c2it cracks down on mileage cards
 

My wife's c2it account was closed without warning with an email that said:

"We have made several attempts by phone and Email to contact you concerning using your c2it membership in a manner that we deemed
excessive. Your transaction activity indicates that you are using the service outside of its intended purpose. As a result, we are terminating your membership. This closure is effective immediately."

In fact no previous attempts were made to contact her by phone or email. Background:

My wife and I had been sending money back and forth between our c2it accounts using a mileage earning credit card and had reached about $20K in charges on both accounts.

My own c2it account received a warning to call them, and when I called they said they knew I was using the account to rack up frequent flyer miles and they deemed that to be "excessive usage" under their terms and if I continued my account would be terminated. They refused to go into what would constitute "non-excessive usage" but denied that they were asking me to stop using my mileage earning credit card. The only useful information I could extract was that all accounts are closely monitored once they hit $20K in cummulative usage, since they need to fill out forms under Federal anti-money laundering laws at that point.

If that's what they told you, they were blowing smoke. The forms that must be filled out that they are referring to are the Currency Transaction Reports (CTRs). A CTR must be filled out for any cash transaction that exceeds $10k. Banks can consider a series of transactions as one (and fill out a CTR) if they think you are performing multiple transactions in an attempt to stay below $10k per transaction (meaning I go to the bank twice in one day, each time withdrawing $7,500. In this case, the bank is supposed to consider these two withdrawals as one transaction).

The fact that you used a credit card to purchase traveler's checks (I think that's what c2it was used for, right?) over a long period of time does not appear to count as one transaction, therefore the bank does not have to fill out a CTR.

My 2 c2it accounts were closed as well, as was my father's. They had called us, but again did not describe excessive. It is really the transferring back and forth that is what they don't like and looks like not a legitimate use. I opened my second account after telephone warnings but before shut down, and basically just sent money out. It was when I sent it to MY other account that I think I had the problem. If I had avoided that I might have been OK. They shut it down about a couple of days before my free transactions were to run out (it was still 90 days free at the time.).
This has nothing to do with buying traverlers checks. This has to do with sending money by e-mail to another e-mail address and charging it to your credit card. The receiver then deposits the money into a credit card or checking account. It was great while it lasted.

------------------
DtG

CTRs (Form 4789) and US Customs Form 4790 apply to PHYSICAL CASH or 'bearer instrument' transactions, exports,& imports >$10K-- not to transactions via 'normal banking channels' like wire transfers, mailing checks, or devices payable to a named person that have not been endorsed by the payee.

[This message has been edited by Brendan (edited 12-27-2002).]

But doesn't sending money with a credit card incur a percentage processing fee? And wouldn't this fee offset the cost to Citibank for the miles. In other words, wouldn't Citibank still make money off of these transactions?

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.

My accounts with ecount and PayPal were closed for the same reasons (but not before I racked up 15,000 miles)!

------------------
When once you have tasted flight, you will forever walk the earth with your eyes turned skyward, for there you have been, and there you will always long to return.

- Leonardo da Vinci

You can send well over $20,000 of transfers without your account being closed. They have threatened to close my accounts, as recently as two weeks ago, but for some reason, a promise to reduce activity has been accepted. I would suggest that sending $1,000 per account every four days, particularly back and forth between accounts, will definitely trigger their interest.

As a side note, the other problem they have is that the program effectively enables the user to carry a balance on their Citibank Visa/Mastercard interest-free. Since transfers to the credit card are treated as payments, you can carry a balance as large as the total you transfer from your account to your credit card.

I just recently signed up and transfereed $2k to my checking account...and i think i'm done. http://www.flyertalk.com/forum/smile.gif

------------------
Albert

I am curious about something.

I used these services to transfer money between accounts and earned a lot of miles. I stopped when they began imposing fees and/or changed the terms and conditions.

I read a significant amount of information as I used the services and tried to find new providers. I just don't see them as providing a really useful service. Does anyone use them for a purpose other than earning miles? Other than online auctions, I don't think they will be used by a large enough group of customers to support their business model.

I closed my wife's and my accounts yesterday after receiving a call from a C2IT CSR asking about my "suspicious" activity (frequent). He asked if I was using C2IT for points purposes.

I told him to close both accounts. It appears that C2IT is reviewing account activity closely.

The C2it thing was a nightmare for me. Bank of America charged a $20 quasi cash for on a $5 transfer to the account. It would be best to check your credit card statements.

I posted a similar nightmare in a c2it discussion on the AA board. I got my credit card (GM Card) to reverse their cash advance fee "just this one time."

Bumping this to the top. Any recent experience? And what arethe consequences of having your account closed?

[This message has been edited by cactuspete (edited 11-23-2001).]

http://www.flyertalk.com/forum/Forum71/HTML/005449.html