companies come up with pre-approved credit cards?

Before the bank mails out a pre-approved offer, they get a list of potential candidates from the credit bureaus. The bank sets certain criteria and then the credit bureau gives them a list of people who meet those criteria. Once the list is compiled, they send out a mailing with enticing offers and special deals to everyone on the list.

What is credit?

Credit is the reputation you have earned for paying your bills on time that makes it possible for you to receive loans, etc. with the understanding that you will pay for them later.

Are there any hidden costs associated with credit cards?

Technically, there are no hidden costs associated with credit cards. However, there may be application fees, start up fees, late fees or annual fees. Any fees of this kind will be laid out for you in the application process. The best way to know all the charges you may be receiving is to read carefully every piece of information that you sign your name to.

What is a grace period?

A grace period is the amount of time after a due date of a bill that may pass before late fees are applied. Grace periods are usually 10-25 days and may depend on the company.

Can a credit card company raise my interest rate without letting me know?

Yes, credit card companies can raise your interest rate and there is no telling how high a certain company will raise the rate. You can avoid this high interest hike by making timely payments every month, even if it is just the minimum payment. Some credit card companies will even raise your interest rate if you are late with other bills besides your credit card bill.