Credit Card Merchant - Generating Your Own Points

[ricee007]

I don't really understand all of the negativity.... If a small business owners puts through, say, $200k/month... Why couldn't they put through another $50k for a few months? Total cost of $150,000 *0.006% = $900 for 150,000 points over 3 months. Perhaps $1,000 for 150,000 points?

 

[lovetravellingoz]

I don't really understand all of the negativity.... If a small business owners puts through, say, $200k/month... Why couldn't they put through another $50k for a few months? Total cost of $150,000 *0.006% = $900 for 150,000 points over 3 months. Perhaps $1,000 for 150,000 points?

Physically they can.

But the CC supplier has rules against it.

 

[zzyss]

Might there not also be other implications outside of banks? If, say, the government (ATO, Centrelink, whatever) decides to audit a business, sees that you're transacting a certain amount, but which doesn't match up with your tax reporting, etc. wouldn't that also bring the pain?

(Not 100% sure what I'm talking about... just trying to play with the cool kids)

 

[trippin_the_rift]

Amex: wilo instantly cancel both your merchant and your card

Visa/mc/au bank: they will match your name to it, send you a nasty letter and call you.

However, if you have a real invoice to pay then using your own credit card is ok, although you will need to explain yourself and provide proof of invoice/service.

Illegal - not as far as I am aware howevrr it may be considered money laundering by people you don't want to ever have to talk with.

 

[Danger UXB]

Tried it once with AMEX thru 2 different company AMEX facilities, but they were on to it very quickly. Froze cards until paid off in full, big slap on the wrist and told never again. I think a better technique requires 2 mutually agreeable AFFers with EFT facilities. Each charges each others cc the same amount each earns the points and EFT suppliers are none the wiser . I'm sure it goes on but have never done it myself. I'm sure the PM grapevine could be put to use by those interested!! Cheers Danger UXB

 

[bil]

Sorry to dig up a super-old thread.

If you read the Financial Services Guide (FSG) for FF programs, they will normally disclose how much they pay for points.

EG: Velocity: $0.0180 (Australian dollars) plus GST per point
$10,000 earns: 5000 points
$10,000 costs card issuer: $90
-----

www mastercard com au/merchant/getting_started/interchange_rates.html
Interchange fees between 2.2% - 0.33% Let's assume FF programs are 'Consumer Premium' @ 1.04%

Available for all Consumer Platinum transactions, other than for Charities, Strategic Merchants, PayPass, Government & Utilities, Petroleum, Education and Learning, Recurring Payments, QPS, SecureCode Merchant and Full UCAF rates.'

Card issuer earns: $104
Profit: $14

www visa com au/aboutvisa/interchange/interchange.shtml
Visa Card Issuers earn between 1.65 - 1.87
Card Issuer earns: (lets assume in the middle 1.76%) $176
Profit: $86

Almost no merchant account these days is a flat MSF (Merchant Service Fee) they all have additional penalties for premium cards and what-not. So it is very safe to assume that a FF program with a Mastercard Card could make (based on my assumptions) $14 on a $10,000 transaction. Wether self generated or otherwise is inconsequential. A visa card would make $86 (based on my assumptions) on a $10,000 transaction.

If you swiped your card through a merchant facility, as a card present sale (enter your pin) nobody will threaten anything. You are paying the profit to the issuer through interchange fees (between $104 - $176 based on my assumptions).

This means each point is costing you $0.028 (based on the median of $140). Which is 1c more than the wholesale rate of the acquirer. After you add your MSF of say 0.6%, thats another $60. So $140 to the issuer, $60 to your merchant provider thats $200 for 10,000$ (5,000 points on virgin) your 'ALL IN' price is 0.04 per point. $0.018 to virgin, $0.01 to card issuer, $0.012 to your merchant provider. You will not get cheaper points! (If you do, please tell me how!!)

Additionally, you MAY qualify for reduced MSF based on your increased monthly transactions with your new points generating scheme!!!

PLEASE NOTE: You should check your Terms and Conditions of your relevant card to make sure you are within the rules to do this. Velocity Global Wallet appears to be fine to run this scheme.

At the end of the day there is no difference if you charge your own merchant facility or make actual spends, the acquirer still makes the same money. The FF card issuers are in it for profit, and I can assure you they don't magically 'lose' money if you charge it through your own facility.

Don't even stress about having to show invoices, proof of payments or anything like this. You are a private company, you don't have to prove anything to anyone without a court order.

A good starting point is to set up a weekly bpay to your card for lets say $5000

Once a week, charge $2403.39
Once a week, charge $2596.60

Change it up a bit. Don't use round numbers.

Thats 2500 points a week, about 10,000 a month. Cost to your business (tax deductable) up to $352 (@176 per 10,000$).

If your FF issuer calls with an issue: "Hey, I normally charge it on my xx_ card, but if you don't want my spend thats fine with me"
If your merchant calls with an issue: "These are CHIP and PIN transactions. These are the safest of all right?"

Conclusion:

This is a great way to earn points. However, remember that if you suddenly earn 1,000,000 points in a month the dreaded "we can terminate your account at any time without reason" clause may come in. So be smart.

Don't ever run these transactions as CARD NOT PRESENT. You will trigger alarms, bells, sirens, whistles and may even increase your MSF due to the higher 'risk' of your facility.

TL;DR:
Merchants pay a fee to card issuers called 'interchange'. This covers all the cost of FF points bought by issuers from the relevant FF program.
There is no difference between you charging your own card or going through a merchant to earn points, the issuer always makes money.
In fact, the issuer makes the SAME money regardless of the merchant facility you charge through.


* Normally the MSF is the profit to the merchant facilities bank. Interchange fees are normally charged over this fee or partially on top of this fee.

** Further reading, interchange fees:

"4. This Standard refers to wholesale fees, known as ‘interchange’ fees, which are payable by an acquirer, directly or
indirectly, to an issuer in relation to credit card transactions in a Scheme. "

www rba gov au/payments-system/legal-framework/standards/interchg-card-schemes.pdf

 

[cove]

At our business we have a flat credit card rate from our bank as we had no way of verifying who might use a "premium or super premium" Visa or MasterCard. We don't do contras thru our system as it is specifically not within the terms and conditions of our processing contract. So what happened was the price for customers to use a credit card rose to over 1% quite a few months ago.
The art of making Qantas, Velocity and Kris Flyer and American frequent flyer points in our family is still very much alive but you have to read the changing rules that card companies issue or you may find the goal posts moved.
Remember it is just a game to get the best seats for the lowest cost.

 

[Danger UXB]

Sorry to dig up a super-old thread.

If you read the Financial Services Guide (FSG) for FF programs, they will normally disclose how much they pay for points.

EG: Velocity: $0.0180 (Australian dollars) plus GST per point
$10,000 earns: 5000 points
$10,000 costs card issuer: $90
-----

www mastercard com au/merchant/getting_started/interchange_rates.html
Interchange fees between 2.2% - 0.33% Let's assume FF programs are 'Consumer Premium' @ 1.04%

Available for all Consumer Platinum transactions, other than for Charities, Strategic Merchants, PayPass, Government & Utilities, Petroleum, Education and Learning, Recurring Payments, QPS, SecureCode Merchant and Full UCAF rates.'

Card issuer earns: $104
Profit: $14

www visa com au/aboutvisa/interchange/interchange.shtml
Visa Card Issuers earn between 1.65 - 1.87
Card Issuer earns: (lets assume in the middle 1.76%) $176
Profit: $86

Almost no merchant account these days is a flat MSF (Merchant Service Fee) they all have additional penalties for premium cards and what-not. So it is very safe to assume that a FF program with a Mastercard Card could make (based on my assumptions) $14 on a $10,000 transaction. Wether self generated or otherwise is inconsequential. A visa card would make $86 (based on my assumptions) on a $10,000 transaction.

If you swiped your card through a merchant facility, as a card present sale (enter your pin) nobody will threaten anything. You are paying the profit to the issuer through interchange fees (between $104 - $176 based on my assumptions).

This means each point is costing you $0.028 (based on the median of $140). Which is 1c more than the wholesale rate of the acquirer. After you add your MSF of say 0.6%, thats another $60. So $140 to the issuer, $60 to your merchant provider thats $200 for 10,000$ (5,000 points on virgin) your 'ALL IN' price is 0.04 per point. $0.018 to virgin, $0.01 to card issuer, $0.012 to your merchant provider. You will not get cheaper points! (If you do, please tell me how!!)

Additionally, you MAY qualify for reduced MSF based on your increased monthly transactions with your new points generating scheme!!!

PLEASE NOTE: You should check your Terms and Conditions of your relevant card to make sure you are within the rules to do this. Velocity Global Wallet appears to be fine to run this scheme.

At the end of the day there is no difference if you charge your own merchant facility or make actual spends, the acquirer still makes the same money. The FF card issuers are in it for profit, and I can assure you they don't magically 'lose' money if you charge it through your own facility.

Don't even stress about having to show invoices, proof of payments or anything like this. You are a private company, you don't have to prove anything to anyone without a court order.

A good starting point is to set up a weekly bpay to your card for lets say $5000

Once a week, charge $2403.39
Once a week, charge $2596.60

Change it up a bit. Don't use round numbers.

Thats 2500 points a week, about 10,000 a month. Cost to your business (tax deductable) up to $352 (@176 per 10,000$).

If your FF issuer calls with an issue: "Hey, I normally charge it on my xx_ card, but if you don't want my spend thats fine with me"
If your merchant calls with an issue: "These are CHIP and PIN transactions. These are the safest of all right?"

Conclusion:

This is a great way to earn points. However, remember that if you suddenly earn 1,000,000 points in a month the dreaded "we can terminate your account at any time without reason" clause may come in. So be smart.

Don't ever run these transactions as CARD NOT PRESENT. You will trigger alarms, bells, sirens, whistles and may even increase your MSF due to the higher 'risk' of your facility.

TL;DR:
Merchants pay a fee to card issuers called 'interchange'. This covers all the cost of FF points bought by issuers from the relevant FF program.
There is no difference between you charging your own card or going through a merchant to earn points, the issuer always makes money.
In fact, the issuer makes the SAME money regardless of the merchant facility you charge through.


* Normally the MSF is the profit to the merchant facilities bank. Interchange fees are normally charged over this fee or partially on top of this fee.

** Further reading, interchange fees:

"4. This Standard refers to wholesale fees, known as ‘interchange’ fees, which are payable by an acquirer, directly or
indirectly, to an issuer in relation to credit card transactions in a Scheme. "

www rba gov au/payments-system/legal-framework/standards/interchg-card-schemes.pdf

Hi bil
and welcome to AFF.
Great first post may I say, lots of interesting info. However, as with my post above I have tried this in the past and the process was shot down by AMEX within a matter of days. Since that post I have "negotiated" with AMEX and I now carry this out with their blessing.
Your cost per point calculations above at $352 per 10000 points ( 3.52 cents/point) seem very high to me . Most over on the ATO thread would be looking at 1cent/point max. Mine with AMEX cost me a fraction more than this but I am able to harvest large quantities of points by this method so I am happy with this cost.
Nice find on the FSG regarding point costs!

Cheers Danger UXB

 

[BillytheFIsh]

Hi bil
... Since that post I have "negotiated" with AMEX and I now carry this out with their blessing.
... I am able to harvest large quantities of points by this method so I am happy with this cost.

How does your business account for all the extra expenses/income?

 

[Danger UXB]

How does your business account for all the extra expenses/income?

Two separate business entities with a legitimate monthly business transaction between them

 

[SOPOOR]

um, where does the OP say about refunding the transaction? If im not mistaken, isnt what they are proposing, eg Shop owner charges his own credit card for $1000, shop gets $999.4, shop gives him back $999.4

so the credit card company makes the $1 comission, everybody is happy?

why, no one is getting screwed, in fact, the credit card company is making the same profit, its the business (ie shop owner) who is basically paying 0.6% or whatever the rate is for his points,

its no different to buying a shirt at full price, then returing it for a full refund to the shop minus the fee, the only loser is the shop owner/business, except for the fact that he feels 0.6% is worth it

 

[BillytheFIsh]

Two separate business entities with a legitimate monthly business transaction between them

Ah right. So you're not creating transactions between them, the transactions exist, you're just paying them by cc?

 

[Danger UXB]

Yep that's right. AMEX's initial problem a few years ago was my name on the credit card and my name as director of the company. They didn't like that. But now all is fine with me doing this and points harvesting carries on at a great rate of knots!