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I see a potential for abuse - if the cash back on certain credit cards exceeds the max rate, people could cycle money through for profit. e.g. I had a 2% cash

I see a potential for abuse - if the cash back on certain credit cards exceeds the max rate, people could cycle money through for profit. e.g. I had a 2% cash back credit card Cashback: 21k/mo * 2%=$420 Fees: $275 Upside potential: $145/mo Not much profit possible, but with multiple accounts at roughly 2 $400 swipes per day per account, I would watch out for something like this.

ConstantineXVI 14y ago
I'd think loads of $400 transactions from the same card to the same merchant would get both Square and your CC issuer's attention rather quickly.
benmanns 14y ago
In this case, who makes up the difference? I would assume that it would be on Square's end to make up the 2%-1.32% difference, so it's likely that Square would be the one to terminate your account. However, I do wonder what kind of perks you get from a credit card company if you could spend $250k/year with them.
- wmf 14y ago
  You get these perks: http://en.wikipedia.org/wiki/Centurion_Card http://en.wikipedia.org/wiki/Centurion_Card
RandallBrown 14y ago
My card limits my cash back to something like $300 dollars per year. If there is a card that lets you get close to $5000 dollars cash back a year, I'd LOVE to hear about it.
- chime 14y ago
  I don't think my CapitalOne credit card has any limit. I've gotten over $1k cash back.
dangrossman 14y ago
I don't know about Square's terms, but I've always been told by merchant account providers that charging your own card is one of those things that will get your account terminated immediately if they become aware of it.
- philip1209 14y ago
  You can hide it with LLCs. I had a roommate sophomore year of college get investigated by the FBI for running a similar scheme.
  - dangrossman 14y ago
    You might get away with it longer doing that, but the repercussions should you be caught wouldn't be lessened any by using an LLC. The real risk you're taking when abusing a merchant account is being added to the TMF (Terminated Merchant File) and MATCH (Member Alert to Control High-Risk Merchants) lists. These are essentially blacklists for the payment card industry that all acquiring banks and processors check new applications against. The reason the risk is not lessened is that when a merchant is added to these lists, both the company and all the company's principals' names and social security numbers are added. The list of a company's principals is something merchant account providers ask for on new account applications for this reason. Basically, if you do something so egregious as to be added to these lists, you'll never be able to have an ownership stake in any business accepting credit cards for the rest of your life. The only way to get approved in the future would be to commit a new act of fraud to avoid the new acquirer from knowing a blacklisted person is a principal of the new company. I don't know about you, but for any kind of entrepreneur, the prospect of a lifelong ban like that would be pretty terrifying.
    - ridersstorm 14y ago
      there was a planet money podcast not too long ago that went into how incredibly easy it is to create a foreign corporation with absolutely no documentation whatsoever, and that it is actually easier in certain parts of the united states. i'm not going to give you a link, if you want it, find it yourself you lazy piece of shit.
persona 14y ago
It won't be worth the trouble as you'd have that amount reported as income to the IRS http://help.squareup.com/customer/portal/articles/21709-does-square-report-to-the-irs- http://help.squareup.com/customer/portal/articles/21709-does...

ConstantineXVI 14y ago

I'd think loads of $400 transactions from the same card to the same merchant would get both Square and your CC issuer's attention rather quickly.

benmanns 14y ago

In this case, who makes up the difference? I would assume that it would be on Square's end to make up the 2%-1.32% difference, so it's likely that Square would be the one to terminate your account. However, I do wonder what kind of perks you get from a credit card company if you could spend $250k/year with them.

wmf 14y ago
You get these perks: http://en.wikipedia.org/wiki/Centurion_Card http://en.wikipedia.org/wiki/Centurion_Card

RandallBrown 14y ago

My card limits my cash back to something like $300 dollars per year. If there is a card that lets you get close to $5000 dollars cash back a year, I'd LOVE to hear about it.

chime 14y ago
I don't think my CapitalOne credit card has any limit. I've gotten over $1k cash back.

dangrossman 14y ago

I don't know about Square's terms, but I've always been told by merchant account providers that charging your own card is one of those things that will get your account terminated immediately if they become aware of it.

philip1209 14y ago
You can hide it with LLCs. I had a roommate sophomore year of college get investigated by the FBI for running a similar scheme.
- dangrossman 14y ago
  You might get away with it longer doing that, but the repercussions should you be caught wouldn't be lessened any by using an LLC. The real risk you're taking when abusing a merchant account is being added to the TMF (Terminated Merchant File) and MATCH (Member Alert to Control High-Risk Merchants) lists. These are essentially blacklists for the payment card industry that all acquiring banks and processors check new applications against. The reason the risk is not lessened is that when a merchant is added to these lists, both the company and all the company's principals' names and social security numbers are added. The list of a company's principals is something merchant account providers ask for on new account applications for this reason. Basically, if you do something so egregious as to be added to these lists, you'll never be able to have an ownership stake in any business accepting credit cards for the rest of your life. The only way to get approved in the future would be to commit a new act of fraud to avoid the new acquirer from knowing a blacklisted person is a principal of the new company. I don't know about you, but for any kind of entrepreneur, the prospect of a lifelong ban like that would be pretty terrifying.
  - ridersstorm 14y ago
    there was a planet money podcast not too long ago that went into how incredibly easy it is to create a foreign corporation with absolutely no documentation whatsoever, and that it is actually easier in certain parts of the united states. i'm not going to give you a link, if you want it, find it yourself you lazy piece of shit.

persona 14y ago

It won't be worth the trouble as you'd have that amount reported as income to the IRS http://help.squareup.com/customer/portal/articles/21709-does-square-report-to-the-irs- http://help.squareup.com/customer/portal/articles/21709-does...