May 8, 2009
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News: Advanta Shuts Down Business CC
One of the nation's largest small business credit card providers announced yesterday they would be shutting down all card accounts to future use. The company released their plan to maximize capital and reduce risks which includes shutting down the cards. According to the press release, the company will be putting their securitization into early amortization which is scheduled to take affect June 10th. At that time, the Advanta's securitization will not allow new receivables. Therefore, they must shut down the credit card accounts. The move is considered a last ditch attempt by the founder's son, Dennis J. Alter, Chairman and CEO of Advanta to keep the business alive. The rising cost of living and escalating unemployment have brought many credit card holders into delinquency and default. Not unlike most of the nation’s financial institutions, Advanta has been hit hard with high loan losses.
Advanta says the move "will not accelerate payments from cardholders on existing balances." Advanta, originally called TSO Financial, was founded in 1951 with $30.00 in seed money by Jack Alter who had a vision of helping teachers. Mr. Alter ran his new business out of a spare room from his home. After an acquisition of Colonial National Bank, the company began marketing credit cards to the general public. In 1985, TSO Financial went public and three years later changed its name to Advanta. They soon expanded their product line to include mortgages and meeting the needs of small businesses. They quickly grew to become the sixth largest provider of consumer credit cards. During the past ten years, Advanta's main focus and core strength has been in servicing more than a million small business accounts.
By shutting down the small business card accounts at this time, Advanta hopes to prevent further erosion of its capital and place them in a stronger position to pursue business in the future. They have not ruled out pursing any particular financial business including credit cards; however, does not intend to do so until their entire plan is on solid ground.