Kang Seung-woo is the Business Desk editor at The Korea Times. Prior to this position, he covered politics, national affairs, finance and sports.
’Sleeper cards’ increase amid economic blues
By Kang Seung-woo
One fourth of credit cards issued by local companies are left unused, the nation’s financial watchdog said Monday.
In addition, up to 3 trillion won was spent on their issuance, a burden imposed on consumers directly or indirectly.
According to the Financial Supervisory Service (FSS), the number of credit cards unused for payments for 12 months came to 32.95 million as of the end of June this year, up 1.66 million from six months ago, and accounts for 25 percent of all issued cards, which total 122.31 million.
A dormant credit card means it is not used for more than 12 months. According to the Credit Finance Association (CFA), an economically active person in Korea carries an average of 4.8 credit cards.
Inactive credit cards have been an upward trend of late.
The number of unused cards, which stood at 29.8 million at the end of 2006, dropped to 22.9 million in 2007.
With the number of credit defaulters diminishing, issuers have launched aggressive campaigns to attract more customers.
In 2008, the figure soared to 25.72 million and it is estimated to eclipse 35 million by the end of the year.
Excessive issuance by card firms has ended up with their raking in more profits from annual membership fees.
Given the minimum annual fee for credit cards is 10,000 won, card companies can fetch a combined 150 billion won from unused cards, market watchers said.
“Since the credit card crisis in 2003, the financial authorities have forced firms to collect an annual fee to keep excessive issuance in check,” said an official of a local credit card company. We are just complying with the regulations.”
Making matters worse, the issuance of cards which are later unused cause immense expense.
In general, the issuance of a credit card costs 50,000 won to 100,000 won, including expenses for recruiters, which translates to 1.5 trillion to 3 trillion won for the current dormant cards and issuers usually make up for this by increasing commission or other means that affect cardholders.