Dormant Credit Cards Surpass 10 Million After 6 Years

Increase Due to Automatic Cancellation Regulation Abolition
Online Issuance Rises and Card Company Cashback Marketing Also Plays a Role

[Asia Economy Reporter Ki Ha-young] Last year, the number of dormant credit cards surpassed 10 million again for the first time in six years. The increase in dormant cards is due to the abolition of the automatic cancellation regulation for dormant cards. It is also analyzed that the rise in online issuance and credit card companies' cashback marketing played a role.

According to the Credit Finance Association on the 7th, as of the end of last year, the total number of dormant credit cards recorded 10,487,000 cards. This is about a 23% (1,977,000 cards) increase compared to 8.51 million cards at the end of 2018. Dormant credit cards refer to personal or corporate credit cards with no usage performance for more than one year from the last usage date. Dormant cards, which approached 31 million at the end of 2011, have steadily decreased and maintained a level of 8 to 9 million over the past five years.

The biggest factor in the increase of dormant cards was the financial authorities' abolition of the automatic cancellation regulation for dormant cards. To curb excessive external competition among card companies, the financial authorities announced a policy to clear dormant cards at the end of 2011, and from April 2013, included automatic cancellation regulations for dormant cards in the industry standard terms and conditions. When card companies complained about management difficulties due to the reduction of credit card merchant fees in April last year, the automatic cancellation regulation for dormant cards was abolished as part of the "Measures to strengthen card companies' competitiveness and improve high-cost marketing."

The financial authorities judged that automatic cancellation caused consumer inconvenience and that an increase in withdrawn members led card companies to incur excessive recruitment costs for new members. In fact, among 1.72 million automatic cancellations in 2017, 210,000 rejoined in 2018, resulting in a re-enrollment rate of 12.2%.

Accordingly, if a card is not used for more than one year, card usage is suspended, but the card is no longer automatically canceled afterward. Customers who want to reactivate dormant cards can easily do so anytime via phone, mobile, or the website. Previously, if a card was not used for more than one year, card usage was automatically suspended, and if the customer did not express an intention to maintain the contract after nine months, the card was automatically canceled.

The increase in online card issuance and credit card companies' cashback marketing are also cited as major factors. From the card companies' perspective, the more dormant cards increase, the more they bear operating costs without revenue, which is burdensome. However, by increasing card issuance, they can generate revenue through card loans or installment financing from new members. Moreover, as the business environment worsens and it becomes increasingly difficult to secure new members, cashback marketing is competitively offered. As a result, the number of cards that customers create once and do not continuously use increases.

A credit card industry official said, "Since the automatic cancellation regulation for dormant cards has been abolished, the number of dormant cards inevitably increases as they accumulate," adding, "However, if marketing using big data is activated, there is a possibility that dormant cards will decrease in the long term because marketing such as personalized card recommendations can be done."

This content was produced with the assistance of AI translation services.