Business credit card issuer Advanta Corp. filed for bankruptcy protection on Sunday, according to a report in Reuters.
The company, which used to offer business credit cards with 0% APR for as long as 16 months (bad idea when the economy is going into a tailspan), saw its capital ratio fall below regulatory minimums as more Americans fell behind on credit card payments.
The filing excludes the company’s Advanta Bank Corp. unit, though it could be turned over to the FDIC for a similar capital shortfall.
However, customers will still need to make payments on outstanding credit card balances; apparently Advanta has 360,000 customers and $2.7 billion in managed receivables.
Advanta stopped accepting new credit card applications in May and closed one million existing accounts after sporting a 20 percent default rate.
But the move wasn’t enough to stave off bankruptcy, as small businesses have been among the hardest hit in the latest downturn.
One month later, Advanta said it would have to cut half of its workforce, leaving about 200 employees with jobs.
Last week, CIT Group, which provides loans to small and mid-sized businesses, filed for its own Chapter 11 protection.
Credit card issuers have been converting to depository institutions to buffer capital ratios and take advantage of low-cost financing from the Fed in light of the ongoing credit crisis.
I wonder who else will fall victim to the credit crunch.
Free Credit Scores: 
No Fee Balance Transfers: 
$200 Cash Back: 
$500 Cash Back: 
Comments are closed.