Advanta Interest Rate Calculation Rip Off!

[GregB]

I have recently been PIFing my Advanta Business Card - ever since they Rate Jacked me last year from 7.99% to 20.39%, which has now gone back down to 15.99%.

Feb purchases PIFed by March due date.

My March statement has $6,525 in new purchases, which was due by 4/25. With all the recent increases in Business Taxes, I paid $4,525 leaving a balance of $2000.

My April statement comes, showing the $2,000 balance from March and the $5,608 in purchases for April.

The Interest is $176.83 dollars!!!

They charged me 15.99% on an AVERAGE BALANCE OF $12,856, which is MORE than the total of March and April.

After an email and phone call to customer service, they assure me this is correct. They also told me the interest charged would be the same if I had paid the $4,525 or not! (Ignoring the minimum due). I asked what the interest would be if II had just paid the minimum for March and paid the entire $6,525 for March plus the $5,608 for April by my May 22 due date. They said the interest would be the same!

Advanta charged me almost as much interest for revolving $2,000 until the next month as BofA did when I revolved $36,000 until the next month!

[creditwherecreditisdue]

Do you have the detailed statement (either on the back of the statment or in the credit card agreement) provided by Advanta as to how they go about calculating the finance charges? If so could you post it here? I am wondering if this is simply a matter of two cycle billing or if it is something else.is going on. Two cycle billing has already been banned and will be total eliminated by mid-2010.

[Anonymous]

Hey GregB -

Have you calculated your daily average balance yet so that you have a number that you believe to be correct in comparison to Advanta?

There are two factors that do come into play.

1.  If you EVER fail to PIF, you lose ALL grace periods for payment and DO pay on the daily average balance.  In order to get back to a grace period, you must zero out your balance prior to the statement cut date so that you have a statement ending balance of zero.  From that point forward, as long as you PIF by the due date, you get the no interest grace (not including cash advances), unless you have a no grace period account.

2.  Your balances from March and April will over lap, meaning that you did accumulate a combined balance between the two.  But, it should not be more than your combined total balances.

I am looking at one of my BoA statements.  It has a "Closing Date" of 03/25/09 and a "Due Date" of 04/19/09.

In my scenario, if I had a zero balance for the statement period ending 03/25/09, then I have a grace period through 04/19/09.  If I had even one penny in beginnin balance for the period ending 03/25/09, then I will have no grace and accumulate daily average interest on my balance even if I PIF on 04/19/09.

In your case, you had a March statement ending balance of $6,525 and new charges in April of $5,608.  I'm going to use my statement dates for calculations:

March Closing Date:  03/25/09

March Closing Balance:  $6,525

March Statement Due:  04/19/09

New Charges in April overlap and accumulate in addition to previous balance until April 19 payment. 

April Closing Date:  04/25/09

April Closing Balance:

April Statement Due:  05/19/09

As you can see, if you made your partial payment on or near your due date, that your new April charges were in addition to your March charges as the statement balances overlap and only have 6 "unique" or non-common days (from the 19th due date till the 25th new statement closing date).

I am assuming based upon the explanation given, that your March statement might have had a beginning balance that was not zero.  If so, whatever the February ending balance was, accumulated on top of your March balance to calculate interest for March.  You did not specifically say what your Feb balance was.  So I can't provide much more comment there.

However, your March ending balance, plus April new purchases is $12,133.  A 20.39% annual APR is .00055863 per day which is $6.78 per day if you actually had a daily average of $12,133.  If that balance were carred 30 days this is $203.34 in interest due to the overlap of combined balances. 

Since you paid only $176 in interest, they did not charge you for 12,133 daily average, they charged you for approximately $10,144 in daily average balance, calculated for 30 days of balance.

So, my estimation is that this interest is probably accurate based upon a 20.39% APR of daily average balance, in which you had a statement overlap of balances and did not PIF, therefore having combined daily average balances between the statement for the previous statement plus all new charges except those in the last week (from the 19th to 25th) where the balances did not overlap from cut to due dates.

Of course, I don't know when you made the new purchases during the month and what your actual daily balances were, I am only making estimations to see HOW you might have legitimately have accumulated the interest charges you disclosed based upon the CC terms you provided. 

Let us know....always interesting cases....sometimes calculating these things is as bad as the IRS and Tax Code

Message Edited by txjohn on 04-30-2009 06:15 AM

[GregB]

John,

You have it correct with your #1. There is the grace period if you pay by the due date but you lose it if you "EVER fail to PIF".  The only thing in the rest of your calculation is that Advanta originally rate jacked me to 20.39% but by the time I didn't PIF the rate had dropped to 15.99%. The statement shows a daily rate of 0.04441%.

I'm going to go back and figure out the daily balances because I still can't figure out how they came up with an average daily balance of $12,856.04 when the total of March and April statements is $6,525.25+$5,608.11=$12,133.36. An interesting note is that the CL on this account is $12,500 so we have to know that the balance never exceeded that. The Feb statement was $1,623.80 PIFed on March 16 due date. Most of March statement was one charge on 3/5 for $4,668.93 so there was some overlap. I am going to calculate the average balance. I'm still thinking there is an error here on Advanta's part.

The one thing that I have learned from this is that losing the grace period is an ugly thing. Not paying that last $2,000 cost me about the same as BofA charged me the same month on a balance of $31,000. I'm now kicking myself because I paid down that BofA account by $4,800. All I had to do was send $2,000 of that to Advata instead but I was worried about a CLD from BofA with all the recent news.

I have gone through some other statements from different companies and so far haven't found a case of such a high fee on such a low balance.

[Anonymous]

Good luck.  While I hate to see the high charges, in some ways you hope you don't have to worry about billing errors....can make you paranoid

But, let us know so that we can all go back and begin check our own statements for issues

[GregB]

John,

Start checking

Highest balance reached during statement period is $9,869.06 for 3 days. I calculate the average based upon each days balance to be $8,875.55.

This is the amount from the March Statement Date until the April Statement Date, right?

Regardless, a $12,000+ AVERAGE is still impossible. The highest balance ever was $10,842 in January which was PIFed in Feb.

edited to fix amounts in first line after calculation

Message Edited by GregB on 04-30-2009 09:34 AM

[Anonymous]

If you EVER fail to PIF, you lose ALL grace periods for payment and DO pay on the daily average balance.  In order to get back to a grace period, you must zero out your balance prior to the statement cut date so that you have a statement ending balance of zero.  From that point forward,

Interest should stop  the day you pay off the statment balance. Say you pay the balance 7 days after the statement date on you next statement  you SHOUD only owe interest for 6 days, and the grace starts  again  the day you pay the balance.

 my amazon chase was normaly my card, I decide to  use a BT offer the I paid it off I called chase to see if I could starting using card and owe interest on new purchases, I was told the grace period startted the day the balance was paid off and I only owed interest on the number of days before the payoff. and thats happened. I ended up owing a $1 and they credited back to my account nice since Since I had a balance larger than $1, since I started using it again after paying it off.

So  you shouldn't have to wait for a zero statement balance to get your grace  period back.

Message Edited by rbbyrbsn on 04-30-2009 11:52 AM

Message Edited by rbbyrbsn on 04-30-2009 11:53 AM

[athensguy]

---

@Anonymous wrote:
If you EVER fail to PIF, you lose ALL grace periods for payment and DO pay on the daily average balance.  In order to get back to a grace period, you must zero out your balance prior to the statement cut date so that you have a statement ending balance of zero.  From that point forward,

Interest should stop  the day you pay off the statment balance. Say you pay the balance 7 days after the statement date on you next statement  you SHOUD only owe interest for 6 days, and the grace starts  again  the day you pay the balance.

 my amazon chase was normaly my card, I decide to  use a BT offer the I paid it off I called chase to see if I could starting using card and owe interest on new purchases, I was told the grace period startted the day the balance was paid off and I only owed interest on the number of days before the payoff. and thats happened. I ended up owing a $1 and they credited back to my account nice since Since I had a balance larger than $1, since I started using it again after paying it off.

So  you shouldn't have to wait for a zero statement balance to get your grace  period back.

Message Edited by rbbyrbsn on 04-30-2009 11:52 AM

Message Edited by rbbyrbsn on 04-30-2009 11:53 AM

---

Pretty sure the problem being talked about is that the average balance is higher than any balance ever attained on the card.

[Anonymous]

I have their net 90 card, so was googling advanta complaints and found where a guy saying some how Advanta some how derived a method of calculating the Daily Average Balance that's 20% higher than normal .

I only have it for the three month rolling free ride,and I just happen to spend avg 5K/yr to get my 0.33% cash return out of the card, well that's icing on the cake. I regret never having app;ied for cap1 Advantage 60 when they offered it then I could used it to transfer my 3 month old balance ,delaying repayment another ~60 days

Message Edited by rbbyrbsn on 04-30-2009 09:00 PM

[GregB]

Finally got an explaination from Advanta about the calculation method. I don't know if other CC Companies use a similar method.

IF YOU EVER DON'T PIF: They take the Average Daily Balance for the current statement cycle AND the Average Daily Balance for the previous statement cycle, total them and they divide this by the number of days in the current statement month. This is how my Average Daily Balance for the current cycle of $8,869 became the $12,856 that they used to calculate the interest charged. After this the Average Daily Balance would have been correct and I would have continued to pay the absurd 15.99% on the true Average Daily Balance.

I do have to give Advanta credit for agreeing to drop my interest rate to 10 point something percent starting today.

I feel seriously overcharged but will admit that I should have been aware of what formula Advanta was using to charge interest. I will check the other accounts in case I ever don't PIF an account that has purchases. (Instead of a low interest BT where the promo period ends).

I hope everyone else learns from my experience.