POS Machine Misuse for Credit Card Cash-Out Exposed in China

China Media Group's China Voice has exposed the illegal use of Point of Sale (POS) machines, services used by merchants for payments, which are being promoted online to individuals for the purpose of cashing out credit cards. Concurrently, users have reported that POS machine issuers, also known as acquirers, entice purchases with low fees, often involving hidden schemes.

Several individuals, including small business owners, have reported being misled by promises of low transaction fees. Once the POS machines are in use, they encounter various justifications for deductions and price increases, deviating significantly from the initial offers.

The report indicates that many POS machine users are individuals primarily engaged in "card churning," which involves simulating transactions to extract cash from credit cards. This process involves linking the POS machine's settlement account to a personal savings account and using a personal credit card to swipe on the device without any real trade of goods or services, thereby converting credit limits into cash.

Despite clear legal regulations, including provisions in Chinese law that classify such activities as illegal business operations punishable by law if serious, some agents for POS machine issuers facilitate these illicit activities. They offer services to disguise the machines, such as providing fabricated business information to bypass verification, driven by the profit-sharing structure within the transaction fee distribution.