Credit Card Funding

[TheBoondocks]

Hey guys, wanted to know when you fund a checking account with a credit card, although it's considered a purchase, can it be considered as money laundering? And get your accounts closed down? Cause I remember my friend told me that since I always overpaid my credit card, he said I could get my cards shut down but never understood how that could happen. If it's a purchase, then the banks know where's it's coming from and going too right?

[Anonymous]

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@TheBoondocks wrote:
Hey guys, wanted to know when you fund a checking account with a credit card, although it's considered a purchase, can it be considered as money laundering? And get your accounts closed down? Cause I remember my friend told me that since I always overpaid my credit card, he said I could get my cards shut down but never understood how that could happen. If it's a purchase, then the banks know where's it's coming from and going too right?

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For it to be money laundering, you would have to be paying off the credit card in dirty money, presumably not by using an existing bank account (if the dirty money is already in that account, problem is already solved!).   Issuers are more likely to view it as Manufactured Spending, but will usually only get concerned if done "too much"

[DaveInAZ]

???? Do you know what money laundering is? It's defined as "the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions". And money laundering almost always involves cash. The drug cartels amass huge amounts of cash and try to run it through several banking transactions to hide the fact that it came from the illegal sale of drugs. That's why there's a federal law requiring banks to report cash transactions of $10k or more.

Funding a bank account with a credit card is most certainly not money laundering, the money was obtained legally through credit extended to you by the creditor. Funding a bank account with a credit card can be considered Manufactured Spend, because while the bank codes it as a purchase you are actually gaining reward points or cashback for . .  getting cash instead of goods or services. I have funded bank accounts with credit cards several times for various reasons, but I would never fund a bank account during a spend for a SUB because that's when many CC companies are specifically looking for that. Amex for example specifically disallows any 'cash equilvalents' purchases during a SUB spend, but after the SUB you can even buy Amex gift cards from them with your Amex card. But try that during a SUB spend and they'll nail you.

[Anonymous]

Banks have rules on, if, and how much bank accounts can be funded with CC’s. The amounts are usually very small ($50-$100). Head over to doctorofcredit.com He has a reader accessible spreadsheet that has crowdsourced information on the policy for several hundred banks across the country.

As a general rule money laundering is a very specific thing. Money laundering is the attempt to make money acquired from one activity (usually illegal activity) appear as if it was acquired legitimately, usually by moving it through various financial institutions and/or businesses so the origin is  obfuscated. Is that what you are doing? No? Ok then you have nothing to worry about as it pertains to crime.

But what you are doing could be considered “manufactured spending”. Which is not a crime but against the policy of some CC companies. I don’t know how much you are doing this so I cannot say for sure if you meet the criteria or not. Banks allow you to fund accounts with credit cards. This is considered natural consumer activity. If you are doing it excessively (it is up to each individual CC company to determine what is considered excessive) you will get shut down.

My personal opinion is that is an overblown concern for the average person. Now if this is a side hobby and you’re making a habit of it then you already know you’re on the CC radar and probably should stop.

[TheBoondocks]

No, I don't MS anymore, only did it once for a SUB. Other than that, I don't usually mix with black hat money spending lol.

[gdale6]

No is the to the point answer. As far as the overpayment of a card I usually get a refund from the bank even if Im using the card every month and have a CR balance on the statement if its negative for over 90 days. They tell me its the law that they have to refund if it goes over 90 days.

[DaveInAZ]

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@gdale6 wrote:

No is the to the point answer. As far as the overpayment of a card I usually get a refund from the bank even if Im using the card every month and have a CR balance on the statement if its negative for over 90 days. They tell me its the law that they have to refund if it goes over 90 days.

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Ah, that's good to know. I've yet to overpay a CC, but for some reason a medical facility has been refunding my insurance co-pays and a $58 credit hit my BoA Travel Rewards card which had a $0 balance and I rarely use it. I figured it was a free shopping trip and put $55.xx on it at Walmart, guess I'll buy some gum at the 7/11 so they don't have to send me a check for $2.xx.

[ChargedUp]

Only time I've overpaid is to wipe out some "pending" transactions at the same time. Some issuers (Elan comes to mind.) won't allow it unless you push the payment vs. pull using their website.