Credit cards, once symbols of consumer freedom, are gradually falling out of favor among Chinese consumers.

"Credit cards charge annual fees every year," said Huang Yun, a post-1995 office worker, noting that credit cards are not her preferred payment option. Fang Fang, another post-1995 worker, echoed this sentiment: "If you accidentally forget to make payments, you risk damaging your credit."

Beyond being deterred by credit card mechanisms themselves, young people's consumption attitudes are quietly shifting. Xiao Han, born after 1995, expressed concern that credit card limits of up to 10,000 yuan might lead to overspending. Compared to credit cards' high-limit temptation, tools like Huabei and Meituan Monthly Payment offer "small, controllable amounts" that are more appealing.

The credit card "shrinkage" is directly reflected in bank financial data. Banking performance reports for the first half of 2025 show that six state-owned banks and eight joint-stock banks combined saw their credit card balances decline by 200 billion yuan in six months.

Wang Pengbo, chief analyst at Botong Consulting, identifies two main reasons for this trend: First, under the macroeconomic environment, residents have become more cautious in consumption, exposing the declining attractiveness of credit card products among young customers and the increase in alternative products. Second, consumer loans have become more convenient to apply for, and with declining consumer loan rates, demand in certain specific scenarios has decreased.

**Annual Fees and Interest Rates Become Consumer Burden as Credit Cards Face Replacement by Alternative Payment Methods**

Chen Yu, born after 1995, used credit cards when she first graduated due to low salary income, but credit cards caused her significant trouble. "I constantly received text messages and harassing phone calls, and they charged annual fees. It's not cost-effective if you don't use them frequently," Chen Yu said.

It's not just young people abandoning credit cards. Wang Lijuan, born after 1975, once applied for a credit card after being approached by a Bank of China salesperson. She stated bluntly, "To avoid annual fees, you have to swipe the card, but then you always forget to make payments when you use it for purchases, leading to overdue payments." Wang Lijuan decided to cancel the card after three months.

He Lin, born after 1985, was once charged hefty penalty interest for failing to make full payments on time. Between March and April this year, He Lin made dozens of transactions using his Bank of Communications credit card, accumulating approximately 17,800 yuan in consumption. Due to partial overdue amounts, he was charged 478.82 yuan in full penalty interest.

Beyond criticism of credit card mechanisms themselves, payment market competitors are also eating into the market share.

Huabei, Douyin Monthly Payment, and Meituan Monthly Payment have all become strong competitors to traditional credit cards, with multiple consumers stating they prefer using these payment methods over credit cards.

"Before Huabei and Douyin Monthly Payment existed, credit cards had some use for overdraft limits, but since these payment methods became available, credit cards are no longer needed," Wang Lijuan said, adding that current policies are lenient, making direct loans preferable to credit cards.

Xiao Han has never used credit cards, "worried about developing habits of advance consumption. Using them too much makes it hard to control desires, and you might not be able to repay when due." Compared to traditional credit cards, he prefers using Huabei, which has small limits allowing advance withdrawal of a few hundred yuan for early consumption, while credit cards have high limits of up to 10,000 yuan, raising fears of overspending.

"There's no need to use credit cards; they always feel like they could lead to debt traps," Fang Fang believes credit cards are used more by older generations and have no obvious advantages compared to Huabei and other payment methods. Xia Tian, born after 2000, also expressed that Huabei and similar payment methods are more convenient than credit cards.

**14 Banks See Credit Card Balances Shrink by 200 Billion Yuan in Six Months as Non-performing Rates Rise**

As credit cards fall out of favor, banks are becoming anxious.

Banks face increased pressure in credit card account opening and are offering richer gifts. A financial correspondent noticed air fryers, suitcases, and other credit card application gifts displayed at a CM Bank branch. Chen Yu mentioned receiving Disneyland tickets and Apple earphones when applying for two credit cards. Fang Fang also applied for a credit card under salesperson promotion for a cabbage-shaped puppy doll gift but never activated it.

Despite banks' vigorous customer acquisition efforts, they haven't been able to reverse the credit card downturn. In the first half of this year, among six state-owned banks and eight joint-stock banks, only Agricultural Bank of China, Industrial and Commercial Bank of China, and Shanghai Pudong Development Bank saw increases in credit card loan balances compared to the beginning of the year. The remaining 11 banks experienced varying degrees of decline in credit card loan balances, with Bank of China down 13.88% and Ping An Bank down 9.23%.

Overall, by the end of the first half of this year, the 14 banks' credit card loan balances totaled 7.52 trillion yuan, a combined decrease of nearly 200 billion yuan from the beginning of the year, representing a 2.56% year-on-year decline. China Construction Bank, CM Bank, and Agricultural Bank of China ranked top three in credit card loan balances at 1.058 trillion yuan, 924.489 billion yuan, and 910.159 billion yuan respectively.

Regarding credit card transaction volumes, CM Bank achieved 2.02 trillion yuan in credit card transactions in the first half of this year, leading other listed banks but declining 8.54% year-on-year. On September 1, Peng Jiawen, CM Bank's Vice President and CFO, stated at the 2025 interim performance conference that the bank's fee and commission income faced overall pressure this year, with the greatest pressure coming from credit card business income.

Peng Jiawen explained that the decline in credit card transaction volume is closely related to the current consumer market's recovery pace not yet being restored. This resulted in CM Bank's credit card income declining 16%, while the bank's credit card customer numbers increased, meaning average consumption per customer and per transaction decreased, which is the main reason for negative growth in credit card income. Since CM Bank has a relatively high proportion of credit card income, the impact is relatively significant.

According to financial reports, China CITIC Bank's credit card transaction volume was 1.09 trillion yuan, down 12.54% year-on-year; credit card business income was 24.486 billion yuan, down 14.61% year-on-year. Huaxia Bank's total credit card transactions were 358.67 billion yuan, down 16.32% year-on-year, achieving credit card business income of 7.574 billion yuan, down 12.91% year-on-year.

Additionally, among the 14 banks, multiple banks saw their credit card non-performing rates rise compared to the beginning of the year. By the end of the first half of this year, Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China's credit card non-performing rates increased by 0.25%, 0.13%, and 0.05% respectively compared to the beginning of the year.

**Credit Card Issuance Declines with Room for Improvement in Agile Product Iteration**

The People's Bank of China's 2024 Payment System Operation Overview shows that by the end of 2024, a total of 9.913 billion bank cards were opened nationwide, up 1.29% year-on-year. Among these, debit cards totaled 9.186 billion, up 1.84% year-on-year; credit cards and credit-debit combination cards totaled 727 million, down 5.14% year-on-year. Per capita bank card ownership was 7.04, with per capita credit and credit-debit combination card ownership at 0.52.

Regarding consumers "abandoning" credit cards, Wang Pengbo believes comprehensive changes in customer behavior result from multiple overlapping factors. On one hand, younger demographics prefer internet credit tools embedded in consumption scenarios, whose "enjoy now, pay later," fee-free, and small flexible amount characteristics better match their consumption habits. On the other hand, middle-aged and elderly customers use credit cards more conservatively, with declining activity among existing users, and some elderly users actively cancel cards or reduce usage due to enhanced risk awareness, further exacerbating overall data contraction.

From an industry perspective, Dong Ximiao points out that the decline in credit card issuance is mainly influenced by the 2022 credit card new regulations. These regulations have had significant and far-reaching impacts on credit card business development, pushing the industry from a "land grab" extensive development stage into a professional and refined high-quality development stage.

Dong Ximiao suggests that banks can seek differentiated and specialized development paths in the future. They should optimize development models to provide credit card products with appropriate interest rates, fees, and limits with distinctive features; adhere to differentiated development by exploring differentiated customer positioning and launching specialized credit cards serving rural revitalization and new citizens; leverage financial technology to accelerate exploration of digital credit cards, providing consumers with better internet consumer credit services.

"There are many areas for improvement. The current core shortcoming of credit cards lies in weak scenario adaptability and lagging user experience. Issues like annual fee thresholds, complex approval processes, unintelligent repayment reminders, and rigid limit management have existed for a long time," Wang Pengbo stated. Banks still have obvious room for improvement in data operations, user insights, and agile product iteration, such as launching scenario-based fee-free cards, optimizing intelligent repayment reminders, establishing dynamic limit adjustment mechanisms, and strengthening deep cooperation with e-commerce, transportation, and local life platforms to enhance usage convenience.

Wang Pengbo mentioned that credit cards and internet credit products each have their advantages. For low-cost, high-frequency small-amount consumption, internet credit tools offer flexible interest-free periods and low thresholds, suitable for daily expenses. For high limits, long-term credit cycles, and complete credit record accumulation, credit cards still have advantages, and high-end card benefits are irreplaceable. He recommends rational users prioritize fee-free or fee-waived credit cards to establish good credit records while utilizing internet credit tools to manage short-term liquidity.

(Names including Huang Yun, Fang Fang, Xiao Han, Chen Yu, Xia Tian, He Lin, and Wang Lijuan are pseudonyms)