posted on February 6, 2001 08:52:39 PM
A report on CNET has PayPal taking on a partner with Providian, one of the more usurious bank card providers. They will be offering a co-branded Credit Card to PayPal users.
For those unfamiliar with Providian, they have a continually revolving credit card. You get charged interest no matter how quickly you pay it off and the rates are very high. They aren't the only ones who do this, but they are often cited as one of the worst. This neo loansharking technique often catches the average consumer unaware.
posted on February 6, 2001 09:10:54 PM
hmmm...I have a providian card. after I had some serious credit problems, they were the only credit card issuer who was willing to take a chance on me. despite their high interest rates and continuous revolval, having their card allows me to rent cars and do other ordinary credit-associated things which make the drawbacks worth while for me. Their "usurious" rates are based on the fact that a lot of the people they offer credit to are bad risks and they take a bigger chance than XYZ credit card co. that they will lose out when the customer defaults. For a lot of good folks with bad credit they are the only game in town so it's not a big deal to us that they charge high rates. the alternative is nothing at all. For what it's worth, I've been happy with them for the past two years and their customer service is quite responsive. i won't be getting their Paypal card (no need nor desire to) but there's no need to imply that they are a sleazy company or that people who use them are necessarily the "average consumer".....if I were the average consumer I certainly would get some other card but most of us using Providian cannot....
posted on February 6, 2001 10:29:07 PM
I got one of the PayPal ATM/Debit cards... now there is a couple of strange bedfellows. The card is issued through Bank One (parent company of email payment service eMoneyMail.com) and then PayPal's debit card processor is First Data Corp (parent company of email payment service MoneyZap.com).
posted on February 7, 2001 04:14:37 AM
FWIW, there are secured deposit card providers who do not use Providian's techniques so people with poor credit can get a card and have the advantage of earning interest on their deposit while not being socked for charging something they are willing to pay off when the bill comes due.
And most of the deposits are in the $100 range, which is not terribly burdesonsome. Providian's methods, again, are not unique, but they are not justifiable. either.
[ edited by mballai on Feb 7, 2001 04:17 AM ]
posted on February 7, 2001 05:42:03 AM
Thank you, mballai, for the heads up on Providian not to mention the new word I learned today. "Usurious" the lending of money at an excessive rate of interest...
I just received a mail promo to apply for a Providian card. It just went by way of the garbage can. I am one of those consumers who appreciates knowing these things prior to making a committment. Credit card "small print" is one of my pet peeves.
posted on February 7, 2001 05:47:43 AM
A little off topic but on the AOL stock board this morning I see eBay has also joined up with eLance.
Just proving what many have said in threads on this board that ebay is more interested in becoming Business to Business and Business to Person than a Person to Person site anymore.
posted on February 7, 2001 06:53:07 AM
I don't understand how any of this is "small print". The interest rate, the annual fee, the grace period are all things that you should look at before deciding on a credit card.
mballai, is your main complaint that Providian does not have a 25 day grace period after making purchases and they have a 21% interest rate?
That 21% is standard for almost all credit cards that are being offered to people who do not have a good credit past. Even those that are "secured" with funds in a seperate account are typically at that interest rate and the funds that are earning interest are only earing the typical interest that accompanies a savings account, which is very minimal.
If you have information, on secured cards that are have an interest rate of less than 21%, I'm sure that many of those here would be interested in hearing about them.
(The grace period issue, I won't touch because I'm not sure that Providian doesn't offer a grace period.. since they offer many different cards under different names and those do have a grace period).
posted on February 7, 2001 06:57:31 AM
I see Paypal is trading a 10% stake in the company and a seat on the board of directors for the privilege of partnering with Providian.
Under the terms of the agreement, Providian will take a minority stake in privately held PayPal. It has agreed to create a cobranded credit card that will be offered to PayPal customers. Providian, the fifth-largest issuer of credit cards in the United States, also has the option of launching a Web-based money-transferring system that PayPal would operate.
It doesn't sound like a bad deal for PayPal.
In another potential revenue generator, PayPal gets access to Providian's 16 million cardholders should the banking company launch its own payment service, said Bill Buchanan, Providian vice president of partnerships.
BTW this Providian issued CC doesn't look any worse or better than any I currently am using. Aria Visa Platinum
posted on February 7, 2001 07:31:32 AM
Here are some other tidbits on the card, from other news reports:
From the LA Times:
[i]Providian will set the credit card limits
based on how much digital cash PayPal's members have in their accounts.[/i]
From The Wall Street Journal:
[i]Providian and PayPal plan to offer incentives to users who send payments charged to the new co-branded card, which is planned for launch sometime in the spring. The two
companies declined to disclose exactly what those incentives might be, but said the deal
may include sign-up bonuses or points that might be redeemed for discounts or goods.[/i]
posted on February 7, 2001 07:47:25 AM
MorningStar.com had an interesting spin on the partnership.
The deal should allow the nation's number-five card issuer to further expand its already fast-growing loan portfolio and, we suspect, allow it to explore an outright acquisition of PayPal in the future. PayPal is a leading provider of person-to-person payment services, allowing consumers to pay one another with credit cards. Despite its current stranglehold on the market--given the popularity of the service in settling Internet auctions on Web sites such as eBay (Nasdaq: EBAY - news)--we suspect that PayPal was searching for a bigger partner to compete with data-processing heavyweights that are pushing their way into the field.
posted on February 7, 2001 12:37:05 PM
Providian has often been cited in consumer complaints. Aria also offers its cards without a grace period for payment. It's possible that any provider might offer different terms for different customers, but there is no excuse for a credit card that does not offer a grace period combined with a high interest rate.
posted on February 7, 2001 01:21:32 PM
I don't understand what no grace period means. You use the card and have to pay the balance at the next billing?
I have had the same credit cards for more than 25 years. I get a bill and have 28 or 30 days until it is due. If I pay the balance there are no interest charges. Is this the grace period? (The interst rate is no where near 21%. It is around 12% and I think this is high.)
So if for some reason you have bad credit you have to deposit funds against a credit limit to get a credit card. Is the credit limit higher than the deposit?
posted on February 7, 2001 02:10:14 PMmballiProvidian has often been cited in consumer complaints. Aria also offers its cards without a grace period for payment. It's possible that any provider might offer different terms for different customers, but there is no excuse for a credit card that does not offer a grace period combined with a high interest rate.
Aria is a subsidiary of Providian Financial Corporation. Their Visa Platinum and Visa Portrait cards both have a 25 day grace period. Only the Aria Visa Personal is without a grace period.
posted on February 7, 2001 03:38:44 PM
smw:
So if for some reason you have bad credit you have to deposit funds against a credit limit to get a credit card. Is the credit limit higher than the deposit?
Not all credit cards have 'secured' funds if you have bad credit. Providian has different types of credit cards .. some are secured in the typical fashion, with $ in a seperate savings account. Others are secured with a life insurance policy (this was about 8 years ago, I don't know if they still do it), and yet the other has no $ in a seperate account.
In the first example, where there's $ in a seperate savings account, typically the amount of credit available is equal the the amount in the savings account. Mind you, the funds have to be in *their* savings accounts so if you default they can grab the money. Occassionaly you'll find a card that will allow you to have 2X the amount of what's in the savings account. That depends on the company. From what I've seen, those types of cards tend to run 19-21% interest and do have a grace period. Of course, if you default they can easily grab your money from that savings account. To increase your credit limit, with this type of card, you need to add funds into that savings account. Occassionally they'll offer to increase your card, but it's minimal.
I've forgotten how the life insurance "security" part works.. it's been so long and I don't know if it's even valid any longer.
The third type really isn't secured. There are no funds in any account in order to guarantee that the company will get it's money. They're taking a bigger risk with these cards therefore they're charging a higher interest rate.. typically it's 21.9%. The annual fee is higher as well. Most of these types of cards do not have a grace period.. from what I've seen. Credit increases are often with these types of cards. Usually around 350 if you have a good history of payment.. (but watch out, they'll charge you 100 for the honor of having a higher credit limit).. with higher increases thrown in once in awhile.
posted on February 7, 2001 07:53:02 PM
rosiebud's post is a very good summation of the options available to those like me with crummy credit.
secured cards are always touted as the solution for people with poor credit, but I don't find them a significantly better deal than my Providian card. I have a secured card with Capital One, and it gives me 150% of my deposit as credit (i.e. if I deposit 200 dollars I get 300 dollars worth of credit.) the interest rate is about 19%---hardly a bargain. and I shopped around. the late fee is $25 and they charge $10 to make a payment over the phone. the customer service is so-so. and interest? oh boy, an extra 6 dollars in my account after having the card for three years. I have had fewer hassles with Providian and I'd rather pay the higher interest and have a higher credit limit so I could actually charge, say, an airline ticket or a couch (pretty difficult to do that with a $300 limit--if that's my limit I may as well just pay cash or layaway.)
i'm happy with the service that Providian provides me for the high rates they charge.
posted on February 8, 2001 02:04:03 AM
I have an Aria Providian card. It cost me $49.95 to sign up and another $37.50 yearly fee so you may as well say about $90 bucks and I had a $300 limit which they raised to $400. For an additional $50 they have offered to raise it to $1,000 but I declined.
It is not secured so I can see the reason for the fees.
I think it's great for reestablishing your credit and worth the fees. No worse than what Billpoint and Paypal are grabbing from me!
posted on February 8, 2001 06:11:18 AM
kidsfeet ~ that's fine and dandy, if you're talking about a spending spree at the mall or putting that $1000 stereo system into your car. But, what about those who want to buy a home? Without re-established credit, those people will remain renters for the rest of their lives (which is fine with me because I own rental properties)...... unless they manage to come up with the entire amount to buy a home outright. Yes, I know there's companies out there that will finance a house for those with less than stellar credit ratings.... but even then, you'll have to come up with approximately 40-50% of the value as the down payment.
If you feel that being debt free is a much better goal than re-establishing credit, I'm not going to say that you're wrong, I'm just going to say that you're not taking a lot of people into account.
posted on February 8, 2001 09:35:19 AM
Years ago, I interviewed with Providian for a position as a financial analyst. At that time, they were undergoing a lot of bad press from a class action suit.
They are not good people who are trying to help those with bad credit. This is their niche because people with credit problems are extremely profitable. They charge for the card, charge annual fees, charge for credit line increases, charge higher interest rates... caching, caching.
It's a good starting point for establishing credit, but users should dump them as soon as they can get better credit terms.
And, when it comes to applying for mortgages, there are certain companies that are earmarked as being in the "sub-prime" (for lack of a better word, this is not the actual term) market. Not sure if Providian is one of them, but having loans, car loans, credit cards, etc. with some of these companies actually LOWERS your FICO score, which could make it more difficult for you to obtain a mortgage.
Back on topic. They are not the most ethical of companies to work with and that PayPal has this alliance with Providian says a lot about PayPal.
posted on February 8, 2001 10:15:29 AM
miracle 118
yep, that's exactly my impression and why I was rather discouraged by the announcement.
Snakes routinely shed their skin, but it doesn't change who they are.
posted on February 8, 2001 10:19:09 AM
Omigosh, if you see Providian anything, run the other way! They are a bunch of crooks.
I have an account with them I am trying to pay off. No matter how early I send my payment, they hold it until after the due date so they can gouge me $29. This happens even if I send it TWO WEEKS early. I can see where mail might be slow once in a while, or around holidays, but not every d**m month. They wouldn't reverse it, either, just said it was my fault.
I called my state's Attorney General's office and was told if I could prove this, they would take action, as it is an illegal practice. They recommended that I send my payments Return Receipt Requested. This got expensive, but every time they had to sign for my payment, it got posted on time. If I got lazy and just mail it, I got socked again.
I finally solved it by using an online bill-paying service that promised to go after any creditor that pulled this crap. The late fees stopped.
As soon as I get it paid off, that account is history.
posted on February 8, 2001 10:56:52 AMkidsfeetPay cash. Forget credit cards.
I guess I'm going to pass on that policy. I haven't paid cash for groceries in so long I can remember the last time I used cash or a check. All my groceries are paid via a credit card (or a debit card if I need cash back). I don't think either of my last two cars have ever had a tank of gasoline that wasn't purchased via a credit card. I'll carry some cash for a haircut or a drink at a bar, but the majority of my purchases are via my credit card.
Yes you can avoid credit cards if you choose but for me they make life much easier.
