Small business credit card issuer Advanta filed for bankruptcy this month, as default rates among its former cardholders soared above the fifty percent mark. At its peak, the Philadelphia-based lender was rated among the top twenty credit card issuers by volume. However, the impact of a soft economy forced many entrepreneurs and business owners to miss minimum payments or seek their own protection from paying debt.
In bankruptcy documents filed with court officials in Delaware, Advanta listed $331 million of debts against $363 million in assets. Despite an apparent surplus, Advanta's portfolio still contains small business credit card accounts with highly volatile repayment rates. Statements made to journalists earlier in the year indicate that as many as six out of ten Advanta credit card customers failed to maintain consistent payment schedules.
With independent industry write-off averages hovering at about ten percent, a portfolio with a default rate five times as high may not attract much attention at auction. Having already cut off new charges to customers, the lender appears to have suffered the wrath of angry business owners who see little incentive to paying their Advanta bills.
About the Author
Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.