Category: Whomp whomp

UPDATE: MSN Flyer reports that American Express charged a cash advance on a purchase at vanillagift.com as well. The issue appears wider spread than we thought and is a troubling development.

American Express is historically very forgiving with cash-like purchases, seeing a cash advance show up on a statement is effectively unheard of unless you visit an ATM, run a bank teller cash transaction, use it at a casino, or for a payday lender transaction. In fact, I’ve never seen a cash advance on any of my American Express cards in my manufactured spend history, even when the merchant sells nothing but gift-cards or when buying literal currency from the US mint.

There’s something rotten in Denmark Manhattan though: There are now two reports of a cash advance fee being charged at a mostly under-the-radar Mastercard gift card online retailer when using an American Express. One of the reports from includes a screenshot of the transactions. (Many thanks to reader Nick)

I haven’t purchased gift cards from this retailer in several weeks so I don’t have a datapoint of my own, but I can say that this retailer has been wonky with American Express for about two months. Some of its quirks:

  • Requires AmEx SafeKey, but only sometimes
  • Orders occasionally pass SafeKey but then sends a failure to the retailer
  • SafeKey tokens can leak to or from other sites
  • Pending charges started appearing with a merchant name of “OTH MISC” or was blank, and the name only corrected when the charge actually posted.

Was the cash advance charge intentional on American Express’s part? I’m honestly not sure, I think it’s equally likely that the vendor messed up their merchant account in some other way that caused the cash advance and it may be fixed in a few weeks. Also, recall that historically when American Express is sick of manufactured spend at a particular retailer they just stop awarding points but still let the transaction through rather than charging a cash advance fee, like with Simon.com purchases, so it’s an odd turn to blatantly charge cash advances on a similar retailer.

Regardless of the cause, watch your American Express manufactured spend charges closely for the next couple of months until we get a better handle on what’s up.

The plumbing between a certain gift card vendor and their merchant processor.

Introduction

Stockpile has been a bastion of manufactured spend opportunities since at least 2017; let’s count some of the ways:

Underground MS

Even when all of the above died there were still several non-public ways to load Stockpile, including:

  • With a credit card masked by some digital wallets (when correctly configured)
  • Using certain widely available gift cards that Stockpile treated as debit

With the above methods, you could load $6,000 per week per payment method per player, and you could do even better if you bought anonymous Stockpile gift cards too. Well, all of that came crashing down earlier this week like it was BeachBody stock, with a new $100 per rolling 24 hour purchase limit with any card for funding your account. Currently the only way I know of to get more volume is via ACH, which obviously is a non-starter for manufactured spend.

Lessons

It’s no secret that I love FinTechs for manufactured spend, and lessons from Stockpile apply to other companies:

  • Try everything when a platform takes cards (Credit cards, gift cards, rewards debit cards, digital wallets, crowbars, etc)
  • Limits can be per-funding type
  • Limits can be different than advertised
  • There are often backdoor ways into scaling
  • When a company has been good for MS and something dies, that doesn’t mean stop probing, a very patched ship probably still has a leak somewhere

Have a nice weekend and go pound those FinTechs like you’re Gallagher and they’re watermelons.

A car bumper that's broken but held together with shoelace stile stitching.
Stockpile’s repair job to keep credit cards and gift cards out of its system.

Reader Gene was the first to let me know that Simon cards stopped working for purchasing money orders at Safeway late last week. It’s the next major in-person liquidation method to fall for Metabank / BHN gift cards, which obviously (as the kids say) sucks.

Background

Metabank/BHN Visa and Mastercard gift cards are some of the easiest cards out there to get at a discount or to buy in bulk, either through Office Depot/Office Max sales, Staples sales, or Simon volume plays. It used to be really simple to liquidate them in person by loading to a prepaid card like BlueBird or converting them to a money order. Unfortunately, that’s been changing over the last year or so:

  • Most Wal-Mart registers stopped accepting Metabank debit swipes over $99 in November of last year. (hint: most)
  • Many Kroger registers stopped accepting Metabank debit swipes over $99 at the same time. (hint: many)
  • As of late last week, Safeway stopped accepting Metabank debit swipes, probably also with a $99 cap. (see above)

Why Now?

Why are major grocery stores clamping down on this? I can think of two reasons, one for each side of the transaction, but in the end both are really just about controlling profit.

First let’s tackle the grocery side with some background information: Prepaid debit card transaction fees are split into two tiers, covered and exempt, each with its own rate. As with most regulation there is nuance to that definition and the fee structure, but it’s not particularly relevant here. What you should know is banks with less than $10 Billion in assets (like MetaBank at approximately $7 Billion) have a higher interchange fee than larger banks. That smaller bank fee is published at somewhere around 1.15% + $0.15. Yes, there is a cap for supermarket transactions, but usually money centers at supermarkets don’t code as a supermarket transaction because they’re, well, money centers.

So when you swipe a $500 prepaid MetaBank gift card to buy a money order for $499.02 the store may be paying somewhere around $5.90 in fees, but charging you less than $1 for the transaction. Ouch. That’s plenty of reason for major retailers to want to shut down prepaid cards from MetaBank when they happening at volume.

Ok, so what about the other side? Why would MetaBank want to shut this down? That’s an easy one. They’re collecting somewhere between $0 and $5 in purchase fees from you, and that number is probably closer to the $0 end after sales commissions, shipping, and other ancillaries are accounted for — so those don’t have a big impact on revenue. They make their money from collecting their portion of interchange fees when you spend on the card. Those fees for a credit swipe are going to be around 2% of the total purchase price or better, vs at best 1% when all is said and done on a debit transaction. By blocking debit transactions they’d approximately double their net revenue.

Where Do we Go From Here?

All isn’t lost with these cards, but the game is a little harder. Here’s how to pivot:

  • There are Visa and Mastercard prepaid issued by bigger banks (like say US Bank) that have more assets and thus are on the lower fee tier for interchange rates. As a result, I think supermarkets and Wal-Mart have a much smaller incentive to care about money order purchases with those cards and thus they’re a safer bet for MS.
  • Plenty of mid-tier grocery stores still work just fine. We’ve talked about several of them on this site before, but certainly look around your area and you’ll probably find others. Don’t let the lack of a name printed on a debit card stop you either.
  • Certain prepaid products (not unlike GoBank) will still accept Metabank cards even though they won’t work to buy a money order.
  • Look for at home liquidation techniques; try payment processors, bill pay platforms, p2p platforms, etc.
  • Explore other techniques that don’t rely on Visa and Mastercard gift cards: buyer’s clubs, gift card reselling, review clubs, bill pay platforms, p2p platforms, social lending, coins, etc.

There are a ton of plays out there friends, keep looking!

There’s more to Wal-Mart than the Money Center. The bad news? To find it, you still have to go to Wal-Mart.

Apparently Walmart is rolling out a POS software update which blocks money order purchases for swipes of above $49.99 for prepaid Visa or MasterCard gift cards from the BlackHawk Network (BHN), which is the network that issues prepaid cards for both Staples and Simon.

You can currently still load GoBank / Serve at the registers or money center, and so far US Bank issued gift cards are not affected.