Advanta's Bad News Points to More Trouble for Small Business

Poor Advanta. They were once a shining example of a prime credit card company: Very low rates, great terms, lots of perks and a stable portfolio of robust small business owners. Now they're a poster child for the credit crunch.

Advanta announced today that they're shutting down all accounts for further purchases. Advanta cardholders will not have their account closed or their repayment accelerated, but they will no longer be able to use their card for new purchases. For Advanta small business cardholders, this bad news follows a massive wave of rate hikes earlier in the year.

The small business credit card issuer was hit early and hard by this economy. Their charge-off and 30-day delinquency rates more than doubled between 2007 and 2008:

Charge-off Rate:          2007: 3.71%       2008: 9.07%   

Delinquency Rate:       2007: 4.29%       2008: 9.53%  

Advanta's 2008 numbers were several points higher than other similarly-prime credit card issuers for the same period. For example, Chase had a delinquency rate of 4.97% and Citi had a rate of 5.25% in 2008.  The difference was Advanta's focus on only small business accounts, a segment that has been extremely hard hit in this recession.

All this adds up to more bad news for struggling small business owners. With small business lending in a freeze, business credit cards had been one place where small business owners could still find some financial flexibility. Now it is basically impossible to open a new small business credit card, and even existing accounts are being shut off.

Are you a small business owner? Share your thoughts and stories about the business credit challenges you are facing in the comments below.

Emily Peters – Credit.com's personal finance expert and former TransUnion credit bureau insider, Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Comments

[Steve Bennett]

I have no sympathy for Advanta. they created the problem themselves. I closed my account and becuase they increased my rate from 9.99% to 24% the minimum payment skyrocketed. As a small business owner, and an almost total shut down in my line of work, I missed one payment. the rate went up to 33% and then the harassing phone calls have begun.

I hope the go under.

[william ager]

I have an Advanta Business credit card......I received my first information regarding this shutdown on Page 7 in section D of my local paper. I had to call Advanta for clarification.
Anyway as I pay my credit card bill in full each month & have alternate Company credit sources , this shutdown is not adversely affecting my business......But I can see where it will imperil many who ride the credit card buffer due to cash flow problems with slow receivable accounts.
I won`t question the necessity for this action , I do though feel Advanta has not been as forthcoming as it should have been to its Card holders. I guess being frugal & paying attention to ones finances is still the best way to remain solvent.

[Bognar Regis]

I was NEVER late making payments to Advanta, and I ALWAYS paid much more than the minimum payment due. For this I was rewarded with 35% interest (they opened my account at 7.99%) and having my credit line cut in half.

Advanta took advantage of their small business customers in a nasty, horrible fashion. They have been dishonest and snotty. They deserve to fail.

I paid off my account in full last week. I did not in any way contribute to their collapse. They did that all on their own. Good riddance!

[Rose]

They kept sending account checks to pay off other accounts or transfer/make big business purchases. Once, sometimes twice monthly. We never used them. Did not hear of them shutting accounts down until we received the letter in the mail. Was never a big fan. Always paid in full. They did this to themselves. Greed is Greed. What goes around comes around.

[Patti J.]

I have no compassion for these greedy @3&*!!! My husband and I both "had" Business credit cards that started with a 9.9% apr and ended in a 35% apr. When my husband called to inquire about the sky rocketing interest all they could say was "we're in tough economic times". We always paid on time, never missed a payment and this is how they reward their good paying customer's. I hope they sink like the Titanic!! Good ridens!!!