early one million customers of failed credit card issuer NextCard are finally out of luck. Federal regulators closed 800,000 accounts on July 10, 2002, suspending all incentives programs and without refunding any annual fees paid.

The taxpayer-backed Federal Deposit Insurance Corp., the government agency that has been overseeing NextCard's business operations since Feb. 7, 2002, will lose between $300 million and $400 million on the failure of NextCard's bank. Until now, NextCard's collapse affected mostly investors and 800 employees who lost their jobs. NextCard's demise is attributed to its banking subsidiary's heavy loan losses, brought on by approving too many people for credit cards through an onslaught of online promotions.

In 1999, the company's IPO and SPO raised $300 million at the height of the dot-com craze as NextCard promised to revolutionize the credit card industry with its online application and approval process. The FDIC notified some customers by e-mail on July 9, 2002 that their cards would be unusable. Others were notified by mail, which left open the possibility that they would try to use the cards without knowing the accounts had been closed, said FDIC spokesman David Barr. He said the agency had tried to give customers as much notice as possible.

The regulators tried to sell the accounts to other issuers for four months, which would have kept the accounts active. The FDIC did sell 200,000 NextCard accounts to Merrick Bank, a subsidiary of CardWorks, L.P., which will take over the accounts by the end of September 2002. Those accounts sold for $126 million.

All customers with closed accounts will be required to pay off any outstanding balances, although 300,000 NextCards have not been used since February 2002, according to the FDIC.

The total amount owed on the outstanding accounts was not disclosed. NextCard's outstanding total loans averaged $1.9 billion in 2001.