Losses Catching Up With Credit Card Companies

   

Posted: May 20, 2009

One sign of the difficulties facing borrowers and consumer credit companies can be seen in a report on the struggles of one company.

A recent article in Fortune notes that Advanta, the nation's top lender to small businesses and the 14th-ranked card issuer, said it would begin closing down customer accounts, leaving up to a million people in search of badly-needed credit.

The company is said to be offering to buy out some bondholders at about a 30-percent discount, while also planning not to repay notes on time that are set to mature next month.

The magazine notes that delinquencies for Advanta cards hit 11.5 percent in April, which was actually a slight decrease from March. A number of other companies have been struggling with default rates in the neighborhood of 10 percent, illustrating what is steadily becoming an industry-wide problem.

Financial analysts have warned that things may only get worse for credit card companies and consumers, with the nation's unemployment rate expected to continue to rise in the coming months.