Unused credit cards cost banks dear

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, which 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.
So, even though the banks tom-tom the fact that the number of credit cards issued has crossed seven million and is growing every year at 25 to 30 per cent, the fact is that 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, 50 per cent are free or discounted. “These are barely used as most of the subscribers already have cards. I estimate that about 30 to 35 per cent of the cards issued by the industry have not been activated,’’ says Standard Chartered consumer banking head Vishu Ramachandran.
He added that in developed countries, the ‘dead’ cards usually amount to only 15 per cent. HSBC estimates that 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 in the country 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 costs of acquiring the customer and processing and servicing him or her, Mr Swaroop says.
Back-of-the-envelope calculations show that the industry has invested about Rs 250 crore on cards that are dead for up to a year at a time. Dead cards are becoming a marketing issue as new entrants have been addressing the same target audience that already owns cards.