Cards with scratches, exposure to debris, and other types of physical damage can be rendered unusable. Key cards may become inoperable when the magnetic stripe is demagnetized through exposure to magnets. Name tags, signs, and purse and wallet closures, and mobile phones are all potential sources of magnet exposure.

The primary culprit behind the failure of hotel key cards depends on the technology used. Older magnetic stripe (magstripe) cards are highly susceptible to demagnetization. This occurs when the card comes into close proximity to strong magnets, such as those found in phone cases, tablet covers, or even certain types of jewelry and purse clasps. Even exposure to the electromagnetic field of a smartphone can occasionally scramble the data on a magstripe. Physical damage is another major factor; scratches on the magnetic strip or the card being bent or snapped can prevent the reader from properly scanning the encoded information. Modern RFID (Radio Frequency Identification) cards are much more resilient to magnets because they store data on a microchip rather than a magnetic strip. However, these can still be ruined by extreme heat, which can warp the plastic or damage the internal antenna, or by "coin-pocket" wear and tear where constant friction wears down the protective layers. Additionally, water damage—specifically salt water—can sometimes corrode the internal components if the card is not fully sealed.