Dormant Credit Cards Surpass 10 Million Again (Comprehensive)

Increase Due to Automatic Cancellation Regulation Abolition
Online Issuance Rises, Card Company Cashback Marketing Also Affected

[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 card 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 was 10,487,000. This is about a 23% increase (1,977,000 cards) compared to 8,510,000 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 between 8 to 9 million over the past five years. The numbers were approximately 8,308,000 in 2015, 8,534,000 in 2016, 7,999,000 in 2017, and 8,510,000 in 2018.

The biggest factor behind the increase in 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 clean up dormant cards at the end of 2011 and included automatic cancellation regulations for dormant cards in the industry standard terms and conditions starting April 2013. When card companies complained about management difficulties due to the reduction of credit card merchant fees in April last year, the automatic cancellation regulation was abolished as part of the "Measures to Strengthen Card Company Competitiveness and Improve High-Cost Marketing."

The financial authorities judged that automatic cancellation caused consumer inconvenience and that the increase in withdrawn members led card companies to incur excessive recruitment costs for new members. In fact, in 2017, there were 834,000 canceled customers, of which about 1.72 million were automatic cancellations, roughly one-fifth. Also, the number of re-registrations in 2018 was 210,000, with a re-registration 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. Customers can easily reactivate dormant cards anytime via phone, mobile, or the website. Previously, if a card was not used for more than one year, usage was automatically suspended, and if the customer did not express the 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 considered major factors. From the card companies' perspective, the more dormant cards there are, 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, customers tend to create new cards as one-time actions and do not continuously use them, increasing the number of dormant cards.

A card industry official said, "Since the automatic cancellation regulation for dormant cards was abolished, the number of dormant cards inevitably increases as they accumulate. However, if marketing using big data becomes active, there is a possibility that dormant cards will decrease in the long term through personalized card recommendations and other marketing."

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