Dormant Cards Sleeping in Drawers Increase by 1 Million in One Year

Due to the abolition of the dormant card automatic cancellation rule
One-time marketing by card companies also affected
Card companies encourage reuse through targeted marketing

[Asia Economy Reporter Ki Ha-young] The number of dormant credit cards, which are cards issued but unused for over a year, has increased by nearly one million within a year. This is attributed to the abolition of the automatic cancellation regulation for dormant cards and one-time marketing efforts by card companies to recruit new members. From the card companies' perspective, as the number of dormant cards increases, operational costs become burdensome, so they are encouraging reuse through targeted marketing.

According to the Credit Finance Association on the 20th, the number of dormant credit cards in South Korea in the first quarter of this year was 11.594 million, accounting for 15.5% of all issued cards. This represents an increase of about 8.9% (946,000 cards) compared to 10.648 million cards in the first quarter of last year. Dormant credit cards refer to personal or corporate credit cards with no usage record for over one year from the last usage date.

At the end of 2011, dormant cards approached 31 million. From April 2013, the industry standard terms included a regulation for automatic cancellation of dormant cards, and from 2014, the number was maintained between 8 to 9 million for five years. However, in the fourth quarter of 2019, the number exceeded 10 million again for the first time in six years. Since then, the quarterly number of dormant cards last year showed an increasing trend: 10.648 million in Q1, 10.68 million in Q2, 11.079 million in Q3, and 11.46 million in Q4.

Among the seven major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana), Lotte Card had the highest number of dormant cards. In the first quarter of this year, it had 1.64 million dormant cards, with the highest proportion of dormant cards at 14.6% of total issued cards. Following were KB Kookmin Card (1.489 million) and Hyundai Card (1.224 million). However, Hana Card had a high dormant card ratio as well, at 12.24% (975,000 cards), second only to Lotte Card.

The biggest factor behind the increase in dormant cards is analyzed to be the financial authorities' abolition of the automatic cancellation regulation for dormant cards. In 2019, when card companies complained about difficulties in management due to reduced merchant fees, the financial authorities abolished the automatic cancellation regulation as part of the "Measures to Strengthen Card Company Competitiveness and Improve High-Cost Marketing." They judged that automatic cancellation caused consumer inconvenience and increased member withdrawals, leading to excessive recruitment costs for card companies to attract new members. Accordingly, the regulation that automatically canceled cards unused for over a year was removed, and the rule was changed to allow dormant cards to be reused for five years. Additionally, since it is difficult to secure new members in an already saturated payment market, one-time marketing provided by card companies to attract customers is also one of the main causes of the increase in dormant cards.

From the card companies' standpoint, an increase in dormant cards is burdensome because it is a structure where only operational costs are incurred without revenue. However, since revenue can be generated through card loans or installment financing by activating dormant customers, dormant cards cannot be simply eliminated. An industry official said, "Since the automatic cancellation regulation for dormant cards was abolished, the number of dormant cards inevitably increases as they accumulate. Dormant customers can become active users at any time, so we are making efforts to reduce dormant cards through targeted marketing based on big data analysis."

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