Summary of Key Points
In the past three and a half years, the total number of credit cards in the country has decreased by 120 million. Small and medium-sized banks (city commercial banks and rural commercial banks) have been hit the hardest: their overdraft balances have plummeted (in some cases, by 80% in three years), and their bad debt rates have soared (reaching as high as 11%). Young people, especially those born in the 2000s, are increasingly avoiding using credit cards. The main reasons for this are the limited offers from small and medium-sized banks and the poor service experience. These banks are now in a dilemma: if they continue to issue cards, they won't make money; if they stop, they fear losing customer loyalty. In the future, they may need to transform into specialized institutions or gradually reduce their credit card business.
I. The Overall Decline of Credit Cards, with Small and Medium-Sized Banks Suffering the Most
The era of aggressive credit card expansion is over. As of the first quarter of this year, the total number of credit cards in the country had dropped from a peak of 807 million in the third quarter of 2022 to 687 million, a decrease of 120 million. Small and medium-sized banks have suffered more than large state-owned and joint-stock banks:
- Rapid Decline in Overdraft Balances: The total overdraft balances of 30 listed banks decreased by 5.7% in 2025, with city and rural commercial banks experiencing even greater declines—Ruifeng Bank saw a 80% reduction in three years, while Jiangsu Bank and Beijing Bank saw reductions of over 20%.
- Surging Bad Debt Rates: More than half of the 15 banks that disclosed data reported increasing bad debt rates, with Dongguan Rural Commercial Bank reaching a rate of 11.03% (meaning that out of every 100 yuan in credit card debt, 11 yuan cannot be recovered).
Why are small and medium-sized banks more affected? They lack the brand, customer base, and technological advantages of larger banks, making it difficult for them to compete in the existing market.
II. Young People Avoid Using Credit Cards from Small and Medium-Sized Banks
The experiences of users directly reflect the pressure these banks face:
- The Trend of Avoiding Credit Cards Among Those Born in the 2000s: Gao Hao, a member of the Gen Z group, says that small banks offer fewer benefits than larger banks, so they rarely use credit cards. Even if they do apply for one, it's mainly for the gift when they get the card, which they then discard after using it.
- Unattractive and Inaccessible Discounts: Lin Ai, who has a credit card from a rural commercial bank, has only used it twice. She noticed a promotion offering a 50% discount on purchases over 10,000 yuan but believes that few people make large purchases daily. Some users also report difficulties in receiving benefits and having their transactions approved.
- Poor Service Experience: Zhou Lin had to cancel her card because the app of the small and medium-sized bank did not allow for automatic payments, resulting in interest charges due to forgetting to make a payment. Others have complained about limited app functions and the need to handle many matters manually.
Marketing efforts by small and medium-sized banks are also becoming increasingly difficult: at a Shanghai exhibition, fewer than five people applied for credit cards from city commercial banks in a single day, and some banks even stopped setting up booths for credit card promotions.
III. Credit Cards for Small and Medium-Sized Banks: Unprofitable and High-Risk
The credit card business is becoming increasingly unprofitable for these banks:
- High Costs and Low Returns: The cost of issuing a credit card is at least 500 yuan, but the revenue from it is minimal (industry insiders say it's not even enough to cover the costs). As overdraft balances decrease, so do interest and fee revenues.
- Increasing Risk Exposure: Rising bad debt rates require banks to set aside more reserves for bad debts, further squeezing profits. In the past, some banks offered high credit limits to attract customers, but during economic downturns, many customers were unable to repay their loans, leading to significant losses.
For example, Ruifeng Bank has seen its overdraft balance drop from 4 billion yuan to less than 800 million yuan, and its bad debt rate is still rising. Is this business model sustainable?
IV. A Dilemma: What's the Future for Credit Cards at Small and Medium-Sized Banks?
Despite the challenges, many small and medium-sized banks continue to issue credit cards because they are one of the few retail products that allow for differentiation and can enhance customer loyalty. Possible future strategies include:
- Specialization and Local Focus: Binding credit cards to local supermarkets and restaurants to create “community cards” or “local lifestyle cards” that target specific customer groups.
- Using Credit Cards as an Entry Point for Customer Acquisition: Focusing on attracting customers with credit cards and then selling financial products and deposits to offset losses through comprehensive revenue.
- Reduction or Outsourcing: Some banks may gradually reduce new card issuances, manage their existing customer base, or even outsource their credit card business to third parties.
For users, if the credit cards from small and medium-sized banks lack unique features, they may end up unused in their wallets. For the banks, failure to transform could lead to elimination from the market.
This news reflects a trend: the competition in the credit card industry is shifting from quantity to quality. Small and medium-sized banks must find their own strengths; otherwise, they will be forced to withdraw from the market. If you have a credit card from a small or medium-sized bank, it might be worth checking for any local discounts available. Otherwise, canceling it is a viable option.