New ideas of balance transfer, does it work?

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New ideas of balance transfer, does it work?

Postby yoaaaaa » Thu Aug 05, 2010 1:55 pm

Idea 1: have a friend sells something generic, for example, a cellphone wall charger for $1000. Clearly no fool would buy it but you. Once your friend receives the money, transfer it back to your paypal account. The drawback is that both ebay and paypal charges commission fee.

Idea 2: Have a friend set up a paypal account for donation, of course, you are going to donate some money, then he will give money back to you. The cost is cheaper than transfer from a credit card to another one and it doesn't hurt your credit score.

Does it work? Is a balance transfer using Paypal considered fraud?

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Postby DoingHomework » Fri Aug 06, 2010 5:53 pm

Depending on the details of how you implemented either of these it would probably be perfectly legal. But you would almost certainly find that the fees eat up any benefit.

I accept credit cards as part of a business and also take paypal. In the first case the commissions YOU pay might be less than a balance transfer fee but your friend will also pay commission so he would be subsidizing you. Your friend will also have to pay taxes on the profits he made from selling you the charger. Let's see, say the charger us $20 to him - that's $980 profit with taxes of about $294. Add in the $20 commission he paid and you get a total fee of about 32.5%. That is higher than balance tranfers.

Of course you and your friend can evade taxes and be criminals. You'll eventually get caught. Paypal and credit card companies ll report to the IRS.

There are people that play these little games all the time, usually to rack up reward points. It's often perfectly legal. It just costs someone commission. Business often "play along" because they profit in ways that are not completely obvious.

I'm not sure how donations work but I think you would run into similar fees AND tax problems.

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