Big ticket CC purchases - for someone else?
 

About a year ago, I was working in Canada. A co-worker wanted to visit his brother in Japan, so he located a cheap ticket, about $1000. Then he found out he needed a US credit card, which he didn't have. So, I put the ticket on my Diner's Club card, and he paid me in cash. He got the ticket, and I got the miles.

Now, there's a couple of my co-workers who are going to buy new cars. The price tag will be between %15,000 and $35,000. I suggested they look into putting the tab on their credit cards and get the miles. They did not seem interested in miles. Since these would be essentially cash transactions, I suggested that I could buy the cars with my credit card, and they could pay me the cash. The cars, of course, would be in their names. My only function would be to "launder" the money and get the miles.

Is this legal? If they have cash in hand, would you recommend it? Might I have to pre-load the card before the transaction?

The card(s) I have in mind are my BA Visa card or my Diner's Club. Advice appreciated.

We recently bought a new car and found that the dealers have a maximum amount they would accept in the form of credit card payments. we were able to make a $5,000 down payment with a credit card.

We also experienced a $5000 NW Worldperks Visa credit card charge limit from a motorcycle dealer where we wanted to charge over $10,000, i.e., the entire cost of the bike and had the credit to cover it on the card. I don't know if the restriction comes from the dealer or from Worldperks and other similar frequent flyer miles credit cards.

What I'd LOVE to charge or "launder" every month without cash advance fees on miles credit cards would be our San Francisco Bay area mortgage payments! We'd be flying first class at will if those enormous charges could generate miles. :-)

There are a few threads discussing the mortgage issue. I have not come across an case where a mortgage company/bank will accept a credit card payment.

From what I can tell, the best situation is to open an AA AAdvantage Mileage Checking Account. I have just applied for it, so I am waiting to see if I understood the terms correctly. As I understand it, you get --

-- 0.50% Annual Percentage Yield (APY) for balances $10,000.00 and greater
-- 0.25% APY for balances between $2,500.00 and $9,999.99
-- 0.00% APY for balances less than $2,500.00 (with a fee of $15.00/month)
-- $100.00 minimum opening balance
-- Free Bill Pay
-- Free TM Card upon request
-- Four (4) reimbursed ATM withdrawals per statement cycle (up to $2.50 per transaction)

-- Earn 1000 miles for opening a Mileage Checking Account
-- Earn 5000 miles for signing up for payroll direct deposit into Account
-- Earn 2000 miles for using bill pay service for 12 months
-- Earn 100 miles for every $1000.00 maintained per month in your Account

As I see it there are pros and cons --

PRO
-- miles for keeping $$$ in the account
-- reimbursed for 4 ATM transaction/cycle (month)
-- miles for bill paying (only need 1 recurring bill to qualify) and direct deposit

CON
-- rather hight minimum balance to avoid monthly service charge
-- interest rate not the greatest

You could accrue miles by using this account primarily to pay bills (and keep a higher balance = more miles/month). Or at least transfer your mortgage payment from you regular checking account to this account a few days before the payment is due, and use the automatic Bill Pay.



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Da DOK

Most car dealers will accept $5K max on a CC. You're lucky if you find someone who'll take more than that.

I recently bought a car and put $10,000 down on my credit card. I would have put the full $30,000 cost of the car on my Discover card but the dealership limited me to $10,000 because they said that they have to pay 2-3% in transcation fees to the credit card company and obviously this would put them out ~$750 on a $30,000 charge. Oh well, I was happy enough anyway to charge $10,000 on my Discover to get my $100 Cash Back Reward. What made me feel even better is knowing that the car dealership had to pay $250 in transaction fees so that I could get that $100 cash back. Yep, I think car salesmen are a bunch of crooks and knowing I was screwing them out of their $250 MADE MY DAY after all the crap I had to go through buying a car from them!

There is nothing illegal or improper about using your credit card to make a purchase for someone else. However, unless you are extremely comfortable that you will be repaid promptly, you may wish to get the cash upfront.

I've purchased 3 vehicles in the past with a credit card but in each instance I made this agreement prior to going out to the dealership. The actual discount rate that most dealerships pay is approximately 1.6% and the sales people who tell you 3% just don't have a clue. They are just repeating what the business office told them because they really don't like to accept credit cards.

One of the main reasons is because of the recourse you have through the credit card issuer should you be dissatisfied with the purchase after delivery.

Everything is negotiable when it comes to car dealers.

If you want to charge the whole thing badly enough, they will let you do it, provided you make it worth their while to do so. You may have to give back some of the great price you negotiated (you did ignore the sticker and negotiate up from the dealer's cost, didn't you? http://www.flyertalk.com/forum/wink.gif ) or pay some or all of the 1.6% or whatever it is the dealer has to pay on CC transactions....

But remember, it's ALL negotiable. http://www.flyertalk.com/forum/smile.gif

If a car dealer is willing to take your credit card, then you know you didn't get the best price.

Renegotiate another 5% off and pay cash or finance through a bank.

[This message has been edited by Rut Dog (edited 08-28-2003).]

Who cares who is paying for the car? All the dealer wants is his $$$. It's an excellent idea and if you trust these people enough not to have YOU ending up with the bill then I'd go ahead and do it.

I don't know enough about taxes in the US but I would look into making sure the IRS stays happy with you....

[This message has been edited by ScottC (edited 08-26-2003).]

Agreed 100%.
If they have lots of room in the price still and all it takes to close the deal is to let u use your CC then they will do it. Otherwise you know you didn't negotiate as good a price as u could have.

I would suggest negotiating your best price as if paying cash, then offer to pay with credit card and covering their 3%. Their profit would still be in the amount your negotiated over their cost plus the holdback that they also receive.

Agreed. Same holds true for mortgages and most other financial products. It's a trade-off if you want the miles.

This may be somewhat off-topic (imagine that, huh?) but if you or your co-workers are buying a car there is a new (I think) site that offers miles from participating dealers.

Not many dealers participate yet (Only 3 in Oklahoma, for instance, but they happen to be 3 big ones)..

So if you are going to buy a car from a certain dealer anyway, maybe check this site to see if that dealer participates with dealermiles.com

A buddy of mine sent me the link. He said it's a brand new company offering these miles. I don't know anyone who has actually bought a vehicle in this program, so I don't know how good it works.

http://www.dealermiles.com/

[This message has been edited by jmartin (edited 08-26-2003).]

I took the best refi offer I got from another lender (that gave no miles) and emailed it to Amex/PHH mortgage. They matched it and still gave me the MR points. You can always negotiate.

a car dealer in n dallas gave aa mi's if you asked for them. it was 1/$4 iirc.

The $35,000 car is a BMW and he wants to buy it in Germany. He's already negotiated the price, and they don't move much for that machine.

We don't know about whether the dealer will take a CC or not. Maybe if he thinks that's the only way he'll get the business, but the Beemer dealers are on allotment (supposedly) and they sell all they get, so maybe the guy won't budge.

At any rate, it's not my car, so I couldn't care less if he gets the best deal or not: I'm just a middleman for miles. He has an offer already for his old car (from India, of all places!) and, once he gets cash in hand we'll look at the CC angle.

I don't plan on being exposed for more than about 20 minutes. http://www.flyertalk.com/forum/wink.gif

I'm also trying to get him a ticket to fly there. Maybe I can buy that for him, too. Hey! Miles is miles, right?

The other car is a min-Cooper. He blanched when I mentioned a credit card deal.

The problem with being a mileage wheeler-dealer is that nobody quite understands what you're up to, and they think it's a scam.

Ah, the great unwashed. http://www.flyertalk.com/forum/biggrin.gif

Anyhow, with the legalities out of the way, it's onward and upward. Gotta get dem miles!

Taxes is pretty much taxes the world over, Scott. But in this case I don't see where I have any income to worry about. I just pay a bill and get repaid. Sort of like lendng a guy a few grand and he pays you back right away with no interest. Where's the taxable transaction?

Unless they want to tax me on the miles...

Uh, oh - don't wanna go there.

BigLar,
a) not illegal in anyway
b) yes, risky, so if it were me, I'ld have the cash in my hand or about a foot away
c) I would advise you, or your friend, to NEGOTIATE the use of credit card up-front so no surprises. AT least disclose your intent. Maybe offer to pay 1% extra, as it will cover the probable 2-3% discount the auto dealer pays to accept the card. Some dealers could care less; some are adament they won't take credit cards; most will take a portion of the payment in credit card; seems to be very related to PROFIT MARGIN or DESIRE TO MOVE THE ITEM. If you're extremely persistent, you *might* can remind the merchant that if they accept credit cards at all, then they are OBLIGATED by virtue of their merchant account with AMEX/Mastercard/Visa/Discover, et al, to accept the card for all services and products, and they if they fail to do so, you will contact AMEX or V or M/C. ie, they are not technically allowed to refuse the card for one purchase, yet accept it for another, as long as they accept it and display the credit card logo on their business frontage, but you would probably have a battle on your hands, and would need to call the responsible credit card company, find out who the regional or account manager for that vendor, make the formal complaint, etc, to force the issue. I think he who bluffs best wins this battle if it came head to head. Probably not worth your time and effort, though you might make the vendor aware that *you* are aware of these "all or none" stipulations in their merchant agreement. Also, in the US at least, these merchant agreements specifically disallow the charging of SURCHARGE, aka "points"...though the easy and common "wink and nod" way around this is the vendor claims their prices are CASH DISCOUNTED PRICES...and this buzz lingo is tacitly allowed. Indirectly, then, vendors charge a SURCHARGE. Internationally, I have seen reference that vendors CAN IN FACT legally charge surcharges. Of course, YMMV.
d) I've done this myself a few times...years ago...for low 6-figures. Knew the other part very well, and all went smoothly. We split the points 60% (me) / 40% (him), and would not have done it had the seller been charging points. Only if cash price = credit price did we consider it.

[This message has been edited by ILUVCITIBANK (edited 08-28-2003).]

Why would you want to offer the dealer *anything*, particularly without seeing whether they'll the card first? If car dealers were honest and charged a uniform price then I might feel differently.

As others have said, if they take a CC for the entire amount you've probably not negotiated as good a deal as you could. In this case it doesn't seem like the final price has anything to do with the question being asked.

xyzzy, I meant *if* the answer was "no credit cards". I, like you apparently, would not offer it in advance of knowing the initial response. I think most knew what I meant for this hypothetical scenario.

All I know is that if I did this in Holland I'd have the dutch version of the IRS all over me. Try explaining to an IRS auditor that you borrowed someone 35k just to get some airmiles...

How can your credit limit be $35,000 or over?

I don't think car dealers even allow you to charge the whole thing to your CC. They may allow you to charge part of it, but not the whole thing.

[This message has been edited by tekelberry (edited 08-28-2003).]

All I know is that if I did this in Holland I'd have the dutch version of the IRS all over me. Try explaining to an IRS auditor that you borrowed someone 35k just to get some airmiles...

I wouldn't worry about it at all. The transaction is pretty much invisible to the IRS unless they happen to want to tear your life apart for some other reason, and happen to wonder what the transaction is all about. Of course, there would be some documentation. It's pretty much a quantum event - if you look away for a bit, it never happened.

How can your credit limit be $35,000 or over?
I don't think car dealers even allow you to charge the whole thing to your CC. They may allow you to charge part of it, but not the whole thing.

My Diner's Club card is pretty much unlimited - that's one of the reasons people get T&E cards. Besides, I'd probably call them up for approval ahead of time. I might even deposit the money in advance. I think I could work the same deal with my Visa card, especially if I was paying in advance (pre-load). Others in this and other threads have indicated they have purchased vehicles with a CC and had little or no trouble.


If it ever comes to pass, I'll fill you all in on how it works out. There's no reason why you couldn't do it for yourself or someone else, and pick up a few thou miles with very little risk or expenditure.

Well, the thing is, with DealerMiles, a given dealer may provide miles only for sales or only for service or both.

You may have 3 dealers in Oklahoma, but it sure to me from the Oklahoma page there that all three of them only provide miles for service.

In California, there's a dozen or two dealer listed, and all but a couple of them only provide miles for service.

So unless this changes signficantly in the future, I suspect very few people will be in a position of having a dealer near them offer miles for SALES through DealerMiles. IMHO it should be thought of primarily as a way to get miles for service done on your car (but that doesn't seem to be the way most FTers promote it)...

Hm, unless your experience is much different than mine here in SoCal, your Diner's Club card is VERY limited... in terms of acceptance at car dealers! (Only a very tiny fraction of car dealers here in SoCal take it.)

Your previous example was buying an airline ticket for someone else. That's quite different, since almost all airlines take Diners Club (RyanAir in Europe is the only one I've looked at so far which doesn't). But car dealers and service is not considered T&E, and thus DC acceptance plummets in that category...

Yo BigLar,
It's not against the Tax Code, however:
1. If you're audited, the IRS will want to know where you "earned" the $35k to buy the car. Get a photocopy of your friend's car title for documentation.
2. Try to get a cashier's check from the car buyer or funds wired into your account. If s/he pays you with physical currency, your bank will require you to fill out a US TREASURY FORM 4789 when you deposit or buy a check to send to your CC. IF your friend is a drug dealer or a spy, you can be in trouble for accessory to REAL money laundering.


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Play the travel game 3 vacations into the future!

Maybe not "illegal" [but possibly so], but probably impermissible regardless and here is why.

If you read the fine print that came with your Diners Club card [AMEX as well] you will discover you can only use the card to make personal purchases. Thus using the card to make a purchase for someone else [especially outside of your immediate family] is a "no no." The idea behind the restriction is to prevent cardholders from accomplishing the very thing you suggest.

For a very short time I had a Diners Club card and used it in part to purchase airline tickets for other persons. Because the names on the airline tickets did not match mine I received a call from Diners Club advising me the charges would not be honored. When I questioned the bases for denial I was referred to the afore referenced language. I was eventually able to pay for the tickets using my VISA card and then terminated my Diners Club card as a show of protest. AMEX has the same restrictions.

Independently I know of a former travel agent who after being placed on notice by AMEX was convicted criminally for interstate fraud and embezzlement in her securing air miles the same way. This agent received payments by check from her clients for travel. When it came to paying for that travel the agent used her business AMEX card. Her intent was to accomplish the very thing suggested by this topic's poster.

Now assuming one could pay for the entire cost of an automobile with one's credit card [which I do not believe is possible for the very reasons already stated by others], I recognize there is a question as to whether or not Diners Club would discover what is being proposed [although making two big ticket purchases for two different cars in a short period of time might be sufficient to tip off Diners Club].

But the question is not whether Diners Club would discover the fraud; it is whether or not the artiface is permissible? As shown this "technique" would be a violatiion of the terms of the credit card agreement resulting in circumventing of its rules. If fraudulent, it would probably be criminal.

Anyway, orry to be the bearer of bad news. Good luck!

I used 3 different cards to buy my card since I reached my credit limit on all 3. (My dealer also said he couldn't go over $5000 but when I walked out of the dealership he changed his mind)

I used my CIBC Aerogold Visa to buy my wife's new SUV. Card has a $35K limit, and I repaid it for the balance needed, made a call to Visa to let them know what was going on. The dealership was not enthused, but changed its mind after a little coersion.

Easy to find a dealer to accept a CC, and if your limit is too low, just pre-pay the card.

smarten, I see you are from San Jose. I bought a new truck from Courtesy Chevrolet - paid for completely on my Visa. They gave me resistance at first, but I told them it was a dealbreaker. They did call Visa (in front of me) and confirm the transaction.

edited for poor spelling



[This message has been edited by RKG (edited 08-31-2003).]

A year and a half ago I bought my Toyota Prius with my AMEX. Since the car was Prix fix, I went from dealer to dealer letting them know I was interested in Prius and would they accept payment in full. Only 1 dealership was willing. The others let me walk out. So it depends on the dealership - obviously some were willing to lose the sale and would not negotiate, and one wanted the sale enough to say yes right away. I got AMEX to raise my credit line enough to cover the transaction (made $1000 deposit when I ordered the car). So it really does depend on the dealership. AMEX never asked for proof that the car was for me. I think it would take more than $35K for the IRS to think you were not reporting income. If you were audited, they could easily see what you did. People lend people money all the time by making charges on their credit cards - even when miles are not a benefit.

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Ms.DtG

You mentioned that the car is being bought overseas. What you might want to check out is if it is being charged in $US, or in the local currency. Most credit cards have a conversion fee and the real buying may not want to pay extra for the conversion which could add 2 to 3% on the price.

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Ms.DtG

1. I used Diner's Club as an example of a card with a very large limit. I realize there might be a problem buying a car with DC. http://www.flyertalk.com/forum/smile.gif Since he was getting it in Europe, though, there might be a better chance. OTOH, I think he sets up the deal stateside.
Oh well - Visa is probably a better bet.

2. If we did use Visa, I can't imagine that they would care one whit what I was buying or for whom. They get their percentage and I make the payments. I mean, really; what do they care? That same argument would apply to DC - how does it affect them? I would be channeling mucho business their way that they would not normally get.

I'm not sure I see the legal problem here. Perhaps I shall call them and ask. http://www.flyertalk.com/forum/smile.gif

And, as others have pointed out, it is quite possible to buy a car with a credit card.