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Credit card crash: Small biz lender Advanta in trouble

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Small biz credit card issuer Advanta (NAS: ADVNA) will shut down accounts to preserve capital and will stop lending June 10, according to Bloomberg. The company has 1 million customers that could be left without credit cards, yet another blow for small businesses suffocating without sufficient credit lines. Shares tumbled 24% on the news to less than a dollar per issue.
Mish has a great breakdown of various credit card related statistics, all pointing to how the credit card crisis is a continue drag on the economy. Zero Hedge discusses how even the discredited (pun intended) ratings agencies -- in this case, Moody's -- think that credit card charge offs are going to be much higher than the worst case scenario tracked by the Fed.

The upshot? Stocks like Capital One (NYS: COF) and American Express (NYS: AXP), that have been riding a wave of optimism, might be in for significant pressure as the big credit card unwind continues apace. Piqqem Sentiment of Capital One and American Express show negative bias. The shutdown of Advanta will only feed the negative cycle as more small businesses go scrambling for credit they do not have and those businesses that apreviously paid for their goods and services via Advanta (after all, small biz buys a lot from small biz) will go begging or just stop buying.

Alex Salkever is Director of Research at Piqqem.com, a stock prediction community powered by the Wisdom of Crowds.

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Last updated: November 25, 2009: 06:15 AM

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