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Lol yeah it definitely felt shady. My attorney said it was legal but they could probably bankrupt me with legal fees if they wanted to. I thought of it the same

Lol yeah it definitely felt shady. My attorney said it was legal but they could probably bankrupt me with legal fees if they wanted to. I thought of it the same as any type of reward people like to find ways to take advantage of (miles, cash back, etc) and I just found a loophole that was pretty high friction so kind of off the radar (friction = I had to buy an ATM!).

actionfromafar 4y ago
Did you just cycle the money in the machine, or did the cycle somehow involve taking a bunch of cash, depositing it in your checkings account, getting new cache delivered by courier, put it through the money machine, repeat... or a tighter loop I can't grasp how it would work with your account?
- conductr 4y ago
  It was a lot of logistics with physical cash. But yeah I tried to run it as close to "real" as possible in case I did hit legal issues (isolating the entities, not comingling funds). Also, had to make sure for taxes that the cycled cash wasn't possibly viewed as income to either entity. There were a few optimization steps I found that helped me streamline the logistics but I still was withdrawal-ing cash from the ATM business account daily. To start the cycle over again. I kept a small amount in the consumer accounts. Maybe $300-500. The cash took 2-3 days to do the loop if I recall. And this allowed me to keep do multiple $20 withdrawals each day on each account. It got big enough that I employed someone to sit at the ATM and make transactions. Then I bought 2 more ATMs so they could multitask / reduce idle time during the 1 minute it took for the machine to process and dispense. I stopped it when I realized the numbers were getting kind of big and a few banks had caught on and closed my accounts. Then because of the physical cash, I was worried about getting robbed. I was getting very paranoid about the whole thing and decided to wrap it up. I remember meeting a few times with attorneys during it to get varying opinions. Over time, the advise turned into "we think it's legal, but you should really stop it". There was also another smaller but pretty invisible loophole I found with interchange. I could set the surcharge to $0 and so long as the cardholder bank didn't charge "foreign ATM fees" then I'd make about $0.50 per transaction. Much smaller, but order of magnitude more banks offer this feature versus the surcharge rebate feature. The surcharge and the rebates were line items on the bank statements. So, any person at the bank that looked at my account could see the fees and that it was costing them money. With this hack, there was no line item on my bank accounts (only the amount withdrawn). So it looked like the ATM owner did not benefit at all. But, in the background the ATM owning entity received ~$0.5 per transaction of interchange fee. It sounds stupid, but at the time, my idea was to test this out and then sell a 'get rich quick' style ebook explaining how it works.
  - rcarr 4y ago
    How did you discover these loopholes in the first place? Did you work in the finance industry or an ATM maker or something like that and just figured it out?
    - conductr 4y ago
      Can’t say I remember exactly. No particular experience other than a general knack for spotting loopholes like this. If I remember correctly I had some vague knowledge that basically anyone can own an ATM and set the surcharge as they want. I probably looked into it as a passive income stream at some point (these things had a high growth phase some time ago). Then I think the first time I heard about ATM rebates was on an advert of some sort and the whole thing seemed obvious. So I looked into the fine print and it seemed to check out. I don’t think this was ever a thing until online banks came around during Web 1.0 , traditional banks would charge you a fee for using out of network ATMs (which is still pretty standard), but the online banks resorted to offering surcharge rebates as a way to compete with brick and mortar banks. And also to overcome the obvious pushback of people wanting quick access to their cash. Then smaller banks started offering it as a way to compete with the national banks that have huge ATM networks.
      - xur17 4y ago
        This makes me wonder if there is a way to (legally) give ATM rebates as an ATM operator. Ex: User withdraws $50. Machine charges $5 fee, and gives a $2 in cashback as part of the withdrawal (cash or gift card?)
        conductr 4y ago
        You can do that. It nets to an inflow of $3 for the operator. and the interchange depending on how they’re registered and what their transaction volume is. You could just give them $55 in cash if you want. This is just a net to any profit you’d have left from the surcharge revenue. It was irreversible by practically all measures, so no real risk. The only issue I ever saw cause a reversal is a mechanical vend error. I think the main thing is you have to properly notify the cardholder what shape their outflow will take and that the cash value is the same. At the end of the day, it’s just a vending machine.

actionfromafar 4y ago

Did you just cycle the money in the machine, or did the cycle somehow involve taking a bunch of cash, depositing it in your checkings account, getting new cache delivered by courier, put it through the money machine, repeat... or a tighter loop I can't grasp how it would work with your account?

conductr 4y ago
It was a lot of logistics with physical cash. But yeah I tried to run it as close to "real" as possible in case I did hit legal issues (isolating the entities, not comingling funds). Also, had to make sure for taxes that the cycled cash wasn't possibly viewed as income to either entity. There were a few optimization steps I found that helped me streamline the logistics but I still was withdrawal-ing cash from the ATM business account daily. To start the cycle over again. I kept a small amount in the consumer accounts. Maybe $300-500. The cash took 2-3 days to do the loop if I recall. And this allowed me to keep do multiple $20 withdrawals each day on each account. It got big enough that I employed someone to sit at the ATM and make transactions. Then I bought 2 more ATMs so they could multitask / reduce idle time during the 1 minute it took for the machine to process and dispense. I stopped it when I realized the numbers were getting kind of big and a few banks had caught on and closed my accounts. Then because of the physical cash, I was worried about getting robbed. I was getting very paranoid about the whole thing and decided to wrap it up. I remember meeting a few times with attorneys during it to get varying opinions. Over time, the advise turned into "we think it's legal, but you should really stop it". There was also another smaller but pretty invisible loophole I found with interchange. I could set the surcharge to $0 and so long as the cardholder bank didn't charge "foreign ATM fees" then I'd make about $0.50 per transaction. Much smaller, but order of magnitude more banks offer this feature versus the surcharge rebate feature. The surcharge and the rebates were line items on the bank statements. So, any person at the bank that looked at my account could see the fees and that it was costing them money. With this hack, there was no line item on my bank accounts (only the amount withdrawn). So it looked like the ATM owner did not benefit at all. But, in the background the ATM owning entity received ~$0.5 per transaction of interchange fee. It sounds stupid, but at the time, my idea was to test this out and then sell a 'get rich quick' style ebook explaining how it works.
- rcarr 4y ago
  How did you discover these loopholes in the first place? Did you work in the finance industry or an ATM maker or something like that and just figured it out?
  - conductr 4y ago
    Can’t say I remember exactly. No particular experience other than a general knack for spotting loopholes like this. If I remember correctly I had some vague knowledge that basically anyone can own an ATM and set the surcharge as they want. I probably looked into it as a passive income stream at some point (these things had a high growth phase some time ago). Then I think the first time I heard about ATM rebates was on an advert of some sort and the whole thing seemed obvious. So I looked into the fine print and it seemed to check out. I don’t think this was ever a thing until online banks came around during Web 1.0 , traditional banks would charge you a fee for using out of network ATMs (which is still pretty standard), but the online banks resorted to offering surcharge rebates as a way to compete with brick and mortar banks. And also to overcome the obvious pushback of people wanting quick access to their cash. Then smaller banks started offering it as a way to compete with the national banks that have huge ATM networks.
    - xur17 4y ago
      This makes me wonder if there is a way to (legally) give ATM rebates as an ATM operator. Ex: User withdraws $50. Machine charges $5 fee, and gives a $2 in cashback as part of the withdrawal (cash or gift card?)
      - conductr 4y ago
        You can do that. It nets to an inflow of $3 for the operator. and the interchange depending on how they’re registered and what their transaction volume is. You could just give them $55 in cash if you want. This is just a net to any profit you’d have left from the surcharge revenue. It was irreversible by practically all measures, so no real risk. The only issue I ever saw cause a reversal is a mechanical vend error. I think the main thing is you have to properly notify the cardholder what shape their outflow will take and that the cash value is the same. At the end of the day, it’s just a vending machine.