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.

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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)!

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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

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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

I had a similar experience with my UA Visa but C2IT contacted me via email last week and stated they had made a mistake and credited my account the "cash advance" charges. Nice... http://www.flyertalk.com/forum/smile.gif

I was reading the C2IT Terms and Conditions

https://www.c2it.com/C2IT/aoltc_off.jsp

D. Instructions for Transferring Cash

1. Transferring Cash from any of your Linked Bank Accounts to any of
your Linked Accounts:

c2it service enables you to Transfer Cash ("Transfer Cash") from any of
your Linked Bank Accounts (checking, savings or money market
accounts) to any other Linked Accounts (these include credit card and
bank accounts). To Transfer Cash, you will need to provide the amount
to transfer, the Linked Bank Account from which you would like funds
transferred and the destination account.

2. Transferring Cash From Your c2it Account to Any of Your Linked
Accounts:

You can Transfer Cash from your c2it Account to any of your Linked
Accounts (these include credit card and bank accounts) in any amount
up to the cash available in your c2it Account, subject to the
transaction limits in Section XIII.

3. At this time, you cannot directly Transfer Cash from a Linked Card
Account.

4. Transfer Cash requests cannot be cancelled.

5. Transfer Cash requests are subject to the transaction limits and
fees in Section XIII.

Line 3 States that I can not transfer cash FROM a linked card account. Am I reading something wrong here?

Jay

I would use my FF Visa cards to get some quick cash (and miles) for my business. I did it quite a few times over the last 5 years. I would hit for around $5,000. I got caught on it from Visa, so I switched to Diners card (double BA miles). When Diners nailed me....the money never hit my business account, but the card charge held! It took about 3 weeks to clear that up. I think the SS number is what got me caught. I may run my wife's BA card (w/ her SS #) next time (in 2002)???

I'm posting this here instead of the DC forum since this is where the thread is...

I'm a big Diner's Club user, so I have accounts with Webcertificate and C2it.

Webcertificate takes DC and charges me $1 per $50, which is half what it would be using my ClubCash account. I can yank $4,000 from my DC account for $80. Not bad when you need the cash for non-DC spending. C2it doesn't charge anything to transfer money from a linked credit card to a linked bank account. Only thing about this system for "laundering money" is that webcertificate won't do more than $50 per transaction and only $150 in a short period (like 10 minutes). I think the $150 is DC's security checks kicking in because I can go back an hour later and do another $150.
Once I've built up a chunk, I transfer it to C2it and then out to my bank.
It's tedious but I don't think I'll (hopefully) have to move any big bucks again (this was post-9/11/01 cash flow problem).

I think the Webcertificate is a great way to get money from DC for transactions that don't take DC. C2it is a great way to move money to my bank account.

Things I've learned. Keep your transaction below $500. Something at that level seems to trip security alarms at both WebCert and C2it. When I first got the accounts set up, I had to talk twice to Webcert and once to C2it to confirm my activity. They weren't nasty about it, just wanted to make sure that I was the one doing it, etc. Standard credit card security procedures. It's pretty obvious that both systems are set up to limit their exposure to fraud.

I reckon you would start triggering sort of Federal bank reporting regulation type stuff when you get to the $20K level.

I'm wondering how long they are going to allow me to effectively use their service for free. Since I don't use any of their fee-based services, they'll probably get mad at me eventually and pull the plug. That's why I jokingly referred to this system as "money laundering" in my previous post.

[This message has been edited by GeorgeBurdell (edited 12-02-2001).]

Sorry to be off-topic,
George, have you been able to use your Diners at webcertificate lately? It hasn't worked on the web site for about 1 1/2 months, and they no longer feel like processing it manually. I'm wondering if it's just me.

My DC works fine for me at Webcertificate.

GeorgeBurdell. Thanks for the tip on DC on webcertificate, which I've never heard of before. I would assume that you would receive Club Reward points for your DC transactions, but wanted to check to see what your experience was first. Also, if you do receive the points, do you receive the double CR points when transferring the amounts you mention.

Thanks.

The webcert transaction comes across as some (I don't remember details) merchant thing. I just have a crapload of $50 transactions on my bill. I didn't notice any missing ClubRewards points. Just shows you that a large part of their account review system is automated and people only get involved when you trip one of their triggers. Personally, if I looked at those transactions on someone else's account, I'd wonder why they bought 80 $50 items from this merchant <chuckle>.

Back when c2it had a 90 day intro period, I managed to rack up 110,000 CO miles on Chase Visa between my wife and I before I was flagged and my account closed. Each of us had three accounts, and we rotated the amount and the accounts so we weren't paying from the same two accounts twice. It seems that better controls are in place today.

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On the road,
In the air,
I enjoy travel
From here to there.

[This message has been edited by ontheroad (edited 12-04-2001).]

[This message has been edited by ontheroad (edited 12-04-2001).]

<quote>Back when c2it had a 90 day intro period, I managed to rack up 110,000 CO miles on Chase Visa between my wife and I before I was flagged and my account closed. Each of us had three accounts, and we rotated the amount and the accounts so we weren't paying from the same two accounts twice. It seems that better controls are in place today.</quote>

This seems to confirm the $20K per account cumulative limit triggering a manual review
(6 accounts X $20K = $120K if you time it just right for a couple). One rep let slip that they had closed about 300 accounts for excessive usage of frequent flier credit cards, out of over 8 million total acounts!

GeorgeBurdell, thanks for your reply. I was wondering though, if the per transaction limit is $200, why do you only transfer $50 at one time? The fee for $200 is $4.95 and the fee for $50 is $1.00, which is a savings of .95 cents for 4 $50 transactions. Is it simply a savings issue?

Thanks GeorgeBurdell, I was offered a retention bonus with Diners if I spent $150 a month. I was still wondering how I would spend that much. My car doesn't use that much gas in a month. The webcertificate idea is just great!! I am also signed up with c2it, but haven't used it yet.

I have been watching this thread (and similar ones) with some interest.

I've seen the question posed several times about why it is that accounts are getting flagged and reviewed manually.

As a former fraud investigator for a credit card company, I thought I might jump in with a quick comment or two.

The reason your accounts are being flagged likely has little or nothing to do with earning mileage. That's right, probably NOTHING to do with mileage.

See, the cash/balance transfer game is a common element in credit card fraud rings.

How does it work?

Well, it all starts with one (or several depending on the size of the scam) legitimate credit card. I say "legitimate" card loosely. Often it is opened by taking a presolicited offer that someone unwisely dumped in the trash without shredding.

Then, the individual(s) opens one (or usually many, sometimes into the hundreds) of credit cards with various banks/cc companies/stores/etc. and uses them to make small purchases.

The legitimate card is used to make payments on the new fraud cards in order to establish some type of history on the cards for credibility. Usually the payment on the legit cards is covered by return behavior on the fraud cards. Cash transferring is common between cards which often have names of a "spouse". Often on store cards, gift certificates will be bought with one card and then used to make a payment on another.

Then, when a payment history pattern is established, BAM, the scam kicks in... the individual goes for credit line increases on all the cards and goes on a spree... usually for cash advances and (in the case of high end stores) pawnable merchandise. By the time the fraud is detected and the accounts closed, the ring has made out well.

Anyway... just about any company with a good fraud investigation department is going to flag accounts that have this shifting behavior going on. It likely has little to do with mileage earning and everything to do with suspected fraud. The fact that it is going on between accounts between two cards with the same name or same surname or same mailing address (or even city)? Suspect. The fact that it occurs on a regular (and sometimes even predictable basis)? Suspect.

If that doesn't discourage you, I would also caution this. If you are having accounts closed and then go to apply for a card somewhere else, and your credi bureau shows high balance or high activity closed accounts (or possibly has even been flagged by the issuing company as a potential fraud), it is not uncommon for this to lower your credit score enough to flag a manual review.

It is not uncommon on a manual review for an investigator from one card company to call an investigator the company where the card was closed to find out why. Companies are very prone to cooperating when it comes to preventing fraud losses. We were always very discreet about this, but a simple "we wouldn't issue to them again" goes a long way towards damaging your credit".

In our computers, these individuals were noted with an X and anytime their social security number or physicial address (or in some cases surname) came up on an application, it was automatically queued to the fraud desk to approve or decline.

I just thought this might be of interest to my FT friends who I care about... ultimately, the $$ you make on free tickets may pale in comparison to the $$ you pay due to marginally higher interest rates due to damaged credit, especially when it isn't something YOU can see on your credit bureau.

That's good information TechGirl.
The reason I do the $50 transactions is because getting the $200 one involves sending a "gift" and then I have to redeem it, etc. Doing the $50 one involves adding funds to my existing Webcert account, which doesn't look so suspicious. When I do that I'm basically refueling the card.
Generally, I'm not trying to accumulate points, I get enough just using my DC for shopping/dining/travel. Webcert and C2it offer a handy way to move cash where I need it. I've even used it to pay a bill where I was almost late paying it and needed to avoid late charges, etc. Better to pay a few bucks service charge than to be late with a bill and its associated late fees.

[This message has been edited by GeorgeBurdell (edited 12-05-2001).]

Techgirl, a quick question for you: I'm well aware that our formal credit record reflects info from our credit cards, loans etc BUT are saying that info on accounts like c2it (and along the same vein perhaps even online payment services like PayPal, PayDirect, Billpoint etc) are also reflected on our credit records? I have been using my c2it account to in effect get cash advances (plus the miles of course) with the attitude of "so the c2it people will probably eventually catch on and cancel my account but who cares - I'll probably be 20,000 miles richer!" BUT if info about c2it is reflected on my credit report then I certainly DO care. Please clarify. Thanks!

GeorgeBurdell, I'm sorry to keep asking you questions, but since you have the experience on webcertificate, you are my best source for information.

I created an account, but have not been able to figure out how to add money to my account. When clicking on the "Add Funds/Money" link, that does not appear to work, however, I can easily create a email gift card. Could you tell me what I'm doing wrong? Thanks!

No, I'm not aware of whether or not a c2it account will reflect on a credit report. If there is no credit line involved, then no.

I picked this thread (although there have been many like it in the past) because I am always seeing threads about cash transfers in various programs. I do know that the practice of doing "cash transfers" on a credit card will reflect in the manner I described above.

I would imagine that a C2it account could be reported to a credit bureau if somehow it wound up in collections.

To answer the previous question about Webcert, I sent a $200 gift certificate to myself to start the account out. Then I redeemed the gift cert to the account I sent it from. Hope this helps.

BTW, I got my DC statement yesterday. There were a boatload of transactions to the webcert merchant name and I didn't notice any sort of negative impact to my CR points.

GeorgeBurdell, thanks for the tips on webcertificate.com, the service will come in handy, not to mention the bonus DC points I'll earn using this service!

Anybody have more recent experiences with C2it? Especially in transferring from a CC to a c2it account and then to a checking account?

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Ms.DtG

If you are hesitant to publicly display your experiences, please e-mail me. I don't want my husband's account to get shut down, so any experiences will be greatly appreciated.

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Ms.DtG

They finally shut me down. I believe it was the volume of dollars I was moving around.
They weren't particularly nice about it either, even though I explained to them that I wasn't violating any of their agreements, they basically assumed I was lying.

Some here. They closed my account, and when I called them they said that they wouldn't re-open it for me no matter what I did. http://www.flyertalk.com/forum/frown.gif

How many miles had you accumulated before they shut you down? Approximate number is fine (to protect the innocent).