Advanta Credit Cards were issued to a number of small business owners. The company chose to focus on this market for their credit card services, and Advanta was a well respected provider of this financial product. Advanta changed its policy regarding credit cards in May of 2009 and decided to close all of its customers’ accounts without notice. Read this Advanta credit card review and then use our free credit card “chaser” to find and compare credit cards from many top banks and credit card issuers online.
Advanta Company History
Advanta was formed in 1951. The company had a modest beginning; it was started by Jack Alter, a schoolteacher from Philadelphia, in his spare bedroom. The initial investment in the company was $30. Alter’s goal was to provide loans to fellow teachers. By the time that Advanta chose to close all of its small business credit card accounts, it was one of the largest credit card companies in the United States serving that niche market.
Advanta Shuts Down All Credit Card Accounts
The announcement of Advanta closing down all of its small business credit card accounts came as a shock to its customers. The company had one million active credit card accounts on May 30, 2009, the day the account closures took effect. Existing customers were given a few days notice that they would no longer have access to credit after that day.
The reason that Advanta took the drastic step of shutting down all the credit card accounts was that its customers were defaulting on their payments in record numbers. In March of 2009, the default rate was over 17% and by the next month it had increased to over 20% of cardholders. At that point, cardholders owed the company $4.5 billion.
The company’s cardholders were still obligated to pay the outstanding balances as of May 30. Many customers were left scrambling and trying to find an alternate issuer for their credit needs. Interest rates on new cards, if the business owners could get one, were likely to have higher annual interest rates and fewer rewards than they were used to.
Options For Advanta Cardholders
The decision to close all Advanta credit card accounts had nothing to do with an individual customer’s creditworthiness. Existing customers can still access their account information online and contact Advanta customer service agents with questions or concerns they may have.
Customers who had signed up for a card offering cash back and who kept their account in good standing were issued a check for the amount owing if it was more than $1. If the amount owing under the cash back program was $50 or more, the customer was issued a check by the next billing cycle (in June). Customers owed less than $50 will receive their rebate checks by September 30th of 2009.
For cardholders who were enrolled in a rebate program offering points, the procedure is a little different. They had until July 28, 2009 to redeem them. After that time, either a check will be mailed out or a credit will be issued on the cardholder’s statement. Again, the account must be in good standing for the check or the credit to be issued.
Cardholders with accounts in good standing will not be negatively affected on their credit score because of Advanta’s decision. The company is working with credit reporting agencies so that the fact the account was closed by the issuer does not directly affect the user’s credit score.
Annual fees will no longer be charged on the closed accounts. If a cardholder paid an annual fee after June 1, 2009, the amount of the fee will be prorated and they would be issued a credit on their account to reflect the fact that the account was closed as of May 30, 2009.
People who own small businesses and members of the general public can take the lesson learned from the Advanta credit card situation and make changes in their financial affairs. Relying solely on one source for financing may not be the best choice. If a credit card issuer runs into financial difficulty, as in the case of Advanta, having a good payment record is no protection against having the company close down the account.
Small businesses need to have access to some form of revolving credit to stay operational. Having a second credit card account for business purposes may mean additional work for accounting staff, but it will also help to keep the business going if another credit card issuer makes a similar choice to the one Advanta made.
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You can start looking for a secondary source of credit to avoid a situation like the one that happened with Advanta credit cards right now. The free credit card chaser tool on this page is here to help you find the right one for your needs. All you need to do is click on it to get started. Start finding and comparing the very best credit card offers now!
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