Cards Sleeping in Drawers Increased by 1 Million in a Year... "Due to Abolition of Automatic Cancellation Rule" (Comprehensive)

Increase Due to Abolition of Dormant Card Auto-Cancellation Rule
One-Time Marketing by Card Companies Also Affects Trend

[Asia Economy Reporter Ki Ha-young] #. Office worker Lee Seo-hyung (35, pseudonym) recently applied for a new card after seeing the Starbucks Hyundai Card event that offers 100 Starbucks stars. Since the event grants 100 stars for spending over 50,000 won, he plans to use the card for exactly 50,000 won and not use it any further. Lee said, "As so-called generous cards disappear, many cards are issued to receive benefits from new member events but are no longer used."

The number of dormant credit cards, which have been issued but unused for over a year, increased by nearly one million within a year. This is analyzed to be due to the abolition of the automatic cancellation rule for dormant cards and one-time marketing efforts by card companies to recruit new members. From the card companies' perspective, as dormant cards increase, 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 11,594,000, accounting for 15.5% of all issued cards. This is about an 8.9% (946,000 cards) increase compared to 10,648,000 cards in the first quarter of last year. Dormant credit cards refer to personal or corporate credit cards with no usage for over one year since the last use.

At the end of 2011, dormant cards approached 31 million. From April 2013, the industry standard terms included an automatic cancellation rule for dormant cards, maintaining 8 to 9 million cards for five years from 2014. However, in the fourth quarter of 2019, dormant cards exceeded 10 million again for the first time in six years. Since then, the quarterly dormant card numbers last year were 10,648,000 in Q1, 10,680,000 in Q2, 11,079,000 in Q3, and 11,460,000 in Q4, showing an increasing trend.

Looking at card companies, among the seven major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana), Lotte Card had the most dormant cards. In the first quarter of this year, it had 1,640,000 dormant cards, with the highest proportion of dormant cards at 14.6% of all issued cards. Following were KB Kookmin Card (1,489,000 cards) and Hyundai Card (1,224,000 cards). However, Hana Card had a high dormant card ratio as well, at 12.24% (975,000 cards), second only to Lotte Card.

Card Companies Encourage Reuse Through Targeted Marketing

The increase in dormant cards is largely attributed to 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 new members by card companies. Accordingly, the regulation that automatically canceled credit cards unused for over a year was removed, allowing dormant cards to be reused for five years. Additionally, since it is difficult to secure new members in the already saturated payment market, one-time marketing provided by card companies to attract customers is also a major cause of the increase in dormant cards.

From the card companies' perspective, the increase in dormant cards is burdensome because they bear operational costs without revenue. However, since revenue can be generated through card loans or installment financing by activating dormant customers, they cannot simply eliminate dormant cards. An industry insider 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.