Credit Card Merchant - Generating Your Own Points

[shifty]

Does anyone generate their own points?

eg.

- a merchant facility with a low visa/master rate eg. 0.6%
- have the cash to dump into your credit card to fund the transaction
- debit the card, get the points for the 'retail' spend
- business gives back the cash it debited
- pay the fees back to the business it incurred for the transaction

Hypothetically - if you set up a merchant with a retail name. Would there be any tax issues or anything to lodge for the business? It's collecting money through merchant and than refunding the same amount. It gets charged fees which would be reimbursed so it technically is always neutral. This I see as the main issue. Would a bas have to be filled out detailing the in and out. As its refunded immediately perhaps not? Essentially the sale never took place, you just refunded the amount via bpay instead of through merchant.

Yes it may be breaking some merchant agreement rules, and some credit card use rules, however nothing I can see as illegal? At the end of the day everyone is getting their fees - isn't that what they care about? Also let's say the transactions are for a prepayment for a super luxury holiday and you generate a contract to prove this, and than you cancel it and get refunded this would seem legitimate.

Thoughts?

EDIT - To be clear this is purely hypothetical only for opinions and debate on issues surrounding the concept. I am not thinking of doing this, and neither should you. Purely hypothetical.

 

[lovetravellingoz]

Yes we may be breaking some merchant agreement rules, and some credit card use rules, however nothing I can see as illegal? At the end of the day everyone is getting their fees - isn't that what they care about? Also if say the transactions are for a prepayment for a super luxury $1m holiday and you generate a contract to prove this, and than you let's say cancel it and get refunded I can't see the issue.

I will ask my accountant for more technical advice (have a catch up this Wednesday), however I fear I know may the answer from mr. conservative...

I had a mate do a few million points this way through his business a few years back in one or two large transactions.
Thoughts?

I don't think the CC company will agree with you at all. This type of thing has been tried before or rather people with access have run through fake transactions for points, and CC companies have intervened.

Illegal? I am no lawyer, but if it is the sole purpose of doing it then you may be on most dubious ground.

 

[deejo77]

Wouldnt do it....ethically, moral and banks would make your life a living hell when they pick it up, never mind other matters

 

[shifty]

Yeah, I suspected that may be the answer, and I tend to agree with you. Good to sound out everyone's thoughts.

That said and to provide debate and more views, rebates are common business practice, and I believe you would be able to find a legal method if the transactions were contractual. The main issue I see is your reporting for the business merchant facilities the transactions.

 

[cove]

Shifty your banking relationship gets threatened if you do this.
If you have a business with 5 or 10 million going through credit cards then it would be "tolerated" as your account would be profitable.
Expect a call from your bank or two bankers knocking on your door to tell you off!

 

[shifty]

We have 80-100m through 50 or so separate but grouped merchant facilities for AML laws. Another facility doing a few mil would be inconsequential.

You could legitimise it completely by using it to pay legitimate management fees charged internally between business which are now paid by direct bank transfer, however that wouldn't get around the non business use issue with cc cards terms.

But yes I agree it's probably wrong, not ethical etc. interested in people's thoughts though, so appreciate the comments.

 

[serfty]

I'm pretty sure any doing such as this on a regular basis (and succeeding) is not going to post so on a public forum.

 

[oz_mark]

I wouldn't underestimate the banks abilities to spot this sort of stuff....

 

[ChrisFlyer]

My terminal can also sell phone vouchers (not that I ever really use the feature), and years ago, my partner made the mistake of using her 'additional cardholder' card (off my account) to buy one voucher for herself. Amex didn't like it (because the account was technically under my name, even though I wasn't the transactor), and held onto the funds until I'd explained what had happened. Fortunately, they were very understanding and there wasn't an issue (just a gentle reminder that she should use "her own card" if buying from my business), though it does show that this would be easy to spot! I believe when you apply for an Amex card, there is a line asking for your Amex merchant number if you have one (and vice versa if applying for a merchant account), so don't be stupid enough to try this with an Amex card (or any card really)!

There are plenty of other ways to earn points!

 

[stomplad]

Wouldnt do it....ethically, moral and banks would make your life a living hell when they pick it up, never mind other matters

Yes banks are so ethical and moral.....GFC

 

[shifty]

Seems a common theme of too hard and possibly dodgy. Looks like stick with the real legitimate transactions, just try and find cards that pay on business and ATO at reasonable fee rates.

 

[stewiejp]

Thought no legal eagle, I would imagine it is illegal, as you would be fraudulently acquiring the Qantas points, by making a "purchase" with full intention to refund (through different kind of transaction; genuine credit card purchases are refunded back to the original credit card).

However, making a "purchase" of a non tangible item (eg advice, consultancy fees etc), and withdrawing the cash yourself (as you are the business as well as the customer) would be more difficult to prove a crime, though would be subject to taxes I imagine.

If it isn't illegal, you could open yourself up to a civil case it QFF chose to take that route, or they would be within their rights (again, I imagine) to wait until you cashed in the points for a flight, and deny you a boarding pass once you arrived at the airport. Could be embarrassing and inconvenient.

 

[shifty]

Agree with the legal issues, hence the reason for opinions on the hypothetical of if its possible and legal and issues surrounding, however it's nothing to do with QFF, it's the credit card issuer that has the cost of providing you the benefits of the rewards associated with the card. For that matter you could be using your points to claim something else altogether anyway.

 

[craven morehead]

Another thing to consider would be your approved "Refund" limit. It could take quite a while to refund a large transaction. :mrgreen:

 

[shifty]

Another thing to consider would be your approved "Refund" limit. It could take quite a while to refund a large transaction. :mrgreen:

True. To make it work you would have to refund not via credit refund to the card otherwise you wouldn't get the points, so direct transfers eg. bpay back.

 

[craven morehead]

Ah yes I forgot about that. I have dabbled with this same theory on a very small scale but yet to find any sure winner :mrgreen:

 

[Ansett]

simple answer is

If it looks Dodgey
If it smells Dodgey
If it walks Dodgey

Then it is Dodgey.

Given the amount going through the bsuiness and even a 5% return to your pocket I question why would you need to try and do something that is potentially financilay dodgey that could have legal ramifications and or lead to no banks wanting to deal with you.

Is a few FF miles worth it?

GREED is such an evil animal

 

[shifty]

Agree. However there are many things in life that stink but are legal.

Please bear in mind that the concept is for hypothetical debate only. I am sure the thoughts of the mechanisms have crossed many minds before mine...

 

[The Rok]

When it comes to Credit Card or Bank Fraud the banks are more in the know than the CIA.

They have ways and means of tracing the links from a person to a company, even if they have to go through layers and layers of cough to get to it. It would probably be safer for two individual unconnected companies to do it. So if you have a friend who has a business who is also keen to do it then it might work, but not with your own businesses.

Given the amount of self employed people on AFF I would of thought this was more common than people realised.

 

[cove]

Back to back transactions can be tracked if it is only two or three parties in the transaction.
i still think you would be in for a grilling and you could get a black mark on your file so don't do it.