Should you cancel your unused credit card?

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Korea has one of the highest credit card ownership rates in the world. Last November, a domestic survey by the Credit Finance Association of Korea found that adults owned an average of 4.5 cards. That figure is down from an average of five credit cards per person in the previous year, thanks to efforts by the Financial Services Commission (FSC) to control reckless credit behavior.

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But there are still issues remaining. According to credit card companies, there were over 23.5 million dormant credit cards in January, little change from October of last year. That means almost every working person in Korea has an average of one credit card that hasn’t been used for over a year. This is mainly because companies are reluctant to shut down dormant accounts, which retain valuable information about customers that could be used in future marketing campaigns.

Below are the figures for dormant credit cards at each major company. You can see that unused cards account for a shockingly high percentage of the total issued, and that in some cases that figure rose further in the four months between October 2012 and January 2013.

20130325 dormant credit card numbers

There are many reasons why you should cancel your dormant credit cards. But first, here is an overview as to what they are and how to trace them.

What is a dormant credit card?

A dormant credit card is one that hasn’t seen any user-initiated activity for more than a year. Starting March 2013, credit card companies will begin contacting the owners of these cards. Those that fail to respond for one month will have their service temporarily deactivated. Card holders then have three months to reactivate their accounts before the cards are permanently shut down.

How do I know if I’ve got one?

You can use the central website www.credit4u.or.kr, operated by the Korea Federation of Banks, to trace unused credit cards. The service is free, and only requires you to set up an ID and password. Alternatively, you can ask your credit card company directly. Numbers for some of these hotlines are listed below:

20130324 dormant account call centersWhat happens if I don’t cancel my dormant credit cards?

There are many reasons why you shouldn’t leave your credit cards unused for an extended period. First, you will be charged an annual fee regardless of how long the account has been inactive (and cutting up your plastic will not cancel it). Having multiple unused credit cards, furthermore, could harm your credit rating, as most financial institutions would classify you as “potentially delinquent,” or someone who is more likely to default. A low credit score would then block you from getting the best rates on loans. Moreover, there’s a chance your unused credit card could be hacked or stolen. Besides, why not get rid of cards you probably won’t use in the future?

Fortunately, more people are switching to debit cards these days to curb excessive spending of their hard-earned cash. But there’s more we can do to keep our plastic from just gathering dust in our closets. Hopefully, this article provided some insight on ways to start.

Please feel free to leave a comment below for any questions you may have!

Cheers,

Sojung Park

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