The tragic U.S. economy is about to claim another victim… even if the vast majority of people would have serious trouble feeling badly for the entity about to go under in this case. Advanta, a major issuer of U.S. plastic, has announced that it is planning to shut down its credit card division due to uncontrollable losses. Advanta is the fourteenth largest credit card issuer in the country, and a major name in business lending. Credit cards currently account for nearly all of Advanta’s revenue, but the company claims that it has no choice but to prune back the division.
At the point when Advanta shutters its credit card division next month, approximately one million American borrowers will be left looking for a credit at a time in U.S. history where it is harder to obtain than ever before. Of course, Advanta had long been jacking up customer interest rates in an attempt to bring in cash, which was probably a big motivator for people to stop paying their bills. Definitely a clear-cut case of a losing cycle.
Advanta’s investors will also be taking a bath as a result of the news. Bond purchases were the fuel powering Advanta’s expansion efforts over the last decade. Already, bonds maturing next month will not be fully repaid on schedule. The bank has offered to buy out bondholders at a discount of approximately thirty percent. It’s more terrible news for Advanta, which lost a reported seventy-six million dollars during the first quarter of the fiscal year. Customers can’t seem to keep up on payments, reflecting the absolutely dreadful state of the American economy. Delinquencies were well above the national average, at almost twelve percent.
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