Tuesday, May 12, 2009

Advanta Shuts Down Credit Card Lending

On June 10th, credit card issuer Advanta will cease lending to its 1 million customers amid surging charge-offs.  The credit card company said that charge-offs hit an astonishing 20% on some cards as of March 31st.  Advanta is the 11th largest credit card issuer in the US, with $5 billion in outstanding balances, and the only major lender focused on small businesses.  Maybe $5 billion doesn't seem like much in context of the $45 billion the government has thrown at Citigroup or Bank of America.  But what it represents is more credit contraction in an economy that is struggling for a foothold.  Small business borrowers have fewer and fewer places to turn to finance their operations.  Since smaller lenders like Advanta fail to qualify for too-big-to-fail status, the competition for the big credit card issuers slowly evaporates, allowing the larger banks to do things such as raise fees for no good reason, even though their cost of funding is zero, and even though the government is supporting them so that they lend money.  Nice how the government's plan is working, isn't it?  

1 comment:

mrbogue said...

Great i'm already getting a glimpse of the future now:

The entire banking system will be owned by JPM soon, and unless you want to put your rapidly hyperinflating money in a mattress, you'll have to PAY the bank to keep your money there.

Everything will cost double and 30% of the global population will be unemployed, the other 65% will be employed with the government licking NOD and bankruptcy envelopes, and 5% will
be ultra-rich bankster fat cats raping and pillaging everyone else.

OH, and the government will be touting "the recession is over" all the while.