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Advanta Ups Fees On $8B Of Credit Card Receivables >ADVNA
Dow Jones News Service ~ May 15, 1997 ~ 4:45 pm EST
By Eric Weiner
NEW YORK (Dow Jones)--In an attempt to change its financial fortunes, Advanta Corp. (ADVNA ADVNB) is increasing the fees it charges on about $8 billion of credit card receivables, according to one analyst who covers the company.
In a report released Wednesday, Merrill Lynch & Co. analyst Michael R. Hughes reported that Advanta increased its cash advance fees to 4% of the transaction value from 2%, boosted its late and overlimit charges to $25 from $20, and raised its standard purchase rates to as much as 23% from 17%.
The Spring House, Pa., credit card company also is imposing a new $25
account-closing charge and a fee of $15 if an account is inactive for six months, Hughes wrote. Hughes was not immediately available for comment.
Pam Godwin, senior vice president of Advanta's credit card division, declined to comment on the changes in the company's rate structure. But she said the firm is only ''reserving the right'' to impose the inactive account fee.
''All we're doing is reserving the right,'' she said. ''But we're not imposing the fee right now.'' Godwin said the company in the future may test the effectiveness of the inactivity charge.
Hughes wrote that the rate changes will take effect June 16 and that customers who close their accounts before then would not be charged the account-closing fee.
Godwin said that for years the company offered a card that was inexpensive relative to its competitors, but that strategy won't work anymore. ''We can't afford to be so significantly lower at this point,'' she said. ''The goal is to charge an appropriate price for the value that we deliver.''
In March, Advanta revealed that 1997 profits will be well below its 1996 levels. The company also said it hired mergers and acquisitions adviser BT Wolfensohn to help it explore strategic alternatives. The company attributed its profit shortfall to increased consumer bankruptcies and charge-offs, and lower-than-expected receivable balances in its credit card business.
Godwin said Advanta is taking steps to make sure that the company has an improved outlook.
''We're very optimistic about the future,'' she said. ''We think we've been doing the right things.''
(END) DOW JONES NEWS 05-15-97 4:45 PM
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I bought shares of this company with the notion that company will be acquired soon. Anyone knows the latest information on this.
junjun |
