Author: TJ (90 Articles)
Computer Geek / Network & Systems Administrator. I have been in computers my whole life and have dabbled in different programs and some web design. I like movies, music, dinners, cooking, hanging with friends, although I am more of a homebody. I like to debate my views with other people in politics, religion, equality, health care reform, and several other topics. I believe in equality for all, and not just some. We have the freedom of religion and the freedom from religion. No religion should dictate our laws, nor should we ever write any discrimination into the constitution. I also believe that just because the majority voted for something, doesn't mean it is the best thing for this country. Americans need to quit selling out their fellow man and demand that NAFTA be fixed now, or just needs to go away, period. America needs to take care of itself before its to late. We need health care reform now. We should never leave health & human services in the hands of the free market. We should never allow anyone to profit off the suffering of others.
I may not be an economist, but I do know that there is a major problem with the economy. It makes you wonder what really is going on behind the scenes. The banks have received trillions of dollars of tax payer money, yet people are still losing their homes, their jobs, and now, their small business credit cards. Might not seem like a lot, but today at a client I learned something today that kind of shocked me. The business is doing well, yet when I told them they had to order some equipment they told me their business credit cards were cancelled and we had to wait for the owner to come in to order the parts. I kind of scratched my head because her explanation didn’t make sense. So I went home at lunch and did some research and found out that she was correct.
Below is an article I found on the subject at hand. After reading this, it made me think about the whole financial crisis. I do believe we are born into indentured servitude to the banks that I feel control this country and its people. They own us, they own our homes, they own our cars, and they own our politicians. Money in my eyes is nothing more than binary written on magnetic media. Money is nothing like it was when I grew up. Did you know that in 1900 90% of the people worked for themselves and by 1990 90% of the people worked for someone else. Our forefather Thomas Jefferson warned us of this, and looks what is happening today.
Tightening credit puts a squeeze on business owners
Businesses that depended on credit cards to make purchases and manage monthly cash flow are paying higher interest, having trouble opening new lines or seeing existing ones canceled.
By Cyndia Zwahlen
June 23, 2009
For small-business owners who rely on business credit cards, the recessionary landscape looks extra bleak these days.
OfficeMax Inc. is no longer accepting its own credit cards after the financial company that ran its program and made the loans terminated the arrangement last month. About 100,000 small businesses were affected by the move, the national office supply retailer said.
It’s the latest blow to a small-business community still stinging from last month’s cancellation by Advanta Corp. of all its small-business credit cards. The step, taken with little notice after the company wrote off a record cache of loans as uncollectable, took more than 1 million account holders by surprise.
Interest rates are shooting up; Advanta hiked its rates into the 30%-plus range for some cardholders before shutting them off completely. Other card issuers have raised rates and cut credit limits, often with little warning.
At the same time, issuers are requiring higher credit scores for new cards as part of tightened underwriting. Card companies are no longer chasing small businesses with competing deals.
“There has been a huge contraction in how aggressively these offers are marketed,” said Curtis Arnold, chief executive of CardRatings.com.
Instead of card solicitations, the mail is more likely to bring bad news.
“Every time I open an envelope, there is a Chase or Advanta or somebody either saying your credit line is cut or interest rate is going up,” said Kirby Newbury, co-owner of DiscountCoffee.com, a 20-employee firm near St. Louis that ships coffee, juice and tea to businesses and consumers nationwide, including a slew of Los Angeles-area entertainment and media firms.
Credit card and home equity loans were two pillars of small-business financing in recent years as home values soared and banks and finance companies competed to win over small firms with 0% interest teaser rates and juicy credit card rewards for office supplies, shipping and gasoline.
Both sources have contracted, with little relief in sight, leaving business operators without tools they used to manage monthly cash flow, streamline accounting and build or maintain business credit.
Office Max is working on offering a new credit product through a different bank in the “near future,” a spokeswoman said. But industry watchers expect the credit card business, struggling with record default rates, to remain stingier with the unsecured loans that credit cards provide.
Advanta’s credit card shutdown was blamed in part on a loan charge-off rate that soared to 16% in the first three months of the year, nearly double some of its competitors’ rates. That compared with Advanta’s level of about 6% in the year-earlier period.
The industrywide rate is growing at a worrisome speed as struggling cardholders fall behind on payments and banks and finance companies try to get loans off their books to limit their exposure to risk. Some estimates show the average charge-off rate hitting 22.5% by the end of 2010.
The rates are the result of several factors, including the difficulty small-business owners are having paying their bills as their sales drop and the loose underwriting standards many card issuers had followed.
Small-business owners are considered by some industry observers to be higher credit risks than consumers because they may be more willing to walk away from their business credit cards. No one is predicting the credit card industry will cut off small-business owners completely.
Discover, which had been working to get more businesses to accept credit cards for business-to-business purchases traditionally billed directly, still offers its small-business cards, although introductory rates are now 10.99%. American Express still offers business cards through its OPEN American Express program.
A major question mark is the plans of the company that issued OfficeMax credit cards: HSBC North America Inc.’s retail services group. At one point, the group offered private-label credit cards for up to 37 retailers, according to its website. Those included OfficeMax, Best Buy, Neiman Marcus and Bon-Ton.
In March, the global company said it would shut down its subprime mortgage services, consumer finance and vehicle finance arms — the former Beneficial Finance and Household Finance companies that it acquired in 2003.
As retailers struggle, some industry observers question whether HSBC will retain all of its U.S. credit card business.
The company seemed to raise the possibility at its recent annual meeting in London, although a company spokeswoman said the subsequent reporting took the comments “somewhat” out of context.
Kate Fitzgerald, who follows credit card issuers as associate editor at Cards & Programs trade magazine, picked up on the report, which said that any decision was unlikely for at least 18 months. “HSBC is one issuer that recently made noises they might exit the credit card industry,” she said.
Such a move could further disrupt small-business owners’ access to credit.
Newbury said he lost a $41,500 line of credit — a big chunk of the $250,000 he has in credit lines on credit cards — when his Advanta card was canceled.
The business owner said he typically pays off his balances each month but relies on credit cards for purchases such as the warehouse lighting he ordered from a California company recently.
Author and freelance writer Donna Stone relied on her Advanta card to support book signings, book festivals and book development expenses.
“As a low-budget author, it has allowed me to easily separate my business expenses from my personal budget,” Stone wrote in a recent e-mail. “I am concerned about where I will find a comparable tool to support my business, my livelihood and my life.”
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