Biz Poll Results: Credit Crunch
Nicole Pritikin, the owner of an online knitting and yarn shop in North Bennington, Vt., was so happy with her credit card from Advanta Corp. that she praised the company in its 2001 annual report. “The checkbook is history!” she said.
Since last week, though, she has switched her automatic bill payments to another credit card and redeemed her Advanta rewards points. The reason: The Spring House, Pa., company is walking away from all one million of its customers.
small-business owners throughout the U.S. were scrambling to replace Advanta credit cards that essentially will be canceled on June 10. The company will continue to accept payments on existing balances, but won’t make any new loans.
Advanta’s move is one of the most extreme retreats in the credit-card industry, which is being racked by record delinquency and default rates. While Advanta is a tiny player overall, with about $5 billion in outstanding card loans compared with $176 billion at J.P. Morgan Chase & Co. as of March 31, Advanta focused solely on small businesses.
Small-business owners have been among the most severely hurt by the credit crisis and recession. Banks have pulled back on small-business loans in recent months, forcing company owners to rely more heavily on plastic for many of their expenses. Card issuers are leery of small businesses because of their volatile revenue streams.
According to a recent survey by the National Small Business Association, credit cards are the most popular form of financing used by small business to finance their capital needs. One-third of small businesses reported that their credit lines had been reduced in the past six months.
Photo by Advanta.
Jaclyn on June 6th, 2009 6:21 am
This is why i don’t own any credit cards. Your spending money that you don’t have, if you don’t have cash to pay for something that you probably don’t NEED it that bad and can wait. In today’s recession you are only getting yourself in deeper trouble by spending money on credit cards.
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