Manufactured Spending: PayPal MyCash

[steevven1]

I just wanted to let everyone know about a problem I encountered with a manufactured spending scheme I came up with myself. I was purchasing PayPal MyCash cards at 7-11 gas stations by using a credit card and loading $500 (the max) onto each one. (MyCash cards are simply cards you load with money and then scratch off a code to add that money to your PayPal account balance). I would then transfer the money loaded into my PayPal account to my bank account via EFT, and pay off the credit card I used to buy the cards with that money. Net of fees, I was making $21 profit per card purchased via a credit card offering unlimited 5% cash back at gas stations. It worked extremely well, and I made about $800 profit.

After clearing all of my profit (after about 6 months), the bank cancelled my credit card saying it "appeared to be used for illicit activity, possibly including money laundering," and PayPal permanently limited (aka closed) my PayPal account, stating that they would never do business with me again and that I cannot ever open another PayPal account for life.

I'm not complaining. I'm just putting this information out there for anyone who may have had a similar plan. Anyone do something like this and have a happier ending than $800 profit and two closed accounts?

PS - I have claimed sign-up bonuses on MANY credit cards without manufactured spending, and WOW, that is a gold mine with zero apparent drawback. Don't mistake this post as an anti-churning statement.

[Paul der Krake]

It's not surprising. Judging from your numbers, you bought 32 paypal loads at $500 each, well above the usage of the target demographic for these kinds of products.

[mxt0133]

This is a well known issue with the Paypal MyCash cardsd.  You can't purchase the cash cards and then just transfer it to your bank account.  What people do is purchase money orders with the debit card and then deposit into their bank accounts.

[Revelry]

I've been trying to get a handle on churning for a couple weeks and I've noticed that Paypal does have a reputation for noticing and banning people for MSing.  A better tactic might have been to not do the max $500 every time and not immediately transferring to your bank account.  Those seem to be red flags for other accounts as well.  I've considered getting the Paypal rewards debit card, having a rewards credit card as the backup funding source, and then buying VGCs and loading to Serve, but I'm not sure I want to jeopardize my relationship with Paypal.