Oh well, better they freeze accounts and let debt be paid off than go under. Recently consumers are finding their credit lines slashed, sometimes below their current balances; this isn't surprising.

"Back in the real world, this means that Advanta no longer has new investors' money to turn around and lend to small business owners"

There more I read about what the companies in the financial sector have been up to, the more I think that Bernie Madoff's crimes were just a slightly more blatant version of what everyone was doing.

A bank that does not lend has no reason to exist. I am not trying to be mean but there will be countless more business defaults and this company is trying to limit their exposure. Anyone who believes in the greenshoots is in for a big surprise.

A lot of small business credit cards have been doing this. I had a Capital One Small Business card canceled because it had a zero balance. I have heard others who have had their cards canceled for having a balance that is too high relative to their credit limit. It seems that it is best to keep a very low balance on these cards and never pay them off fully if you wish to keep the credit line. Of course, they can still just shut you down but you may escape whatever algorithm is used for the first few rounds of cancellations.

@Go Pug Yourself:

A zero balance is perfectly fine, credit card companies LOVE that, as long as you're actually using the card. I don't understand this whole myth that the only way they make money is via interest fees. They make a TON from merchant fees (2-4%!), and when cards are paid in full each month, their risk is zero. This is IDEAL for them.

Considering that they jacked my interest from 15% to 30% a year ago, when I unfortunately was carrying a large balance (and making timely payments), I can say I am happy to see them go.

@zarex42: I have a half dozen or so credit cards and I never keep a balance on any of them. I have a couple thay I may only use once a year. I have yet to have a card get canceled due to lack of activity.

I have an Advanta small business credit card, and they haven't communicated this to me yet.

Not that it would matter that much anyway. I barely use the thing.

They raised my rate to 35% a few months ago. Luckily the only balances on the card at the promo rate of 6.9% until paid off.

I'm thrilled that they didn't accept TARP funds. Kudos to upper management for keeping their hands out of our pockets.

@zarex42: I don't think it's a myth. The stated reason for the cancellation was "Canceled due to inactivity." I think they are quicker to do this on small business cards than they are for general consumer credit cards. Also, a lot of small businesses have only the credit card relationship with certain issuers (like Advanta or Capital One). So, there is no disincentive to canceling the person like you would have if the person also had a checking and savings account with the bank.

I can absolutely tell you that canceling cards due to inactivity is not a myth. It has happened to me.

@zarex42: True, if you are actually using the card, it's ok. I was referring to not using the card but keeping the credit line.

I just got off the phone with Advanta. They confirmed the story and told me that notices had been sent out to all cardholders, but due to "postal problems" we will not get them until the end of the month. That gives cardholders just 10 days to get new credit cards for their employees and make changes to any automatic payments which may be attached their Advanta cards. I suggested they post a notice on the website, but was told they don't plan on doing that because they are not required by law to do so. My business isn't carrying a balance, and this is only a small inconvenience for me, but it's just bad business to leave their customers in the dark until the very last minute. I hope Advanta Bank Corp. painfully dissolves like a slug in a salt bath.

@yesteraeon: Yes, Ponzi comes to mind. Maybe that's why everybody's credit limits are being lowered and fees and interest raised.

@TEW: And it would seem that people who have had their credit withdrawn might not be so motivated to pay off their cc balances.

@zarex42: "They make a TON from merchant fees (2-4%!)"

They seem to not have been just happy to harvest those fees but wanted more, more, more...

"A bank that does not lend has no reason to exist."

Exactly. And a business that has to live off of CASH will not exist for very long.

Seconding doctormoondog.

The outsourced customer rep gave a long drawn out explanation of what my responsibilities will be starting Jun 11.

Excellent way for a company to treat a client that has never had a late payment.

Luckily they weren't my primary line of credit.

Crazy - I have been pounded by their recent offers for cash advances, and did take one to buy a used car! Glad I did the deal before they shut things down. I'll pay it off on my terms now...

So does anybody have a suggestion on what would be the best card to switch too? I have an Advanta account with 4 employee cards and charge around 10k per month, what is the best rewards prorgarm?

@ChuckECheese: These are business cards not your ordinary consumer cards. If you don't pay the bill they take your company. Most likely the company has enough to cover the bill for now but if the economy declines companies might not be able to cover the bill.

I love how the memo ends with "The information in this memo should not be discussed outside of the Company." right after saying that their staffing levels could be "significantly affected". Seriously. They inform the employees that a massive layoff is impending and to basically not count on your job being around much longer, then asks you to kindly keep it quiet and don't leak it to reduce negative exposure for the company.

@yesteraeon: Ding, ding - we have a winner!

To be honest, I am totally not upset that Advanta decided to, for all intents & purposes, go out of business. When I also received my letter from them advising me that the interest rate of my account was being increased from 7.9% to over 25%, I decided it was not worthwhile to even initiate any new charges on the card. I just feel sorry for all of the Advanta employees that will probably be filling out forms for unemployment benefits in their respective states!

I received the first notice from Advanta in an email this morning (05/26/09). The important part is here: "...effective May 30th all Advanta Business Credit Card accounts, including your account, will be closed."
Wow. Five whole days notice! That's plenty of time for any small business to secure other credit options, right? Luckily, I read the article on this site which gave me an extra 8 days to get a new card. Thank you Consumerist.com.

@doctormoondog: I just got my notice today (5/26) and it was dated 5/22, so I don't think they were really having postal problems back when they gave you that line of crap. This was a big surprise to me but it's only a slight inconvenience. It is just so sad to see that they felt no obligation to notify customers weeks ago when this was clearly a done deal. They're not required to do so by law, but why not just follow the laws of common consideration. In retrospect, I am glad that I always travel with more than one serious card.... since most of my trips last longer than the 4 day warning they have given.

I cannot believe that a Class Action suit is not being considered by all card holders. They continue to bill us each month with interest and fees and providing no services. It is as if we applied for a bank loan, not a credit card. My belief is when they are not providing services there should be no interest and fees as there are no services.