KEEP CALM AND CHURN ON

panic-button

With the demise of BB/Serve I think it is time to take a moment from our regularly scheduled programing and discuss some pitfalls that people should be reminded of, or learn about for the first time.  The days of easy MS are temporarily over so let’s discuss about how we can avoid getting ourselves in trouble by doing stupid shit.

Unless you were living under a rock last week, you probably heard about the Pointchaser structuring drama.  She offered this advice in a post last week.

This one is tricky and could cause a lot of trouble if you go about it wrong. I try to limit my monthly money order deposits to $9,000 across two checking accounts. Federal law requires banks to report suspicious activity, like large deposits that exceed your monthly income. Any deposit of $10,000 or more gets reported to the Financial Crimes Enforcement Network (FinCEN), but I’ve read that if you split up $10,000 worth of deposits within 30 days, it may still get reported. Obviously, I’m not doing anything illegal, but I’d rather avoid the hassles of being investigated for money laundering, so I keep my deposits under $10,000 per month just to be safe.

The post highlights a particular pitfall with money orders.  The pitfall is a federal crime called, structuring. The IRS Manual has a good explanation of it and if you are doing MOs it is a must read.  Essentially, structuring is making bank deposits in a manner that avoids the $10,000 reporting requirement.  Pointchaser took down the offending advice after receiving a fair dose of criticism.

In defense of Pointchaser I will say one thing.  The reporting law applies to cash deposits.  I am not 100% sure if money orders are treated the same as cash deposits for the purposes of reporting.  In fact my wife used to work in a credit union and is familiar with the reporting requirements.  She says that the reporting requirements only apply to cash and not money orders.  Still, I would err on the side of caution with this one.  Don’t deposit MOs into your bank account. If you do, don’t structure them.  You are much better off going into the local branch of whatever bank’s credit card you need to pay off and use the MO to pay the bill.  I for one am on the MO sideline.  It is not worth the hassles for me.

Speaking of Money order hassles, did you all see this tweet from Tahsir?

Of course there is nothing illegal about MS and money orders, so long as you don’t structure.  This, however, just further highlights why this particular game is not for me.  I’m frankly surprised this does not happen more often. Fraud and identity theft are very real concerns for stores.  A cashier is not going to be able to tell the difference between a person MS’ing versus a fraudster.  It will all look suspicious to them.  Tahsir wrote about the experience and it is worth reading.  Best take away from the story is to be honest about what you are doing.  Tahsir’s honesty saved him.

The last thing I want to touch on is the low level terror that internet chatter seems to suggest has set in on our hobby. As I read comments on blogs, tweets, bloggers answering emails, etc…it seems clear that people are worried.  The state of panic I think is best summed up by this tweet.

This also leads me to  a comment that was left on a post over at TBB. Here is the comment:

How would you make a 10K 3 month spend, if Amex disqualifies VGC and “cash equivalents”? Would you go so far as paying 2.5% for one of those rent/mortgage paying services ?

TBB’s advice was spot on and I want to repeat it here.  If you can’t meet the minimum spend don’t get the card.  How novel?

keep-calm-and-churn-on-4People need to adjust their expectations.  With BB/Serve gone the reality is that minimum spends are going to be harder to meet.  I don’t feel comfortable doing thousands of dollars in MOs.  As a result my options are limited.  This is why I got into reselling last year.  I wanted to learn a new way to meet minimum spends, and make some money while I was at it.  I had a gut feeling the gravy train was coming to an end so I adapted.

Adjust to the new reality, adjust your expectations, keep calm and churn on, but don’t be stupid about it.  My last credit card churn was 6 cards and $22,000 in 3 months.  For now, I can’t do that again.  I hope I will get good enough at reselling to eventually be back at that level, but for now it is time to slow things down.  Figure out what is realistic for you and do that.  Maybe that means one or two cards at a time.  Remember pigs get fat and hogs get slaughtered.

Now back to our regular scheduled programming.

4 Comments on "KEEP CALM AND CHURN ON"

  1. johnthewanderer | February 5, 2016 at 6:06 am | Reply

    Interesting perspective on this. I have not gone the money order route. I just try to do everyday spend on the card. What type of items are you buying and selling? Do you use OfferUp to sell them locally or do you ship and sell via ebay or other sites?

    • I am reselling electronics right now. I keep looking to branch out but because I am still doing this on a small scale I am looking for items with high profit margins, so for now electronics work best for me. I almost exclusively use FBA. I’ve tried some other things but so far FBA has been the best for me.

  2. FYI money orders are absolutely treated as cash per the rules. Here is a link to the IRS website describing it and a quote. https://www.irs.gov/irm/part4/irm_04-026-013.html

    4.26.13.3.1 (01-07-2016)
    Identification of Potentially Structured Transactions in a Title 26 Form 8300 Examination

    The preplan for a Title 26 Form 8300 examination must include steps to identify transactions which may have been structured to avoid the reporting requirements of 26 USC 6050I.

    Whether a transaction is structured is determined by the definition of “cash” received. The regulations (see 26 CFR 1.6050I-1(c)) define cash to include monetary instruments (such as cashier’s checks, bank drafts, traveler’s checks, or money orders) having a face value of not more than $10,000 when received in a designated reporting transaction (see IRM 4.26.10 and section 1.6050I-1(c)(1)(B)(1)), or when received in any transaction in which the recipient knows the instrument is being used to avoid reporting of the transaction under section 6050I (section 1.6050I-1(c)(1)(B)(2)).

Leave a comment

Your email address will not be published.


*