Credit Cards

Tips, news, reviews, caveats, trends, updates and analysis related to consumer and business credit cards, and prepaid debit cards. From the interest rate specialists @ FedPrimeRate.com

Tuesday, May 26, 2009

Advanta Will Close All Business Credit Card Accounts on May 30

Advanta Business Credit Card
Advanta Business Credit Card
The outlook for domestic and international financial systems and institutions appears to be improving, as evidenced by new record lows for the 3-month London Interbank Offered Rate (LIBOR) and a narrowing TED spread (for more about the TED spread, click here.)
But one could argue that the improvement in interest rates is not a good indicator of the health of banks. Low, short-term interest rates, one could argue, are more a result of dramatic rates cuts and quantitative easing by the Fed and other key central banks across the industrialized world than they are the result of banks' improved condition. Yes, short-term rates are extremely low right now, but banks are still failing at an alarming rate. In fact, in the United States, there were 8 bank failures during April 2009, and 7 more have failed so far this month.

Advanta Will Close All Business Credit Card Accounts on May 30

Advanta, a bank that specializes in providing credit cards to small businesses, recently announced that the company will close all business credit card account on May 30, 2009. According to the Advanta's Account Closure FAQ page, May 29, 2009 will be the last day that Advanta business card holders can use their account to make purchases. Also from the FAQ:

  • If you plan on opening another business credit card account to help fund your operations, don't look to Advanta for a new account. The company is not accepting new credit applications. If you're worried that your credit score will be adversely affected by the reduction of available credit, or you simply need another card to use for temporary financing, other major banks like PNC, CitiĀ®, Bank of America and Chase are still offering business credit cards. Also, look out for snail-mail business credit cards offers. These so-called "pre-approved" offers usually have slightly better terms, conditions and rewards than their online counterparts; if you are going to apply for a new business card, you might as well go for the best possible deal.

    An excellent alternative to getting another business card is to get a small business loan via a peer-to-peer lending site like Prosper.com, VirginMoneyUS.com or the popular Prosper.com.
  • Advanta's online account management system will continue to function after May 30. The company has no plans to remove or limit cardholder access to transaction data. Customer service will also be available after May 30.
  • Advanta accountholders will not be forced to pay their entire balance on, before or after May 30. Accountholders will still be able to pay down their account over time, according to the terms and conditions associated with each account.

Here a clip from the email Advanta sent out to business cardholders today:

"...Your Advanta Business Card account is funded by an independent trust which owns the balances you owe on your account and provides funding for new transactions. We expect the trust to stop funding activity on our accounts. The trust also restricts our flexibility to fund activity on your account. Unfortunately, as a result, effective May 30th all Advanta Business Credit Card accounts, including your account, will be closed.

This means that you will not be able to use your card or account for new transactions, including purchases, checks and balance transfers beginning on May 30th. We understand that you may have written checks on your account before May 30th and we will make every effort to honor those checks that are presented to us for payment by June 3rd. If you use your Advanta card to make automatic recurring bill payments, you will need to make alternative arrangements for those payments promptly.

It is important to understand that you are not required to pay your entire balance at this time. You may continue to pay down your account balance over time, as allowed under your Advanta Business Card Agreement.

You will not lose the rewards that you have earned. If you participate in a Cash Back program, you will receive a check for the amount of any accrued rewards more than $1.00 as long as you make the required minimum payments and your account remains in good standing. If you participate in a Business Rewards program, you will have at least 60 days to redeem your points as long as you make the required minimum payments and your account remains in good standing.

We deeply regret the impact this action will have on your business and very much wish it was not necessary..."

Advanta did not apply for any TARP funds, but, maybe it should have. The lion's share of the company's revenue comes from it's credit card business, and the company recently reported that delinquencies have doubled year-over-year. Right now, you can buy shares of Advanta (trading on the NASDAQ exchange with symbol ADVNB) at $0.79 a piece. A year ago, the stock was trading at $7.60 per share. Two years ago it was trading at $25.68 per share.

How This Advanta News Has Affected Me

I liked my Advanta Platinum BusinessCard a lot when I was enjoying a 0% introductory APR, and continued using it sporadically when the intro period ended and my purchase rate jumped to 7.99%. I was using this card to fund a new business venture.

Last month, Advanta gave me an ultimatum: you can either continue to use your card and accept a 17.15% interest rate, or we will close your account and let you pay down your balance over time at 7.99%. I was given a month to make up my mind. 17.15% is a subprime rate, and I'm not a subprime borrower, so I chose to opt out of the new terms. I did not want to disrupt my cash position by paying the balance down to zero right away, so I chose instead to transfer the balance to a feeless balance transfer American Express consumer card.

Some months ago, both my CitiBusiness and Chase business credit cards were closed (you can read about it here), and now my Advanta card is gone. I'm now left with two business credit cards, and both are from Bank of America. I received a snail-mail offer for a Bank of America Business MasterCardĀ® last week, and since the terms appear reasonable, I've decided to apply for this card.

I am hoping banks stop closing accounts and cutting credit lines soon, because, to be perfectly honest, I am really getting tired of this game.

For more on this Advanta news, check out this Consumerist.com article. You should also check out the content and comments at this article.

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