I wrote yesterday afternoon about my first test of using Square Cash to unload a prepaid Visa gift card. Unfortunately, Square new what I was up to and refused to accept it. Had it worked, I would be able to buy a gift card with my credit card, unload it directly to my checking account, and pay my credit card bill. It’s possible — but unlikely — that another Visa or MasterCard branded gift card would work, but I am more excited now about the prospect of using a miles-earning debit card.
Bear with me. This is totally untested, but I think it would be cool to try. Maybe. There’s a good chance of catching the attention of the authorities if you go as far as I suggest.
Two Contenders
You’ll hopefully excuse me, but I originally forgot that such cards still exist. The lower transaction fees enforced by the Durbin Amendment to the Dodd-Frank Act wiped out pretty much everyone except the Delta debit card from SunTrust and Alaska Airlines debit card from Bank of America. The latter only earns 1 point per 2 dollars, making it half as rewarding as a credit card. But it may be a necessary sacrifice for situations that insist on a true, honest-to-goodness debit card.
While I don’t normally hold a grudge, there are two companies that I have not done business with for about five years. Since I don’t have much interest in Delta’s so-called loyalty program anyway, the SunTrust Delta debit card is out.
Bank of America… Let’s just say that on the day I finally walked into a branch and demanded they close my accounts, which had been opened at another branch, the first thing the teller said to me after complying was, “Would you like to open a new checking account today?” But I do value Alaska’s miles, so I will compromise and use them for my points laundering scheme.
The Opportunity
As I explained yesterday, Square Cash promises the ability to send money directly from one debit card account to another. Will this count as a purchase? I don’t know. I don’t currently have a rewards debit card to test it with. But if it does then it would be a great way to manufacture spend. If it works more like an electronic funds transfer or writing and depositing a check, then there’s probably nothing to look forward to. Because you enter your debit card number rather than a checking account number, and because Square is known as a mobile payments processor, I’m still hopeful.
Unlike Bluebird, which allows only $5,000 in loads per month, plus another $1,000 via online debit loads, Square Cash will allow $2,500 per week. That’s roughly $10,000 per month. And you don’t ever need to leave home either, not even to buy Vanilla Reloads. You just need to have some money in your checking account and send an email.
With 52 weeks in a year, you could manufacture $130,000 in spend — 65,000 miles. Even if you don’t keep the minimum $1,500 daily balance in your account to avoid the monthly fee (there are other ways, too) the $12 is more than worth ~5,400 miles. Bank of America also charges a $30 annual fee for the Alaska debit card. Altogether you’re looking at about 0.27 cents per mile. (SunTrust charges $75 for Delta’s card.)
The Leverage
Don’t stop there. We can use the same $2,500 over and over. Let’s say I get my family to open checking accounts with Bank of America, too, and let me manage them. I can use Square Cash to transfer $2,500 from my account to Megan’s, from her account to my sister’s, from her account to my brother’s, from his account to my dad’s, and from his account to mine. Now I’m manufacturing $650,000 in spend per year. 325,000 Alaska miles.
That’s more than enough for two first class awards to Asia on Cathay Pacific. Or, if you really do prefer to earn Delta miles instead, you might get an economy class ticket from Duluth to Milwaukee.
I’m sure at some point a bank official is going to stop me or alert the FBI to potential money laundering. I’m not actually doing anything illegal (I think), but they might close my accounts to avoid the risk. Fortunately this is Bank of America, and I don’t really care. My advice is to ramp up slowly.
Have I missed something? Do share your experiences if you’ve already tried this. Maybe I won’t have to go back to dealing with Bank of America after all.
