Why CC doesn't simply forbid Gift Card purchasing?

[UpNComing]

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@UpNComing wrote:

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@Open123 wrote:

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@Anonymous wrote:

Now the poster was advised not to do it, and so probably didn't, but the question arose, so I view this as a classic example of "Let him that is without sin cast the first stone" type of stuff.

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LOL...Amazingly enough, if there were a place where people are "above" the lure of "perk abuse," it's here!

I've seen many occasions where many here have opted to forgo applying for a new card missing out on (1) the free annual first year fee; (2) 50 - 100K MR bonus points; (3) and, 200K AA miles because the 2bm method was unethical.

However, perhaps it's because the cost of inquiries or a credit score is more important to some than money, miles or upgradable flights.  

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Forgive my ignorance, but what is the 2bm method?

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Nevermind, I just answered my own question.  I would say unethical to say the least.

[lonewolf210]

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@laboi_22 wrote:

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@lonewolf210 wrote:

So I was thinking about this today and I am obviously missing something because I fail to see how CCC lose out on gift card purchases. If I go to Walmart and buy a VR, best buy card,  ect, then either I, Walmart or  the third party buy the fee that they get on any other transaction. Now if your using a visa to buy gift cards directly from Visa online I could see how that would hurt them but otherwise why do they care? 

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It also hurts because technically they would be able to charge you a cash advance fee. This is what it is. When you strip it all down, funding an account that you can then liquidate to your benefit, is considered a cash advance. It's equal to you going to the ATM with your credit card, and then turning around and placing that cash in your checking or prepaid account so that you can pay bills etc. You would normally pay an ATM fee and a cash advance fee not to mention the interest fees that start to pile up until the transaction is paid off which begins the day of the cash advance transaction. APR's for cash advances tend to be higher than purchase APR as well.

With merchants (and there seem to be less and less of them) that allow you to use a credit card to fund this VR card, banks miss out on cash advance fees and still have to pay out rewards. That is why most banks are upset. You are knowingly getting away with cash advance fees and you are taking money directly out of their pockets. Eventually, the merchants that allow this (because they can care less that the bank is loosing money--they are making money) will get caught by the banks and the banks will not allow the transaction to be approved. This is the common problem with over use of this method. Eventually people won't be able to purchase with credit cards at all.

That is after all how VR markets its reloadable cards anyway. Cash only transactions. Most merchants are aware of this under handed work around to cash advances and they don't allow it ie Walgreen's. 

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I see your point. I just realy haven't looked into it that much so when I thought about it intially I wasn't thinking about all the other side effects.

Side question: Do CCC consider bills cash advances? Visa has ways to set up bill pay and stuff, I just never did it because of the "convience" fees that get charged that and up until I recieved my new card today I only had one card with a 1k bonus that woulkdn't even be enough to pay my rent

[Anonymous]

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@lonewolf210 wrote:

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@laboi_22 wrote:

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@lonewolf210 wrote:

So I was thinking about this today and I am obviously missing something because I fail to see how CCC lose out on gift card purchases. If I go to Walmart and buy a VR, best buy card,  ect, then either I, Walmart or  the third party buy the fee that they get on any other transaction. Now if your using a visa to buy gift cards directly from Visa online I could see how that would hurt them but otherwise why do they care? 

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It also hurts because technically they would be able to charge you a cash advance fee. This is what it is. When you strip it all down, funding an account that you can then liquidate to your benefit, is considered a cash advance. It's equal to you going to the ATM with your credit card, and then turning around and placing that cash in your checking or prepaid account so that you can pay bills etc. You would normally pay an ATM fee and a cash advance fee not to mention the interest fees that start to pile up until the transaction is paid off which begins the day of the cash advance transaction. APR's for cash advances tend to be higher than purchase APR as well.

With merchants (and there seem to be less and less of them) that allow you to use a credit card to fund this VR card, banks miss out on cash advance fees and still have to pay out rewards. That is why most banks are upset. You are knowingly getting away with cash advance fees and you are taking money directly out of their pockets. Eventually, the merchants that allow this (because they can care less that the bank is loosing money--they are making money) will get caught by the banks and the banks will not allow the transaction to be approved. This is the common problem with over use of this method. Eventually people won't be able to purchase with credit cards at all.

That is after all how VR markets its reloadable cards anyway. Cash only transactions. Most merchants are aware of this under handed work around to cash advances and they don't allow it ie Walgreen's. 

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I see your point. I just realy haven't looked into it that much so when I thought about it intially I wasn't thinking about all the other side effects.

Side question: Do CCC consider bills cash advances? Visa has ways to set up bill pay and stuff, I just never did it because of the "convience" fees that get charged that and up until I recieved my new card today I only had one card with a 1k bonus that woulkdn't even be enough to pay my rent

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There are different types of bill pay.   Some third party vendors (e.g. Chargesmart) allow you to pay people/companies that don't normally accept credit cards (e.g. some mortgage lenders).  Chargesmart  and other similar schemes charge a fee to cover the fees it has to pay the credit card company, and adds (a lot!) for profit.

But this is still a purchase, not a cash advance, you are purchasing a service from Chargesmart.   You can also have billers charge directly to your card, this is also a purchase.

Some lenders, particularly Citi, will charge as a cash advance if you do things like buy Amex gift cards online from Amex.  If you buy the same cards at a grocery store, they will be purchases.

[Anonymous]

You are also going to pay a fee to load up the gift cards.. so be careful. 

[enharu]

Most gift cards charge a 1% fee assuming you load the entire $500.

If you're using a 1% card for GC, you technically are not making any net gains, so it'll be a waste of time.

for 2% cards, you make a net gain of just 1%, so it's really just $5 for each GC you buy.

People do it with 5-6% cards because it's pretty much $20-25 in net gain for each GC, and if they do it many many times, that amount scales up very fast.

[lonewolf210]

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@enharu wrote:

Most gift cards charge a 1% fee assuming you load the entire $500.

If you're using a 1% card for GC, you technically are not making any net gains, so it'll be a waste of time.

for 2% cards, you make a net gain of just 1%, so it's really just $5 for each GC you buy.

People do it with 5-6% cards because it's pretty much $20-25 in net gain for each GC, and if they do it many many times, that amount scales up very fast.

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It wasn't going to be a regular thing just a one time thing to make it a lot easier to reach the spend min much easier for the initial offer.

[Anonymous]

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@lonewolf210 wrote:

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@enharu wrote:

Most gift cards charge a 1% fee assuming you load the entire $500.

If you're using a 1% card for GC, you technically are not making any net gains, so it'll be a waste of time.

for 2% cards, you make a net gain of just 1%, so it's really just $5 for each GC you buy.

People do it with 5-6% cards because it's pretty much $20-25 in net gain for each GC, and if they do it many many times, that amount scales up very fast.

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It wasn't going to be a regular thing just a one time thing to make it a lot easier to reach the spend min much easier for the initial offer.

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That's what they all say!

Seriously, if you are trying to meet minimum spend, you usually have two or three months (unless you need the bonus sooner for some reason).  Generally, buying occasional gift cards along with other spending will be "OK", not necessarily in the sense that it is allowed but in the sense it is not going to be detected unless there are serious suspicions for other reasons.  

So if you are manufacturing spend, you generally want to buy $500 MC/V/Amex gift cards, because the fee is the same whether it is $20 or $500, and you want these types of card so you can repeat the process after paying the credit card bill via various means.   But if you are trying to meet minimum spend, in an inconspicious way, you can buy lower value cards, so that your normal $100 supermarket bills doesn't become $600, or even buy, at no extra charge, gift cards for stores that you use.   (If you are using a reward card, the T&Cs may say the points aren't earned on them, but....)

[lonewolf210]

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@Anonymous wrote:

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@lonewolf210 wrote:

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@enharu wrote:

Most gift cards charge a 1% fee assuming you load the entire $500.

If you're using a 1% card for GC, you technically are not making any net gains, so it'll be a waste of time.

for 2% cards, you make a net gain of just 1%, so it's really just $5 for each GC you buy.

People do it with 5-6% cards because it's pretty much $20-25 in net gain for each GC, and if they do it many many times, that amount scales up very fast.

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It wasn't going to be a regular thing just a one time thing to make it a lot easier to reach the spend min much easier for the initial offer.

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That's what they all say!

Seriously, if you are trying to meet minimum spend, you usually have two or three months (unless you need the bonus sooner for some reason).  Generally, buying occasional gift cards along with other spending will be "OK", not necessarily in the sense that it is allowed but in the sense it is not going to be detected unless there are serious suspicions for other reasons.  

So if you are manufacturing spend, you generally want to buy $500 MC/V/Amex gift cards, because the fee is the same whether it is $20 or $500, and you want these types of card so you can repeat the process after paying the credit card bill via various means.   But if you are trying to meet minimum spend, in an inconspicious way, you can buy lower value cards, so that your normal $100 supermarket bills doesn't become $600, or even buy, at no extra charge, gift cards for stores that you use.   (If you are using a reward card, the T&Cs may say the points aren't earned on them, but....)

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Haha I'm sure. Luckily I actually have a couple friends getting married so I can make some "big" purchases without it being "manufactured." I  have to get them gifts after all.

[enharu]

There's a lot of ways to do manufactured spending as well that does not involve gift cards. Some are actually a lot easier as well, just that it's not really feasible / practical to be repeating the process over and over. Million miles secret has a good article on it. If you look around on Google you will be able to find a lot more.