China UnionPay, the top domestic credit card organization in China, is now accused of facilitating illegal cash advances.
According to local media reports, under the rules of China UnionPay, businesses need to return only 0.5% to 2% of the total amount of consumption of a cardholder to the card issuing bank and China UnionPay, and the rest of the income shall go to the pocket of businesses themselves. It is said that it is this rule of China UnionPay that has resulted in an increase of intermediate agencies helping people with the illegal cash advances.
Illegal cash advances here means that a credit cardholder chooses to withdraw cash by swiping their card on the point-of-sale machine of an intermediate agency who often charges them less service fees and enables them to withdraw more money than they are allowed at the ATM or the bank and to enjoy other benefits like a 56-day interest free period.
In addition to illegal cash advances, the agencies are said to also take advantage of China UnionPay's rule to help card holders pay back their loans with a credit card, which has caused a lot of bad debt for the banks. Local experts are quoted as saying that it is the disordered competition among banks and the improper positioning of some financial institutions like China UnionPay that has incited the illegal activities, and they stress that China UnionPay should adjust its positioning and play the role of a service provider for the banks instead of competing with them.