Advanta Credit Cards Cannot Be Used After Next Saturday

Advanta Corp. announced it is freezing almost a million accounts as a consequence of an unprecedented 20.15 percent default rate in April.

The Philadelphia Enquirer has the story in “Advanta moves up card-freeze date“.

This article begs the question, what does a credit card company do when the default rate climbs so high that being in the business costs more money than it takes to stay in business? How many borrowers of the 79.85 percent who have not defaulted will default now that their credit card company offers no services? In this case, the article notes, “The company hopes customers will pay off their balances, but it is not clear what business Advanta will have after that.”

Credit Card Defaults Rose in April

They rose to record highs. And banks like Citigroup, Wells Fargo, JPMorgan Chase and Discover Financial Services are trying to figure out what to do. They’re raising rates, lowering limits, closing accounts and hiring psychologists to teach debt collectors how to persuade card holders to pay down their balance.

CNBC.com has the article: “Credit Card Defaults Reach Record Highs in April“

Banks are Hurt by Credit Cards

The New York Times has this story: “Rising Credit Card Losses Are Next Challenge for Banks“.

Eric Dash and Andrew Martin do a good job of explaining the extent of trouble banks are having and are going to have with credit cards. “Even the government’s grim projections may vastly understate the size of the credit card troubles in store for major U.S. banks.”