Banks worry over low card usage

MUMBAI: Pesky calls from credit card salesmen and free plastic in the mail might annoy, or sometimes even flatter you, but for banks, efforts to push sales by bombarding customers with spending power are coming close to nought.
Big banks, who have been aggressively pushing credit card usage, are coming to terms with the fact that up to 40 per cent of cards issued are not used even once in the year or ‘activated’ by customers.Even though the banks tom-tom the fact that the number of credit cards issued has crossed seven million and growing every year at 25 to 30 per cent, the fact is some 2.5 million are tucked away in safes or proudly adorn wallets as decoration.
Bankers say that out of the 1.75 million cards issued annually, fifty per cent are free or discounted. ‘‘These are barely used as most of the subscribers already have cards. I estimate that around 30 to 35 per cent of the cards issued by the industry have not been activated,’’ says Standard Chartered consumer banking head Vishu Ramachandran. In developed countries, the dead cards amount to only 15 per cent, he pointed out.
HSBC estimates that out of the six lakh cards issued so far by the bank, only 45 per cent have been used once in the last three months. HDFC Bank’s country head of retail banking Neeraj Swaroop says that only 40 per cent of the seven to 7.5 million cards have been used once in the last year.
For banks, unused cards are a major expense as each piece of plastic costs between Rs 100 and Rs 2,000, including the cost of acquiring the customer.