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Thursday, August 21, 2008

Advanta Bank - credit card - rate increase

I guess blogs tend to evolve. This is supposed to be a technical site but sometimes one just needs a soapbox to shout from and vent some frustrations. Here's one now.



I just received a notice from Advanta Bank that my interest rate will be going up next month. When I signed up for this account, I was offered a fixed annual rate of 7.99%. The new rate is going to be 22.59% plus "variable rate index". According to Advanta, "The Variable Rate Index for any billing cycle is chosen by us from among the London Interbank Offered Rates ("LIBOR"s) published int the Wall Street Journal's "Money Rates" section during the three (3) months prior to the month which contains that billing cycle's Billing Cycle Closing Date." So I'm figuring they can pick the highest of the past 3 months and add that to the 22.59% and (based on a quick Internet search) that is about 3%.

So, 7.99% to 25.59%. My first thought was that I had misread the notice and that it must be for "default" accounts or "special advances" or someone other than me. After re-reading it a couple of times I found that the new rate did in fact apply to me. I called Advanta and confirmed my conclusion and was told that rate changes are based on a periodic review of all of their accounts. I ran an updated credit report to see if I had identity theft issues or if there was a mistake on my report. Thankfully, there were no negatives on the report. I did a Google search and found lots of results on "Advanta Rate Increase". A series of articles on pissedconsumer.com convinced me that this company is using some sort of flawed formula or is just hoping that most of their victims are not reading the fine print and paying the new rates.

I will be using the opt-out option which requires that a letter be sent to Advanta and that the account will be closed. In the meantime, I will need to update about a dozen online accounts which have this credit card on file. Bank of America agreed to convert an unused card that I have with them, to a rewards card and I'll be using that for business expenses from now on.

I have never had or heard of this happening with any other credit card issuer so I will strongly suggest that if you get an offer from Advanta that you shred it immediately. Please leave a comment here if you have had a similar experience. Maybe with enough bad publicity, this company and others will change some frustrating practices. They have the freedom to run their business any way they like and consumers have the freedom to change banks and use to "word-of-mouth" to share their opinions.

Comments

1. EJ said...

Me to. Had for years...suddenly, 200% increase in the "sneaky letter" I think they are just trying to catch people.

2. John Dykstra said...

Mina Kimes at Fortune interviewed me on this subject for a comprehensive article on card rate increases. See the article here... http://money.cnn.com/2008/09/26/news/economy/creditcards_kimes.fortune/index.htm

3. Scott MacKinnon said...

I have had an Advanta Bank Corp platinum business card with a current limit of $26,500 for just short of 10yrs.. I am carrying a current balance of $13,165.54 and it’s burning me up as I write.. I was just shocked to read the current statement on the biz card (last month I made a payment of $8,000 by the way) for no apparent reason my rate just went from 9.49% to %25.08. I was told I was sent new terms agreement? I actually found it since I hadn’t yet thrown this months junk mail in the trash. The envelope said “important information inside”…oh yes right along with all the other promo trash mail I got last month. There was no date at all on the envelope.( I thought post offices have to date stamp the mail?...might just give me a little legal leeway if they were required to do so.) unfortunately I have no idea when it was actually sent. It does say something about new terms and my tacit consent to such if I use the card after a certain date (Sept 2nd), (another reason to consider not authorizing any auto payments like Servers, Magazines, or health clubs for example, to your credit card) …otherwise get out the microscope and your law degree, got all night? Blatant deception is it not? How is this kind of deception not criminal? As far as know I have a perfect payment history, never a problem with credit on my part. My first thought,… well maybe its Identity theft? Just checked my FICO scores and hmmm TU-791, EQF-796, EXP-810 I understand that’s pretty good eh? I’m not carrying any transfer amounts as part of the current balance on this card… this is all regular purchases for my business….I have had the balance anywhere from $20,000 to zero over the past 9yrs…the last time I recall being paid down to zero was 2ys ago. The Advanta rep just kept stonewalling me when I asked for a reasonable explanation. Actually offered me a $100 credit to my account because she “wanted to be nice”. Huh? When was the last time you called your credit card company and asked for a $100 credit?. Come on, just be nice! Here’s the deal. I am wondering how I react to this may effect my FICO because I am planning to apply for a mortgage within a few weeks. It seems that Advanta does not report to the credit agencies so that balance of approx. $13,000 has not yet effected my FICO scores, of course nor has my nearly ten years as a responsible customer. I have now come to realize that some business cards are not reported to the personal credit rating agencies, even as a sole propriotor. It’s a double standard here of course. I’ve further found out that the bowerer is reported to the credit rating agencies for negatives but no regular reporting that would reflect as in my case, almost ten years of great business credit! I just discovered all this, luckily I never did anything to hurt my credit except to do everything the correct way with this company. I wanted to submit this as a warning to all Advanta Business Card holders. (and against all the corporate greed immoral crap underbelly of America that have the balls to pull this stuff off on the honest hardworking individual business owner!) Because I was just bleeding $ from their actions I have already acted on my #2 option, paying off more than half from cash reserves and a transfer balance of $6,000 to one of my zero balance cards. I still need to likely open a new account for my business needs, and wonder how this might effect my FICO score? Just a hint of the bleeding upon discovering the nearly tripling of my APR yesterday 10-1-08 my balance grew from $13,165.54 to $13,348.99 by Oct 3rd Midnight, the earliest my bank transfer today will supposedly register on their accounts. As for the transfer of the difference to another of my CCards, I am told by that cards rep that it may take up to 10 days for the transfer to register. Who controls that timeline? I was told the 1st party (Advanta) of the transaction. So the party that looks to gain 25.8% interest in each day my balance remains on their books, can actually delay the process to make more money? How can this be legally sanctioned? I could litterly drive the cash there in 10 days and I should have considered this as I now reflect. Perhaps I could have made a nightly deposit on their corporate headquarters steps. If I did what just happened to me to another person it would be a punishable crime. The entire deal is immoral. Oh and as a footnote I believe the option of paying by way of the Credit Card Companys’ website might have been suggested as an alternative, but has it finally come that we are now financial hostages of the internet? .. I have various reasons why I do not use the internet for financial transactions no matter how guaranteed the proposed site supposedly is. So is it now a necessity that one have a pc, be connected to the web, and use only this option or pay a fee (ironically everyone already does by paying a server) for just the privilage of being a consumer. If this is the case then it is certainly time to regulate the internet like any other utility that is considered an everyday necessity of the culture….though we don’t really do a very good job of this anymore…just witness the telephone companies. I would argue that this is exactly the special interest crap that all the politicians mouth but rarely step up to the plate about. I know it's a rant...double standards and the little guy loses again. I'm angry! SM

4. John+Dykstra said...

Scott,

Even if you missed opting out of the rate increase, you can still close your account. I understand that so long as it is closed at your request it won't affect your credit score. Given today's credit environment however, you may want to wait until after your mortgage closes and just try to pay down the balance so that a couple of months of extortionist rates won't hurt too much.

Congratulation on the great FICO and good luck.

5. Linn said...

I just received my statement from my Avanta business credit card and noticed the rate had jumped from from 9.9 to 27.18%. The finance charge is ridiculous. Their explanation was that even though my credit is good and I pay extra and early each month it was based on some projection of what I could pay or some other BS. They supposedly sent some type of letter last month but I guess my magnifying glass wasn't strong enough to read the small print. They are truly criminals in what they are doing, especially to the people who pay their bills.

I immediately closed the account and will be making payments until it's paid off. Beware!

6. Mika said...

Same here!!! Mine went from 6.9 to over 27%!!!! I am really upset!

7. Joe said...

I have had an Advanta card for a number of years - started at an initial 9 % and overtime crept up to 17%. It was bad but tolerable as I was more focused on growing my business. I have never had a late payment and pay way over the minimum each month. Last month they raised may rate from 17% to 33% and I just received my current statement and they have raised it again to 37%. I have called several times and have been unable to get a single person who can discuss may account. All canned answers about their proprietary formula handled from their call center in India. I pulled my credit report in a panic thinking I must have done something horribly wrong or there was a mistake - my FICO is in the 730, no lates. The only negative is high balance ratios.

The bottom line is nothing has changed and Advanta has more than doubled my rate to line their pockets. The CEO of that company should be tarred and feathered and locked away.

8. anonymous said...

this happened to me yesterday. my rate went from 7.99% to 31.38%. no late payments, paid more than minimum due. i encourage everyone they are doing this to, to contact the FDIC at 800-378-9581 and your attorney general. i am. they are going under and screwing their customers over because of it.

9. Brian said...

Dito here. Been a loyal customer for over 5 years. Never late, excellent credit, and bam 27% interest. With a balance of $13K, the monthly interest charges are stupid. Read the rip off report on these crooks. I never got a opt out letter, along with many others. Transferring the balance to out Citi business card. To hell with thses people.

10. daffyd k jones said...

He he, you got linked to from CNN money

11. G Jiggy said...

Advanta isn't the only one doing this. A few months ago I got the big jack-up on the rate of my Key Bank business card. I carry a small balance on this card and depending on cash flow will either carry a balance or pay off the card. I usually carry a balance of some kind. I also have a HUGE FICO (won a bet on it one time). In other words, I see myself as a good customer. I called Key bank to ask them why they were doing this and they assured me it was noting personal. They asked if I wanted opt out and I said that I would stay in and told the lady "I have a better plan for you folks." Upon that I hung up the phone, payed off the balance and now I keep the card rotting away on my desk. I buy nothing with it and they have to spend money to keep me in their database and mailing me paper. I'll charge a couple of bucks every six months or so to keep the card open and let them loose money on me. Screw 'em.

12. marknamy said...

Not only did these ^&*^(*!~!! raise my rates, the other companies that I had credit with got wind of it and raised their rates to 25% because Advanta's move indicated that I had become a risk. I wound up having to refi my house so that I could get all this crap cleaned up and I'm now card free. Hope they choke on the loss of income.

13. Mr.Fireigg said...

Thank for this information ,it is useful for me.

14. Customer Service Resume Format said...

Yes, i had same issue with bank of america..

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