Legit Uses of MS Instruments?
Jul 29, 2014, 2:22 pm
#16
Join Date: Feb 2012
Location: Los Angles
Posts: 2,101
I'm guessing that paying in Gift Cards is illegal and a way to circumvent FICA taxes for the employer. Much like claiming all employees are "independent contractors". But if someone can demonstrate that it is legal, it's all the more reason why WM should not be giving people a hard time for trying to load them onto serve/BB.
As for legit uses - gifting, underbanked et al seems to be the obvious ones. I'm still curious why they even offer the variable load cards since it cuts into their profit margins (but is good for us
).
As for legit uses - gifting, underbanked et al seems to be the obvious ones. I'm still curious why they even offer the variable load cards since it cuts into their profit margins (but is good for us
).Are u saying that Gift card companies (banks) are encouraging/promoting to circumvent FICA taxes?
Jul 29, 2014, 4:45 pm
#17
Join Date: Feb 2012
Posts: 4,470
I guess MS must be a nuisance to the Fed, as it doesn't siphon the paper out of the system, but they must still love the increased velocity of money.
Last edited by MaxVO; Jul 29, 2014 at 4:51 pm
Jul 29, 2014, 4:49 pm
#18
Join Date: Jun 2013
Posts: 531
At companies where there is a choice, it is often more in theory than in practice, according to interviews with employees, state regulators and consumer advocates. Employees say they are often automatically enrolled in the payroll card programs and confronted with a pile of paperwork if they want to opt out.
In the case of the New York City Housing Authority, it stands to receive a dollar for every employee it signs up to Citibank’s payroll cards, according to a contract reviewed by The New York Times.
On a side note, a manager where I work was handing out small GCs now and then as bonuses. Once HR found out, they had to go around telling people the bad news that a bit more taxes would have to be taken out of their next paycheck, to balance the books
Jul 29, 2014, 5:02 pm
#19
Join Date: May 2013
Posts: 1,153
MS instruments exist because the Federal Reserve system ordered the banks to create them. Any money transactions, including MS, increase the velocity of money -- and it's the Fed's primary metric to indicate how well the 'economy' is doing. They would also like to suck the cash out and cycle all transactions through the banking system. Every time money passes through banks, they grab a tiny portion of it. Cash transactions obviously don't need to involve the banks. They are still a part of the economy, but the Fed can't count them in, and the banks can't skim a tiny portion of them.
I guess MS must be a nuisance to the Fed, as it doesn't siphon the paper out of the system, but they must still love the increased velocity of money.
I guess MS must be a nuisance to the Fed, as it doesn't siphon the paper out of the system, but they must still love the increased velocity of money.
I have no clue how significant/insignificant "velocity of MS" you speak of. M1 & M2 money supply, GDP, all other factors to measure....since I have no intention of understanding it, I'm not gonna try to figure it out.
Last edited by vagrants; Jul 29, 2014 at 5:12 pm
Jul 29, 2014, 5:50 pm
#22
Join Date: Feb 2012
Location: Los Angles
Posts: 2,101
MS instruments exist because the Federal Reserve system ordered the banks to create them.
Do you have any official reference to your statement? I am curious, what more it says?
Any money transactions, including MS, increase the velocity of money --
Agree
and it's the Fed's primary metric to indicate how well the 'economy' is doing. They would also like to suck the cash out and cycle all transactions through the banking system. Every time money passes through banks, they grab a tiny portion of it. Cash transactions obviously don't need to involve the banks. They are still a part of the economy, but the Fed can't count them in, and the banks can't skim a tiny portion of them.
I guess MS must be a nuisance to the Fed, as it doesn't siphon the paper out of the system, but they must still love the increased velocity of money.
Do you have any official reference to your statement? I am curious, what more it says?
Any money transactions, including MS, increase the velocity of money --
Agree
and it's the Fed's primary metric to indicate how well the 'economy' is doing. They would also like to suck the cash out and cycle all transactions through the banking system. Every time money passes through banks, they grab a tiny portion of it. Cash transactions obviously don't need to involve the banks. They are still a part of the economy, but the Fed can't count them in, and the banks can't skim a tiny portion of them.
I guess MS must be a nuisance to the Fed, as it doesn't siphon the paper out of the system, but they must still love the increased velocity of money.
We all know prepaid cards hanging on the rack has value '0', the moment u say 500 to cashier, the cash register creates that value which at that moment becomes the asset of the bank so Federal Reserve gives credit (loan) to the bank for that amount. When u pay, the payment is credited which balances the debit, Fed money stays outstanding loan to the bank, The new $500 is created and distributed into the economy.
People with Financial Accounting background (not the bank tellers) may be able to explain more in details
Jul 29, 2014, 6:38 pm
#23
Join Date: May 2013
Posts: 1,153
We all know, Federal Reserve is in a business of creating liquidity in the market by manufacturing 'money' the manufacturing cost today is absolute '0' (electronic transfer) but the distribution cost to inject into the economy is not 0.
We all know prepaid cards hanging on the rack has value '0', the moment u say 500 to cashier, the cash register creates that value which at that moment becomes the asset of the bank so Federal Reserve gives credit (loan) to the bank for that amount. When u pay, the payment is credited which balances the debit, Fed money stays outstanding loan to the bank, The new $500 is created and distributed into the economy.
People with Financial Accounting background (not the bank tellers) may be able to explain more in details
We all know prepaid cards hanging on the rack has value '0', the moment u say 500 to cashier, the cash register creates that value which at that moment becomes the asset of the bank so Federal Reserve gives credit (loan) to the bank for that amount. When u pay, the payment is credited which balances the debit, Fed money stays outstanding loan to the bank, The new $500 is created and distributed into the economy.
People with Financial Accounting background (not the bank tellers) may be able to explain more in details
"Prepaid cards
Is the money on my prepaid debit card FDIC-insured?
updated 5/22/2013
Not necessarily.
For bank accounts, if your bank goes out of business, the government guarantees you will get back up to $250,000 of the money in your individual bank account through FDIC insurance. There are no such government guarantees for prepaid debit cards.
If your prepaid debit card issuer is a bank, you may have some amount of FDIC insurance for your money. If the bank goes bankrupt, you may get some or all of your money back.
If your prepaid debit card issuer is not a bank, you cannot have any FDIC insurance, and whether you will get your money back depends on the issuer’s rules.
You can refer to your cardholder agreement to find out whether your card is issued by a bank and whether you are insured."
http://www.consumerfinance.gov/askcf...c-insured.html
"Prepaid cards
What is a prepaid card?
updated 5/18/2012
A prepaid card is a card that you use to access money you have paid in advance. A prepaid card can refer to a number of different types of cards. For example, gift cards are prepaid cards that typically are used up after you deplete the value on the card. But you can also buy a prepaid debit card that you can add money to and continue using over and over. You “load” money on the card by paying in advance, and then you spend that money by using the card. Some types of prepaid cards also allow you to take money out at an ATM."
http://www.consumerfinance.gov/askcf...paid-card.html
Last edited by vagrants; Jul 29, 2014 at 6:55 pm
Jul 29, 2014, 10:10 pm
#24
Join Date: Jun 2014
Posts: 290
I have seen someone use a bluebird (at a bar) and fund serve with cash at CVS. My roommate uses Simple as his primary bank.
These are legitimately useful products to those who are "unbanked," especially with a bill pay and ATM access feature. I am personally very happy that competition in the prepaid space has meant more features, more transparency, and lower fees.
Banking is perhaps the single largest industry yet to be seriously challenged by an up-and-coming startup. Glad to see more innovation, though clearly it is very hard. Many have tried, few have yet to succeed. All we are seeing in the industry is more consolidation among the largest banks, which is actually terrifying since it means WHEN the next financial collapse happens it will be all the uglier.
These are legitimately useful products to those who are "unbanked," especially with a bill pay and ATM access feature. I am personally very happy that competition in the prepaid space has meant more features, more transparency, and lower fees.
Banking is perhaps the single largest industry yet to be seriously challenged by an up-and-coming startup. Glad to see more innovation, though clearly it is very hard. Many have tried, few have yet to succeed. All we are seeing in the industry is more consolidation among the largest banks, which is actually terrifying since it means WHEN the next financial collapse happens it will be all the uglier.
Jul 29, 2014, 10:18 pm
#25
Join Date: Oct 2006
Location: DTW
Programs: AA EXP, DL FO
Posts: 1,719
You need to get out more.
Ok, not really. But it sounds like you most likely primarily interact with others in your same socioeconomic circle. As has been mentioned, there are tons of unbanked/underbanked people in the country. For some, these kinds of things are great, as they allow things like shopping online, freedom to not carry huge flashy wads of cash, etc.
For others, they really have no idea what they're doing. They never had parents or anyone else who taught them about proper money management, and see no real need to learn it themselves (trust me, I've tried to help a couple). As far as they're concerned, all financial anythings come with big fees - that's just part of life. These are the ones who will be paying these fees for the rest of their lives.
So, like so many other things in life, these MS methods may have a positive side (and may have even really been started to help people who needed something besides cash), in the end, they're just big profit centers for the companies who make them. People who actually understand financial instruments (like most of us here) rarely make banks a lot of money. With these products, they've opened themselves up to a much more lucrative market.
Ok, not really. But it sounds like you most likely primarily interact with others in your same socioeconomic circle. As has been mentioned, there are tons of unbanked/underbanked people in the country. For some, these kinds of things are great, as they allow things like shopping online, freedom to not carry huge flashy wads of cash, etc.
For others, they really have no idea what they're doing. They never had parents or anyone else who taught them about proper money management, and see no real need to learn it themselves (trust me, I've tried to help a couple). As far as they're concerned, all financial anythings come with big fees - that's just part of life. These are the ones who will be paying these fees for the rest of their lives.
So, like so many other things in life, these MS methods may have a positive side (and may have even really been started to help people who needed something besides cash), in the end, they're just big profit centers for the companies who make them. People who actually understand financial instruments (like most of us here) rarely make banks a lot of money. With these products, they've opened themselves up to a much more lucrative market.
In the grand scheme of things I suspect MS is still a small percentage of prepaid GC sales and related products discussed here otherwise the methods would have likely been shut down already. There are tens of millions of legitimate users out there whose volume has to dwarf the MSers.
I'm personally surprised anyone still allows prepaid GC sales with a credit or debit card. In this case the number of "legitimate" needs for credit/debit transactions has to be tiny compared to the MSers not to mention the potential for fraud.
Jul 29, 2014, 11:11 pm
#26
Join Date: Feb 2012
Location: Los Angles
Posts: 2,101
Jul 29, 2014, 11:44 pm
#27
Join Date: May 2013
Posts: 1,153
No, I was just quoting how I understand how it works. Your links to your sources of how it works? I have never heard of the Fed making loans to PrePaids. All I wanted to show was the involvement of government. It goes as far as FIDC. And, from the quote, there are several conflicts I can think of from your statements.
It just makes me so tired of discussing things, people do not give sources or #s when they are asked to provide. And, they tell me to look it up or whatever.
It just makes me so tired of discussing things, people do not give sources or #s when they are asked to provide. And, they tell me to look it up or whatever.
Last edited by vagrants; Jul 30, 2014 at 12:04 am
Jul 30, 2014, 12:25 am
#28
Moderator: Manufactured Spending
Join Date: Jul 2011
Posts: 6,578
We all know prepaid cards hanging on the rack has value '0', the moment u say 500 to cashier, the cash register creates that value which at that moment becomes the asset of the bank so Federal Reserve gives credit (loan) to the bank for that amount. When u pay, the payment is credited which balances the debit, Fed money stays outstanding loan to the bank, The new $500 is created and distributed into the economy.
People with Financial Accounting background (not the bank tellers) may be able to explain more in details
People with Financial Accounting background (not the bank tellers) may be able to explain more in details
That's not what I understood how it works...do you have a reference so that I can read more about this?
"Prepaid cards
Is the money on my prepaid debit card FDIC-insured?
updated 5/22/2013
Not necessarily.
For bank accounts, if your bank goes out of business, the government guarantees you will get back up to $250,000 of the money in your individual bank account through FDIC insurance. There are no such government guarantees for prepaid debit cards.
"Prepaid cards
Is the money on my prepaid debit card FDIC-insured?
updated 5/22/2013
Not necessarily.
For bank accounts, if your bank goes out of business, the government guarantees you will get back up to $250,000 of the money in your individual bank account through FDIC insurance. There are no such government guarantees for prepaid debit cards.
Jul 30, 2014, 5:39 am
#29
Join Date: Oct 2013
Posts: 1,322
From WSJ:
Celebrities Struggle in Prepaid-Card Business
Fortune Eludes Cards Backed by the Famous as Competition from Big Banks Mounts and Fees Come Under Pressure
http://online.wsj.com/articles/celeb...od=djem10point
One factoid:
"In all, consumers made $132.9 billion of purchases using prepaid cards last year, more than double the $60.45 billion in sales made in 2009, according to the Nilson Report, a Carpinteria, Calif., newsletter."
Celebrities Struggle in Prepaid-Card Business
Fortune Eludes Cards Backed by the Famous as Competition from Big Banks Mounts and Fees Come Under Pressure
http://online.wsj.com/articles/celeb...od=djem10point
One factoid:
"In all, consumers made $132.9 billion of purchases using prepaid cards last year, more than double the $60.45 billion in sales made in 2009, according to the Nilson Report, a Carpinteria, Calif., newsletter."
Jul 30, 2014, 5:52 am
#30
Join Date: Dec 2009
Location: HNL
Programs: UA 1K; Marriott Plat; Hyatt Diamond; CCarlson Elite
Posts: 641
No, I was just quoting how I understand how it works. Your links to your sources of how it works? I have never heard of the Fed making loans to PrePaids. All I wanted to show was the involvement of government. It goes as far as FIDC. And, from the quote, there are several conflicts I can think of from your statements.
It just makes me so tired of discussing things, people do not give sources or #s when they are asked to provide. And, they tell me to look it up or whatever.
It just makes me so tired of discussing things, people do not give sources or #s when they are asked to provide. And, they tell me to look it up or whatever.
I share the OP's confusion tho. I also have seen people pay $3 to load $50 onto a card, and I've seen even worse: back in the glory days of the $20 Discover Christmas promotion, I watched a guy buy $1K worth of mall gift cards with cash. I just couldn't stand it, and I asked him "why would you trade cash, which never expires, has no fees and can be spent anywhere, for something that has an expiration date, has fees and can only be spent at this mall?" The response was a confused mumble about gifts and "it's the thought" and whatever.....
So my rational side tells me that there is no way there's enough stupid people in the world that gift cards (and even worse; prepaid debits) can be a viable market, and yet there is. So all the crazy money being made in the prepaid debit market - just like all the money being made on check-cashing services and we-tote-the-note car lots - is really a tax on stupidity. And there's lots of stupidity to be taxed, it seems...
Makes me feel good about doing my little part to level the playing field
