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There Are More Flavors Than Vanilla: Maximizing Miles and Points With Green Dot & Paypal

by on November 26, 2012 · 68 comments

in American Express, Bluebird, Chase, Citi, Prepaid/ Reloads

Vanilla Reload cards can be difficult to find these days- and even when you do, some stores may mandate that you can only pay in cash. However, that doesn’t mean that you still can’t reap miles and points with the purchase of other pre-paid and reload able cards that allow other means of paying bills and withdrawing cash.

Green Dot offers a pre-paid and reload card for $4.95 (max load of $500), both of which can be loaded directly into your PayPal account. Update: Green Dot packs can also be uploaded to your Amex Serve account, which can also be linked to your checking account. I had absolutely no issues purchasing $500 versions of both products with my Chase Freedom and Starwood American Express card at a Manhattan RiteAid this past weekend.

Green Dot cards at a Manhattan Rite Aid

Once I got home, I went to Moneypak.com, which displays the option to “Use your MoneyPak to add money to your PayPal account for instant online spending power”.
I’ve been a PayPal user for over 10 years and have a merchant account, so I know that I can transfer money to my checking account for free. I clicked the button and it prompted me to sign into PayPal and once verified it showed that my maximum monthly load amount was $4,000- sounds good to me! It then asked for my MoneyPak number and once I entered the first card info, it showed immediately in my PayPal balance. I actually had a small existing balance that I’d been meaning to transfer to my checking account, so I processed a checking account transfer which went off without a hitch.

I then loaded my last $500 into my PayPal account and initiated a final $500 transfer to my checking account- no issues, whatsoever. I looked throughout the T&C and nowhere did it say that transferring to PayPal and then onto your checking account was against the rules. Sure PayPal wants me to use their service to pay bills and other vendors (so they can generate processing fees), but I’ve given them enough money over the years and my account is “legit” enough, where I felt like this small withdrawal wouldn’t raise a red flag.

However, the following morning I got an email from PayPal compliance stating:
“At PayPal we regularly screen activity in our system. A recent review of activity on your PayPal Account shows that you have been using the Green Dot MoneyPak to deposit cash and then withdraw it. Unfortunately, this activity is not acceptable use of the MoneyPak and we must request that you discontinue this activity.

The Green Dot MoneyPak was designed for the purpose of depositing cash to your PayPal account for retail purchases. Continued use of the Green Dot MoneyPaks with PayPal for the purposes of cash withdrawals will lead to limitations on or closure of your PayPal Account.

We apologize for any confusion regarding intended purposes of this new feature. Please feel free to contact us if you have any further questions.” 

Fair enough that they sent me a warning without shutting down my account. Now that I know they are sensitive to this activity, I’ll make sure to mix in a lot more activity, such as bill payment and payment transfers to people who I owe money so I don’t trigger any more alerts. Per the PayPal fee schedule, sending money to other people within the US is free when you use your PayPal or checking account to fund the transaction.

So while this isn’t a perfect solution and I clearly prefer to use Vanilla Reloads purchased with Amex Prepaid cards that I buy at certain office supply retailers for nice category bonuses, it’s another way to meet minimum spend and generate miles for less than a cent per piece.

Take for example the $500 card I bought with my Freedom card- since I have it linked up to Chase Exclusives Checking program, I get a 10% bonus and 10 points per transaction. The $504.95 purchase netted me 566 Ultimate Rewards points (505 base + 51 + 10) for $4.95 or just under .9 cents a piece. If I can max out the $4,000 a month in loading to my PayPal account, that would mean 54,336 Ultimate Rewards points a year for $475.20. I generally value my Ultimate Rewards points higher than any other currency at about 2 cents a piece, so  I’m getting more than twice the value with this method. If I can purchase Amex Prepaid cards at Office Depot and then use those cards to purchase Green Dots, my earning increases drastically.

The Hilton Amex / Surpass: are ideal for drug store expenditures, since they offer 6 points per dollar spent at drug stores. If you hit $40,000 in spend on the Surpass card, you also get Hilton Diamond Status, so $48,000 in spend would generate 288,000 Hilton points and Diamond status for $475.20. Pretty amazing deal.

My pending Amex transaction- not listed as a cash advance

There are risks to this method (getting your PayPal account shut down), but great upsides as well. I’d highly recommend mixing up your activity to not draw red flags and start slow to test the waters. Also, make sure your purchases don’t hit as cash advances- mine have not with Chase and American Express, but I haven’t tested with all credit card companies, so start slow before diving in. Think through your strategy to make sure it makes sense- if you are just going to use pre-paid cards for normal purchases, getting hit with the $4.95 fee is unnecessary- just use your points earning credit card to make purchases! However, if you can turn spend like rent/mortgage/payments owed to other into points-generating activity and you can get more than 1 cent per point/mile, then this strategy could be very lucrative.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author.s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through the credit card issuer Affiliate Program.

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  • http://twitter.com/WanderngAramean Wandering Aramean

    Don’t undersell the risk of getting the account shut down. Should that happen they will potentially seize the funds in it at the time. And shifting a few dollars here and there around to some people plus paying yourself out the large cash volumes is unlikely to hide it sufficiently.

    Involving PayPal is just inviting trouble.

  • http://twitter.com/Mileage_Update Mileage Update

    I gotta agree with WA. Where is the upside to this if Paypal is gonna shut you down after 1 transfer?

  • Jon

    I agree. I have read many horror stories of PayPal accounts being frozen (including any funds in it at the time). Though clearly TPG is a risk taker, so it could work out for him if he’s careful. But I personally wouldn’t advocate this type of activity.

  • http://twitter.com/Peachfront Peach Front

    If your Paypal account is shut down, you have lost a lot of earning ability because too many small customers/buyers go through Paypal. Plus…you even lose buying opportunities. I am not the only seller out there who will no longer accept buyers who don’t use Paypal. I figure if Paypal thinks they’re a problem customer, why do I want to risk it? I don’t think Paypal is allowed to take your money and seize the funds — this would give them too big an incentive to close accounts “by mistake” and they would actually profit by accusing people of money laundering — but if it *looks* like money laundering, then presumably there is the risk that the money in the account might forfeit to the federal government. I have heard rumors of money being tied up for months while it was investigated.

    At the end of the day, there is no real easily explained reason why a middle class employed person with a job who can get free checking/bill pay would be using services like Green Dot. It unavoidably looks like you’re involved in wrong-doing, because you’re choosing to pay a too-high fee ($5 per $500 REALLY?) for something the middle class person gets for free. Predatory fees are meant to prey on the poor who have no choice. ..and, I suppose, to the money launderer who figures the fees are the price of doing business. You do realize that you can ACH money *from* your local checking account into Paypal for free? There is just no easily explained common sense reason for you to use Green Dot, Paypal, etcetera. No wonder your account was flagged right away…

    I personally see no upside to the Paypal technique suggested here. EBay and Paypal are too useful for earning actual cold hard cash to risk your account for the doubtful privilege of paying 1 cent a mile for frequent flying miles.

  • Umut

    you can add moneypak funds into your SERVE account without any problem, then withdraw it to your checking account with no fees. I have been doing that for a while

    @PAYPAL: STAY AWAY FROM PAYPAL. Short story long I used to have a store on ebay 2 yrs ago and they shut down my account and froze my funds without any explanation for 6 months. They are horrible company. I WOULD NEVER EVER DO ANYTHING WITH PAYPAL.

  • Scott H

    This is terrible advice. Using PayPal is a bad idea. I can’t believe you are telling your readers to use it even after you did it once and got sent a warning email.

  • SgFm

    If I buy an Amex gift card at OD and use it to buy a Vanilla RL at CVS won’t I need to use a second form of payment for the $3.95 purchase price @ CVS?

  • http://profile.yahoo.com/3CTW3Z2HMUQF5TPFSZZ3GWRYIQ BBCD

    The upside is that TPG gets a lot of CC referrals from his unsuspecting readers. Very classy, Brian – downplaying the risk of Paypal freezing funds for months at a time.

    Also good luck trying to mix in legit activity. Paypal is smarter than the travel bloggers.

  • PointsSurfer

    I know Bluebird does not mention MoneyPak as a funding source, but since technically it is a prepaid debit card, has anyone tried to see what happens if you try to use a MoneyPak to load Bluebird on the Green Dot site?

  • thepointsguy

    Paypal isn’t going to steal your money. I wasn’t underselling the account shutdown risk considering I pasted the email I got. People can think for themselves how they want to approach this- I just laid out my experience.

  • thepointsguy

    I tried and it did not with with Bluebird..sadly

  • thepointsguy

    Just purchase a $496.05 Vanilla Reload so the $3.95 fee brings the total purchase price to $500

  • thepointsguy

    I’m not telling anyone to do anything. I’m simply outlining my experience and adults can think for themselves how they want to approach it.

  • thepointsguy

    How did I downsize the risk of getting shut down when I INCLUDED the email from Paypal compliance? If you use Greendot and Paypal for more than withdrawals, there’s a good chance this could be lucrative, but I’ll let people make that decision for themselves.

  • thepointsguy

    I didn’t get shut down after 1 transfer. After 2 very simple loads and withdraws I was given a warning. In the future I won’t do what they warned me about (loading and withdrawing instantly)

  • JA

    What is a SERVE account?

  • thepointsguy

    An Amex pre-paid product https://www.serve.com/

  • TravelBloggerBuzz

    I avoid these companies: Netspend, Paypal, Cartera, Wyndham ( I am sure I am missing a few) due to “prior severe experiences”. Not worth the hassle imho. If you did not have a Paypal merchant acccount, I think u may not have gotten the warning!
    I never withdraw money out of BB back to my checking account or use ATM. I mix my activities by loading & paying legitimate bills online and by check AND use the BB card for purchases.
    I have some figures on the prepaid card market which I will post on my blog soon. Since you are so tight with Chase…are they coming up with their own prepaid card??

  • Jason

    Brian, you’re advocating a policy that’s clearly against their rules, and people attempting this WILL get caught and shut down. “Mixing in other types of activity” won’t help as it says in the email you received: “Continued use of the Green Dot MoneyPaks with PayPal *for the purposes of cash withdrawals* will lead to limitations on or closure of your PayPal Account.” In other words, any money you load with MoneyPak (according to this wording) has to be used for online purchases and can’t be withdrawn without catching their eye, IMO.

    PayPal isn’t a company to mess around with, as many other commenters have posted. Their customer service is the most opaque I have ever dealt with.

    Yes, “readers can decide for themselves,” but any who attempt this will get shut down. It’s not worth it.

    This was a waste of a blog post because the method described will not work for anyone more than one time.

  • AP

    Not ideal, but at least TPG has provided full disclosure. Props on providing the warning email from Paypal.
    If you try this with Swerve, will someone report how the withdrawal from Swerve to your checking works out? Any similar type of warning?

  • Choiklu

    does paypal discourage loading with greendot and then pay bills even if no plan of cash withdraw ?

  • thepointsguy

    That’s fine- they just discourage straight loading and cash withdrawing

  • bigr3dbears

    Add Jetsetter to the mix.

  • Marty Garcia

    Just a thought — couldn’t someone fund their account with MoneyPak and then just send the money to a friend and then have the friend withdrawal the money and give it back to you?

  • JustAGuy

    I am curious. What’s the economics behind reload/ gift card sales????

    Clearly, if those sales were encountering the typical 2-3% transaction fee, plus a $3.95 fee, Chase, Citi, Amex, etc., would all be lined-up behind us in support! And the sellers (drugstores, supermarkets, etc.) would be holding the bag. And dropping the offerings like a hot potato…

    So, how does it work fee-wise. No speculations, just the facts!!!!!!!!

  • MB

    Unfortunately serve.com will not allow you to open an account using the same phone number if you used it to sign up with Bluebird. In hindsight it appears that going the SERVE route using Moneypak (more widely available) is much better than going the Vanilla RL route using Bluebird. I suppose you can just put in a bogus phone number to open the account but who knows.

  • CGCG

    I wonder how far/deep PayPal will monitor the Green Dot Money Pak deposits? If you fund your PayPal account with Green Dot and then transfer money from you to person B, I wonder if person B could withdraw the money to their checking account. Person B should not be obligated to only use the money for eBay purchases since they would have no knowledge (theoretically) of where the money originally came from.

  • Ace

    How many times do people have to say stay away from paypal? for years there was a website paypalisthedevil, its been taken down/renamed, they wil tie up your money for as long as they effing want to. DO NOT EFF WITH PAYPAL! You have no recourse with anyone that can help either.

  • Justin

    You’ve obviously never dealt with PayPal “customer service.”

  • http://www.facebook.com/profile.php?id=3431439 JP Cross

    I bought Vanilla visas at Office Depot in Berkeley on my ink with no issues (5x$500). Tried finding a CVS or Walgreens today to exchange for vanilla reload. Visited 3 in San Francisco today:
    1. Walgreens on Market and Van Ness had reload but insisted cash only
    2. Walgreens on Gough had signs indicating cash only for “debit cards” but I didn’t have the Vanilla reloads
    3. CVS on Van Ness was the same experience, no vanilla reloads, “cash only” signs

    Thinking this deal is dead in SF, or at least probably not worth my time. I might just used my Visa Vanillas for regular purchases until they run out (went to whole foods, lunch, BMW repair tomorrow).

  • David

    All Green Dot cards state on the back of the packaging that you must pay for the card using cash. Tried to purchase and was told the same at checkout.

  • thepointsguy

    Not true. 100% purchased both types of green dot cards at rite aid and had no issues whatsoever. It does not state the cash requirement on my cards so maybe you were looking at a different item

  • David

    I went to a Ralphs supermarket in Los Angeles and I am positive that I was looking at the Green Dot card.

  • adambadam

    I was wondering when a blog was going to pick this up. RiteAid near by house currently has GreenDot for free :) (i.e. zero service fee).

    I have been doing this for the last week or so. I also got the email from PayPal “Lori” after they shut down my account and put all sorts of restrictions on it. I think the game is over.

  • relative newbie

    Why take the risk with Paypal, and not just use the Pay Bill tool on the MoneyPak website to pay the credit card company directly, and skip a whole step or two? I am going to try to buy a Moneypak and pay the credit card company directly (or maybe buy two with two cc’s and pay off the other one) tomorrow, and reason this shouldn’t work?

  • adambadam

    Any of the CCs I tried were not in their network of accepted banks

  • Fsagfdsgfdsg

    I’d pay extra money not to have to deal with paypal… they can shut you down and hold your money hostage for months

    http://lmgtfy.com/?q=paypal+froze+my+money

  • Sam

    TPG readers can think for themselves. The risks are clearly laid out in this interesting and fully legal point-yielding strategy.

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  • MB

    Exact same thing happened to me at CVS moments ago in San Francisco. Cash accepted only, no credit cards.

  • MB

    It’s the same card. The back of the card doesn’t “state” that only cash is accepted, but it has an illustration of a pile of cash + the green dot card = Moneypak. The CVS computers only accept cash for Moneypak cards.

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  • Azriel

    What about loading Paypal with Greendots and paying people that you “owe money to” for various things, like rent or consulting services?

  • thepointsguy

    Should work fine.. Per the email they are focused on people withdrawing to their own bank accounts so if you use for normal bill pay and paying people you owe, I don’t think you’ll have an issue

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  • PointChaser

    MB, the RiteAid in downtown Oakland let’s you buy $0 fee Greendot MoneyPaks with a debit card. You’re not earning as many miles, but it’s still something

  • AceTracer

    PayPal has done exactly that to me on numerous occasions. They froze one of my accounts for years, and there was one refund issue that netted them over $50 of “my” money. I use that word in quotes because PayPal doesn’t really see any money in their accounts as ours.

    The problem is that the amount of time and money necessary to fight them on this isn’t worth it, and they know that. I spent a cumulative eight hours on the phone one time trying to get them to fix that last issue to no avail.

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  • disqust101

    PayPal shuts your account down without ANY warning. Like you, I bought some reloads (PayPal branded) and loaded onto my PP account – after I put thru ~$3K, I recd an email where they locked my account – and asked for more documentation. I complied but they closed my account anyway (this activity was the only “non standard” activity I had ever done on my PP account). They went another step and reversed my last $500 transfer – just to f me apparently. Now have 180 day hold on my money…

    This may work for the occasional $500 load, but there is no way in H you will ever make this an ongoing thing and max out $4K a month…

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  • cholcobo3

    Uhhh… So at best you’re losing 1% on the moneypak, more when you consider fuel and time to go to a place that sells them, and then the risk of embarrassing yourself by seeing somebody you know while holding a product designed for black people who can’t do math. thepointsguy, maybe you should take a few remedial math classes and learn how to use Microsoft excel. Are you that stupid or having a stroke?

  • cholcobo3

    $4000 / $500 max = 8 moneypack transactions. 8 * 12 months = 96 moneypack transactions. $4.95 rounded to $5 (since thepointsguy apparently can’t math) * 96 moneypack transactions per year = $480. How much was he going to get for maxing out the $4,000 a month? That’s right. $475.20. Pretty amazing deal. You act like a retard for a whole year and you’re rewarded with a LOSS of $4.80 and frozen accounts and maybe even a criminal investigation. Bravo thepointsguy. There are a lot of idiots on the internet but you have a domain name and publish articles. Oh. My. God.

  • Stimpsonjkatz

    God you are an idiot. Learn to read.R-E-A-D.

    He pays $475.20 (96 transactions * 4.95 fee = 475.20).
    He gets $1086 of Chase Ultimate rewards points.

    You are bad at both math and reading.

  • cholcobo3

    hahahahaha you’re wrong. I think you should take your own advice hombre.

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  • Jeremiah Johnson

    What happens if you withdraw the money from your PayPal account with PayPal debit card at an ATM?

  • Jeremiah Johnson

    Or as part of a debit transaction?

  • Ryan

    “…risk of embarrassing yourself by seeing somebody you know while holding a product designed for black people who can’t do math.”

    Racist pig. You must be one of those baggers aren’t ya? Still pissed that a black president is running “your” country? Keep drinking that tea!

  • cholcobo3

    Ryan, the only thing more satisfying than being right is watching a loser like you get her pubes tied in a knot over it. lllolooooool. thanks for making my day. :D

  • ben

    Brian, where in Manhattan did you buy the MoneyPaks with a credit card? I have gone to a couple and all of them required cash payment only. Thanks.

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  • Dontfwitme

    I don’t know why everybody is hating on you pointsguy. This was just an observation and experience you had and shared and frankly it was quite helpful. Yes, everyone on this post is right. Don’t F with Paypal. You have little recourse. Some people on this blog don’t understand that you maximize buy potential and convert it into rewards/points. That’s the purpose of this blog and website. Not that black people can’t do math or that you’re an idiot for spending so much money and wasting it. If they did the math and realize this site/blog is for making money/earing points, then they wouldn’t be so ignorant and full of hate. Idiots! Keep doin’ what you do Pointsguy.

  • marathon man

    With respects to the Paypal message you received comes a bit of confusion. I got this message but also got a chance to speak live with someone at Paypal who eventually put me through to a higher up on the matter. There is NOTHING in the T&Cs preventing you from doing this activity and so I contested their telling me it wasn’t the intent of the product/service and took them to task on it with vigor. But what the higher up said to me was astounding: “Well sir we cant be expected to put EVERYTHING into the terms!” I was like, oh yes you can and you must! What would a judge say if we were in court about this?! With that, he cordially bowed out and my account, which had been frozen for a day, was suddenly active again. When my wife got the email version of the message you have above, she wrote back asking where it was stated in the terms and they never bothered her again. Needless to say they haven’t bothered either of us but what we do is simply stagger the loads and wait. We then give Paypal a week to hold onto our money and then WD it. This seems to work–so far. I have been successful with it for at least a year and my wife for maybe 6-7 months. We load anywhere between $1k and $4k MP each per month, $4k being the max.

  • ericdabbs

    Sorry dude but your logic is off and Stimpsonjkatz is correct. Your argument for the $480 for the total fees and saying you lose $4.80 is ridiculous. Your math intentionally rounds up the $4.95/card fee to $5.00/card fee so of course it skews the math to say you “lose” money.

    Now about risking your paypal account getting shut down is another thing and that is a legit reason not to do this. In terms of criminal investigation…OHHH please!!! doing this Paypal Cash thing is small fries to the police. There are tons of folks that try to do this and the police should not be wasting time going after these peoples on a criminal level where there are real criminals on the street. Its not like the money is being sent to Swiss bank accounts or some sheltered account. Shutting down their Paypal account which by the way is tied to your SSN is already punishment enough..

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