The use of refundable store value cards for manufactured spending

[miklcct]

In Hong Kong, there was a method for people to use Octopus cards to generate cash back without cost, due to the following facts:

1. It is possible to load value into the Octopus card using a credit card which provides cash back.
2. It is possible to fully refund the value, including the deposit, of the Octopus card.

Normally, topping up an Octopus card is only possible by cash, with the exception of the auto top up service which an Octopus card is linked to a credit card (at most 3 Octopus cards can be linked to a credit card), in such cases cash back is given to the card for each time the auto top up is triggered and card issuers actively promote this by offering rewards for people to apply.

The Octopus card company offers an app with a digital wallet feature, which can be registered with a mobile number, used to make payments and transfers, and, the most importantly, to load values to / from Octopus cards using NFC. The intended purpose of this is to transfer values between different Octopus cards, and there is a monthly limit on this feature.

Some people than started using this feature by registering multiple accounts using multiple mobile phone numbers, applying as many credit cards which offered cash back as possible and link the maximum number of Octopus cards to the credit cards (earning welcome rewards in the process), then repeat the following process:

1. Buy a stack of Octopus cards at a train station
2. Transfer value from the linked Octopus cards to the wallet, which triggers the auto top-up, earning cashback
3. Transfer value from the wallet to the Octopus cards just bought from the train station
4. Return the Octopus cards to the station for a full refund, and pay back the credit card balance using that cash

It could be observed that people were going to the station customer service counter with a stack of Octopus cards to be refunded. The Octopus card company would lose money in the process because a commission is paid to the bank for the auto top up feature, which is why the bank actively promotes it.

In order to combat this, the Octopus card company changed a few rules for refunding cards, that a fee would be deducted from the refund unless the card was surrendered after 3 months of the purchase, and it had been used for travel. However, this didn't stop the act as one could just buy the card, use it for travel, put into the drawer for 3 months before doing steps 2 to 4 above. The act has finally been stopped by requiring accounts to be named, limited to one per person, in order to use this feature (that anonymous wallet accounts can't be used for transferring), and the number of cards to be used for transferring to the wallet limited.

In London, before 2020, Oyster cards were fully refundable. Were people doing this to earn cashback as well? Did you see people bringing a stack of Oyster cards to a station for refund?

Elsewhere in the world, is this practice widespread as well?

 

[skyhigh]

In London, before 2020, Oyster cards were fully refundable. Were people doing this to earn cashback as well? Did you see people bringing a stack of Oyster cards to a station for refund?

I really doubt it.

 

[AlterEgo]

Credit card companies cut down on manufactured spend in the UK several years ago. There are now very few opportunities to do this.

 

[ABB125]

Does "manufactured spending" work if you ask for a large amount of cash every time you go shopping, then pay it in to the bank account you'll use to pay the credit card bill?

 

[miklcct]

Does "manufactured spending" work if you ask for a large amount of cash every time you go shopping, then pay it in to the bank account you'll use to pay the credit card bill?

Doesn't this facility only exist when paying by debit card?

 

[RJ]

Credit card companies cut down on manufactured spend in the UK several years ago. There are now very few opportunities to do this.

There are still loads of ways, depending on how you do things. A lot of the easy stuff is a thing of the past but out of the box thinking yields results.

Does "manufactured spending" work if you ask for a large amount of cash every time you go shopping, then pay it in to the bank account you'll use to pay the credit card bill?

You can only really get till cashback from debit cards - even if you can earn rewards on this type of activity, a limit of £50 means the amount generated will barely be worthwhile.

In London, before 2020, Oyster cards were fully refundable. Were people doing this to earn cashback as well? Did you see people bringing a stack of Oyster cards to a station for refund?

Elsewhere in the world, is this practice widespread as well?

Oyster is not really a viable way to manufacture spend - the maximum balance per card isn't very high and TfL will manually scrutinise excessive refund requests. Money launderers use the same methods as MSers, albeit for a different (illegal) purpose so volumes permitted for this sort of thing will always be low.