Kevino : you are right, the credit card makes money of the merchant discount (paid by c2it,
and ultimately by the c2it user after
the 3 month free period) and moreover makes the same money as they do off the transactions c2it was set up for (paying merchants for auctions).

The best explanation I have heard is that c2it like all credit card merchant account holders is required by its credit card agreement to stop any customer from effectively getting a cash advance disguised as a purchase transaction. A friend of mine than runs a buisness says he could lose his merchant account and hence his buisness if he were caught allowing customers to get cash advances (for a small fee) disguised as purchases, so I can understand c2it's having to forbid circular money transfer's that effectively amount to cash advances. Most credit card companies want to be able to charge hefty fees for cash advances and avoid paying FF miles. As others have pointed most current consumer credit card agreements allow purchases from quasi-cash merchants (like paypal, c2it etc) to be reclassified as cash advances allowing the credit card co to collect both a merchant fee and a cash advance fee. There is at least one legitimate buisness rational for agressively disallowing cash advances from being disguised as purchases : most consumers have a lower credit limit for cash advances since cash advances have a higher default risk than merchandise purchases.

For FF junkies the aim is to be able to figure out what algorithm c2it uses to detect circular money transfers and try to stay under their radar if that is possible. Has anyone sucessfully been able to transfer over $20K (per c2it account) to the c2it account of a friend/relative and avoid being shut down ? $20K in cummulative "send cash" transactions seems to be the point at which they check you closely for non-trivial circular transactions (trivial circular transactions such as sending money to another c2it account in your own name seems to get caught right away). I tried sending randome amount between $495.01 and $499.99 so no two payments were ever the same but that didn't avoid detection. Perhaps someone else has figured out a method that works and let others know.