The domestic credit card industry has now shed roughly 130 million cards since peaking at 807 million in the second quarter of 2022, according to the latest data from the People's Bank of China on the payment system for Q2 2026. As of the end of June, total bank cards in circulation across the country stood at 10.267 billion, with credit and loan-credit combo cards at 677 million — a decline of about 10 million from the end of March and nearly 20 million from the start of the year, translating to an average of more than 100,000 cards being retired every day.

The 2026 interim reports from listed banks paint a clear picture of an industry in deep adjustment, marked by simultaneous scale contraction and structural divergence. On one hand, most institutions are trimming card issuance and tightening credit supply, while on the other, asset quality pressures are rising, with credit card non-performing loan (NPL) ratios climbing across the board — though the gap in risk management capabilities between institutions is widening.

Where the industry stands now

After years of rapid expansion, the credit card sector has formally entered a cycle of contraction and structural optimization. Data shows that card numbers have fallen by approximately 130 million from the historical high of 807 million in Q2 2022. The decline stems from multiple factors, including banks' systematic clearing of dormant accounts, deliberate scaling back of credit lines for high-risk customers, and shifts on the demand side such as more rational consumer spending and voluntary card cancellations.

Based on incomplete statistics from Wind data compiled by Yicai, among 42 listed banks, 33 have disclosed their credit card overdraft balances. All six state-owned major banks reported lower credit card overdraft balances at the end of the first half compared to the end of last year, and joint-stock banks followed the same trend. Only two banks — Lanzhou Bank and Bank of Shanghai — saw slight increases in overdraft balances versus end-2025.

Among the state-owned giants, ICBC recorded the sharpest drop in credit card loans, with the balance falling 14.39% to RMB 597.157 billion as of June 30. Agricultural Bank of China, Bank of China, CCB, Bank of Communications, and Postal Savings Bank saw declines of 4.03%, 7.57%, 7.66%, 8.66%, and 9.56%, respectively.

Yet within the broader contraction, clear divergences have emerged. While most banks are aggressively reducing card volumes, a handful are expanding against the tide. ICBC and CCB each cut card issuance by about 2 million cards in the first half, while Bank of China and China Merchants Bank stood out as exceptions — Bank of China's cumulative card issuance rose to approximately 152 million, up 1.76 million from year-end, and China Merchants Bank's active card count grew by 256,300 to 97.7073 million, with the active customer base steadily improving.

Wang Pengbo, chief analyst at Botong Consulting, said the primary motive for certain banks to expand card issuance against the trend is to acquire active customer segments, boost per-capita transaction frequency, overdraft balances, and fee-based income, thereby filling the business gap left by the retirement of dormant cards. These banks are also leveraging digital cards for product iteration, cutting costs tied to physical card production, logistics, and operations, and pushing the business model from scale-driven growth to single-customer value, asset quality, and profitability efficiency.

Asset quality under pressure, but with clear winners and losers

While scale contracts, credit card asset quality continued to deteriorate in H1 2026, characterized by slower loan growth and higher NPL ratios. The divergence in risk control capabilities across institutions has become increasingly pronounced.

Within state-owned banks, risk performance varied sharply. Agricultural Bank of China and Postal Savings Bank maintained low NPL ratios of 2.05% and 1.45%, respectively, demonstrating steady risk control. In contrast, ICBC's NPL ratio climbed to 5.37%, up 0.76 percentage points from end-2025, marking the highest risk pressure among state-owned banks. Bank of Communications posted the largest jump, with its ratio rising 1.12 percentage points from 2.68% to 3.8%.

Joint-stock banks showed a similar two-tier pattern, with some institutions seeing risk exposure accelerate while a few leading banks improved asset quality through continuous cleanup. In H1 2026, China Minsheng Bank's credit card NPL ratio rose 0.35 percentage points to 4.22%, and Industrial Bank's ratio increased from 3.34% to 3.79%, up 0.45 percentage points — both now rank among the highest in the listed bank universe, reflecting persistent pressure in retail credit risk. Meanwhile, Ping An Bank and Shanghai Pudong Development Bank kept their NPL ratios around 2%, showing relatively stronger asset quality.

The industry has now entered a window of concentrated disposal for bad credit card debts. According to the latest data from the China Banking Credit Information System (SilverDeng Center), in August 2026, the pace of NPL transfers by financial institutions accelerated notably. Credit card NPL transfers reached RMB 12.2 billion, up 10.4% year-on-year and accounting for 31.7% of total NPL transfers by principal and interest.

A research report from Western Securities attributes this to rising pressure from credit card risk classification downgrades, prompting banks to expedite the disposal of aged credit card bad debts to smooth NPL fluctuations. August data indicates that a few major card-issuing banks were the primary sources of these transfers.

China Merchants Bank, often regarded as a retail benchmark, demonstrated in H1 2026 a trend of rising new NPL formation coupled with intensified disposal efforts. The bank saw newly formed credit card NPLs of RMB 23.698 billion, an increase of RMB 3.929 billion year-on-year, representing over 60% of the bank's total new NPL formation. Its credit card NPL ratio rose slightly to 1.90%, up 0.16 percentage points from end-2025. However, China Merchants Bank stepped up disposal efforts, employing a combination of write-offs, NPL securitization, and cash recovery to move assets off the balance sheet — with NPL securitization serving as the primary tool to offset the pressure from new NPL generation.

Outlook from bank executives

Several bank executives offered their predictions for credit card asset quality at interim results briefings. China CITIC Bank's vice president and chief risk officer, Jin Xinian, said he expects credit card NPLs to peak this year. Asset quality will remain under pressure in 2026 due to the withdrawal of relief policies and adjustments to personalized installment plans. However, through optimized customer admission standards and strengthened scenario-based acquisition, the quality of newly issued cards has improved significantly, while the bank has also aggressively reduced tail-risk customers. As a result, he believes credit card risk will be largely cleared by year-end.

Industrial Bank's chief risk officer, Lai Furong, noted that the bank has adopted more prudent risk classification standards for certain negotiated installment customers this year, accelerating the exposure of potential risks and leading to an increase in new NPLs. While this adds short-term pressure, it helps strengthen the credit card asset quality foundation. He expects the full-year NPL ratio to rise compared to last year.

Policy support and market implications

Amid rising risk, banks are turning to consumer subsidy policies as a core growth strategy. In H1 2026, the six state-owned banks and several major joint-stock banks launched credit card installment subsidy programs, expanding applicable scenarios for bill, consumption, and scenario-based installments, and raising the subsidy cap for customers to RMB 5,000 to stimulate the consumer finance market.

Wang Pengbo noted that some consumer loan subsidy products carry notably attractive interest rates, prompting some customers to choose between the two products, which could cannibalize a portion of credit card installment business. There is a possibility of high-quality customers being diverted, potentially adding to credit card risk control pressure. At the same time, this will force credit card issuers to adjust installment pricing and benefit strategies to retain existing customers.

Western Securities expects that given the intensifying credit stratification among residents and the slower-than-expected income recovery for long-tail customers, the risk of household credit consumption loans may not be fundamentally resolved in the short term. In the second half of the year, NPL generation from credit consumption personal loans is likely to persist, adding marginal pressure on banks' provision buffers and limiting earnings recovery.