Help, my Cardcash gift card is bogus!

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Veronica Wittmann buys a $100 gift certificate through a company called Cardcash. Then the money disappears. What happened?

Question: I recently purchased a $100 gift card on JetBlue through a company called Cardcash.com. I used my credit card to make the purchase.

The next day, I contacted JetBlue, and it confirmed the balance. I also merged two gift cards into the same account, so I had a new balance of $117.

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A few weeks later, when I tried to use the new gift card to purchase a ticket on the JetBlue website, I discovered I only had $17 in the account — the $100 was missing.

I immediately called JetBlue. A representative was very helpful and researched the above gift card activities. I was then told that due to a “dispute,” the $100 had been removed by corporate. I contacted Cardcash by email, but it never answered. I called Cardcash and a representative told me that the warranty on my card had expired, so they wouldn’t offer any reimbursement.

Cardcash won’t help, and JetBlue refused to refund the $100 because it claims there was fraudulent activity on the card and because it is not responsible for gift cards purchased from a third party. Can you help me? — Veronica Wittmann, Orlando

Answer: Cardcash.com operates an online secondary gift card marketplace. So the $100 card you purchased was probably originally given to someone else as a gift, and they decided to sell it instead of redeeming it. Here are a few details about how it works.

Then again, maybe something else happened. Perhaps someone used a stolen credit card to buy your $100 card and then tried to launder it through Cardcash? According to the company, it does a rigorous due diligence on its gift cards, and it even offers a 45-day “buyer protection” for purchases made through the site.

The question is, what happens when that 45 days are up? If the $100 card was bogus, and the company catches up to the scam, then you’re basically holding a worthless card.

JetBlue should have spotted the problem sooner and given you and Cardcash a heads-up that there were problems with your card. Instead, both the airline and the website told you, “Too bad, so sad.”

That’s not the response I would have expected. Sure, Cardcash has a 45-day warranty, but you’d think it would be worried about any card that has fraud on it and has passed through its system. Likewise, JetBlue should do more than show you the door.

After you sent me your documentation, I could see a few problems. Some of your communication had been by email, but most of it by phone. There’s no paper trail when you make a phone call, and no way to verify what someone said — or didn’t say.

Also, you waited too long to redeem the cards (remember, you have 45 days, after which all bets are off) and you merged two cards. For some reason, merging two accounts seems to trigger a company’s fraud detection systems, maybe because it looks as if you’re trying to hide something. In the future, I’d keep the accounts separate.

I’m not a fan of gift cards. They are abused by companies and by hackers and in the end, I side with the fraud departments that take a hard line on gift card shenanigans.

After reviewing your options, you decided to dispute your gift card purchase on your credit card. Your bank sided with you and returned the $100.

Who should have fixed this problem?

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103 thoughts on “Help, my Cardcash gift card is bogus!

  1. That’s exactly what happened. Someone bought a card with a stolen credit card and laundered it through cash card. 45 day warranty means nothing if a card holder has 60 days to dispute or report fraudulent activity. Might as well just call the company “CashScam” or “ScamCard”.

  2. The micro-second it looks like I’m getting a run-around, or the company is trying to “run out the clock”, I file the credit card dispute.

  3. I wonder what percentage of re-sold gift cards are fraudulent? I guess it must be low enough for these companies to be able to stay in business, but still…

    That 45-day warranty limit should not apply for fraud. IANAL, but I don’t think there’s any limit (besides the multi-year statute of limitations) on how long you can recover funds from somebody who has sold you stolen property, which these cards certainly are.

    I suppose it could have been worse; he could have promptly spent the card and discovered at checkin for his flight that he owed more money (or, even worse, his ticket had been canceled and he was now going to have to buy a walk-up fare!)

      1. CE Wrote: “Yes, that would have been worse!”

        Izzy had a habit of always saying,
        no matter what the story, “Well, it could have been
        worse!”

        His friends got tired of it, so they decided to
        concoct a story so dreadful that even Izzy couldn’t
        say that it could have been worse.

        They said, “Hey, Izzy! Did you hear about Sam? He
        came home last night, found his wife in the sack
        with Joe, shot them both dead, and then turned the
        gun on himself!”

        Izzy said, “Wow! That’s terrible! But, it could
        have been worse!”

        “HOW could it POSSIBLY have been worse?”

        “Well, if it had happened two days ago, I’d be dead
        now!”

    1. I can understand someone wanting to get cash for a gift card they received for a company they would never shop at. So I am sure a large percentage of the cards available are legitimate. However, I am also sure that the scammers out there have found a way to buy gifts cards fraudulently to sell to these sites. There must be enough money in this or it would not be happening. Could it be that the original purchaser of the gift card found out it was sold and then reported it “stolen” because they were angry the recipient sold it?

      1. Getting a new credit card number seems to be an awful lot of trouble to go through because you are annoyed at a gift-recipient.

        The fraudulent purchase and re-sale of gift cards (or gift card codes) is a pretty common way to take advantage of stolen credit card numbers because you can “cash out” so quickly before anybody wises up.

        1. NO pretty common, you advertise Starbucks gift cards on Craig’s list or some other site and then once the exchange or deal is made then you use the stolen credit card to buy the digital “eCertificate” numbers for the cards and immediately email them to the purchaser. So many people use auto reload with Starbucks, and the fraud doesn’t occur until the time of the sale and exchange, the thief has the money well before the bank even posts the transaction to the card holders account.

          1. My response was to the suggestion that Could it be that the original purchaser of the gift card found out it was sold and then reported it “stolen” because they were angry the recipient sold it?

            I posit that such a scenario is unlikely, nay highly unlikely.

  4. Whoa. I’ve heard of gift cards or gift certificates for brick and mortar stores, of course. And also not-so brick and mortar stores: Itunes, Amazon, etc…

    But *airlines*? You can now get a Jetblue gift card???

    That’s it. Civilization, as we know it, is over.

    1. Whoa. An airline gift card means civilization as we know it is over? What is so wrong with airline gift cards?

      1. “Happy Birthday, pal! You’re X years old, and here’s to X more years, and here’s … an airline gift card.”

        “Sweetheart, you’re the world to me, so to show you how much I care you here’s … an airline gift card.”

        What an excellent way to show someone you care, or how you appreciate them: chipping in to help them to pay for a TSA-administered medical exam, complete with gut-frying X rays, then getting stuffed into a pressurized sardine can, that gets hurled halfway across the world, with your knees up to your chin, trying to fit into your seat space, surrounded by screaming babies, and unwitting carriers of infectious diseases.

          1. Holy cow. I had never heard of that particular website and now I can’t erase it from my mind. Thanks. 😉

        1. I suppose you could say that about any company’s gift card. I got an Olive Garden gift card once. I took it to mean “for everything you did, here’s an opportunity to go eat prepackaged faux-Italian food, microwaved warmed and brought to your table after waiting for 45 minutes to be seated in an understaffed restaurant.”

          1. and served by a diffident clown who ignores you once he takes your initial order and goes off to pay attention to newly-arrived customers. That happened to us about 30 years ago in OG, and I asked the waiter why he was paying so much attention to the newly-seated customers while ignoring us. “Well, I have to take care of my customers!” “And WE AREN’T your customers?” No response. One penny as a tip, and haven’t set foot in the place since then. Pass it often; doesn’t even register on us; it’s like there’s nothing there…….
            Once a restaurant gets on someone’s blacklist, it’s almost impossible to reverse that. See my post above about the cutsie-pie card from another joint which had many strings – they’re on the “don’t go” list as well.

          2. As an Italian, I can’t rightfully go to OG. I was dragged there a few times back in the day, and I did put up a fight, and my worst fears were confirmed.

          3. Yeah, if they ask you “What’s a good Italian restaurant around here?”, I’d bet your answer is “How would I know? It’s my kitchen.” Ha ha!

          4. Well, there are some places I go in NY with Dad. The waiters resemble Luca Brasi. They have gooda stuff. You know what I mean?

          5. That ain’t Italian. That’s run by the Darden group.
            Speaking about real Italian, if you ever get lost near I-84 Farmington CT, stop by Piccolo Arancio. The same family runs a small restaurant about 2 blocks (East) of Fontana di Trevi in Rome, Italy. Been to both locations (no need to write a review). Enjoy!

          6. Thanks for the info. I live in SE Connecticut but will give the restaurant a try. Since I’ve driven out to the Cape for lunch, Farmington isn’t far at all!

          7. For me good Italian means small family run restaurant. Are you far from Pepe’s of New Haven? I live in Stamford and so many folks come to visit for the oil pizza of Colony Grill. Of course it helps that the sausage (De Yulio’s) is made across the street (although I think the city is making them move or something like that). New Haven should have something that will make you happy (except for the high crime).

          8. Wow! THIRTY years ago? What a memory you have! I remember bad service from waitstaff but not from 1984! Shades of George Orwell.

          9. It kinda stands out in the mind, but only when the subject of Olive Garden comes up. Otherwise, it’s forgotten. As I said, I pass the place and don’t notice it – don’t like getting heartburn at dinner. This one was particularly sub-standard; notably so.

        2. We actually get my grandmother and her husband Southwest giftcards every year for Christmas. They use it to help defray the cost of their annual trip to Florida to visit friends who are retired there. They love it and we’re happy to give it.

          1. You can get Disney Resorts and Cruise line gift cards as well, and I haven’t seen but I’ve heard of Sandals Resorts gift cards are a big hit for wedding’s (assuming thats were the bride and groom are going).

      2. The same things that’re wrong with gift cards in general: 1] They are an interest-free loan to the card company, and 2] they are a windfall gift to the company if the holder of the card fails to redeem it. I hate them.

        My daughter-in-law gave us one, and it’s been sitting unused for the better part of a year. She’d given us another one to a restaurant which has nice food, but had so many strings attached to it that I’ll not go back to that restaurant again because of their GREED. You can’t use all the money in the card on one dinner for 2 people unless you buy over-priced unhealthy sugar-loaded desserts and lattes, etc. They got your money, and wanted to ensure 4 visits to their place. They’ve ensured ZERO visits from me. I won’t go back there NO MO! [It occurs to me to let the owner know that, and why. They think they’re being clever; they merely alienate people, and the word spreads.] There’re other places with chow of the same quality, and one is closer to my house to boot! Walking distance, actually – good to walk off the dinner!

        You wanna give a gift? Give a check, give a C-note, take ’em to the fine restaurant in person and pick up the tab. Giving some company money for a gift card reminds me of what my Swiss friend told me about seeing all the gift shops in NYC upon his first visit: “How come there were so many shops selling POISON?”

        1. That sounds like an incredibly restrictive gift card to the restaurant. But since it was a gift and is free money to you (and you like the food) why wouldn’t you at least use the amount you could on a single visit? Isn’t it a rather odd way to punish them for their greed by letting them realize a 100% profit on the cost of the gift card?

          1. I personally hate the gift cards where you can only use a certain amount and/or are required to pay a certain amount on top of it to use them.

            I received a gift like that once from previous employer. I received a $100 gift certificate that was valid for a short list of restaurants. How it worked was that I could only use $25 per visit, but I was required to spend $45 or more before tax and tip per visit to be able to use the card, and it also required that we have 2 guests per visit, and purchase at least one appetizer, two entrees, and one dessert per visit. Drinks could not count towards the $45 minimum. So in order to use this “free” money, I had to spend a minimum of $20 plus tax and tip on $45 out of my own pocket on four separate occasions, so that’s roughly $32.60 per visit, or $130 total, and that is assuming I was able to get a combination that came to exactly $45 while also getting what I actually wanted.

            We normally didn’t go to those restaurants, even if we did we would get two entrees, a glass of wine which doesn’t count, and no desert or appetizer, so we wouldn’t hit the $45. Like Joe S. I didn’t use it. If it cost me minimum of $130 to be able to use my $100 gift card, I would rather leave the “free” money on the table and spend my $130 the way I want to spend it.

          2. Couldn’t use it in one visit by two people, unless you wanted to get your stomach pumped later. Cheesecake after pizza? Can’t eat that much. We did go back and use it up; but no more.

        2. Cash can be used virtually anywhere and for anything. Gift cards restrict the use of the funds to a particular vendor. It is like voluntarily handcuffing yourself for no reason.

          I have identified only one legitimate reason to buy gift card: the vendor will provide greater value on the card than the amount required to buy the card (e.g., my local warehouse club sells a $50 restaurant gift card for $40). In that case, I will consider the discount as a reason to handcuff myself, especially since the risk apparent in this story seems minimal when purchasing the discounted gift card directly from a legitimate warehouse club.

          1. That is a legitimate reason. I also get a gift card when I use the coin sorter. My credit union started charging to use their coin sorter. However my grocery store has one, and they take a 7% commission if I want cash, or the give me a gift card to the grocery store where they take no commission. Since I was going to buy the groceries there anyway, I just get the gift card and use it during the same visit.

          2. That’s a good rate of return, but I still dislike ’em. Those folks are savvy – they are making money off the float, and un-redeemed cards.

      1. Buy it VFR-DIRECT from the airline itself. NEVER get it from some fly-by-night 3rd party of unknown provenance.

        1. I was not suggesting that anyone buy any type of gift card any way except directly from a reputable dealer which is either the company itself or the display t your local grocery or other merchant where they sell and activate the card on the spot.

  5. It appears that Cardcash should have been the one to fix it. Jet blue did exactly as they should, once they detected the fraudulent activity they removed the money from the card. Why should Jetblue contact Cardcash at all? I guess the lesson to be learned is if you want a $100 gift card, pay the $100.

  6. This isn’t the first article here about gift card purchases that went wrong.

    Was saving the few dollars off the total price of the card worth all of the hassle the LW faced? It would not be for me. But then we are talking about travel here. People will do anything to save $5 off the cost of a trip.

    I think the lessons here are a) don’t use the gift card resell sites b) if you do get a gift card spend it immediately.

    1. And c) if you are going to regularly buy resales of gift cards be prepared to write off some percentage because you’re going to get some denied.

      It seems like every case Chris has like this involves multiple cards, so I suspect these are all people who do this regularly. It feels like the online equivalent of buying speakers from some guy in a back alley. Best not to ask too many questions and if somebody questions you about it later on you won’t be too surprised.

  7. This story just reinforces why I won’t purchase “recycled” gift cards. If it isn’t activated when I purchase it, the risk is too large for me.

  8. What does the OP mean when she “bought the card on JetBlue”? Was it from their SkyMall catalog? Catalog product quality may be outside the airline’s area of responsibility, but it has a duty to make sure that nothing in the catalog is an outright scam. That seems to have been what happened here.

    1. Maybe an editing issue? 🙂

      Should read “for JetBlue” or “for use on JetBlue” or something like that.

      Definitely not from the SkyMall catalog.

  9. I won’t focus in the problem, but at the description. LW states:

    A few weeks later, when I tried to use the new gift card

    If she had 45-day warranty, it means she wait at least 6 weeks to use tha card. Sorry, it doesn’t fit as “few weeks later”…

    She used it to gather more sympathy, instead of confessing she forgot / waited a lot to use it. I’m pretty sure Chris would help her anyway, but the white lie bugs me.

    1. In this case it would not have mattered if she used it the same day she received it if the flight wasn’t until later as JetBlue would have cancelled her ticket (or at least asked for the $100) because the gift card was fraudulently obtained.

    2. I agree…there are too many OPs that stretches the truth, embellishes the truth, fail to disclose the whole truth or just outright lie in their stories to Chris…just be honest…honesty is the best policy.

  10. I get these kinds of calls all the time: We will send you a free $100 Visa Gift card, you just need to provide me with a credit card so I can bill you a $7.95 shipping and activation fee.

    India? No, we are located in Phoenix, Arizona, that is also where I was born from.

  11. And this is why I never use secondary gift card exchanges. They are ripe with fraud no matter how safe they try to make them. Yet they are so tempting because you get a $100 gift card for less than $100. Its consumer greed yet again. Who wouldn’t want to pay $80 for $100.

    Here is the scenario. Scammy McScamScam steals a credit card, actually, he stole hundreds, he purchased bulk full swipes in an IRC room. Then he buys $100 gift cards, for simplicity’s sake, lets say 100. They he sells them all through an exchange for say $80 each. They he gets about $70 for every card due to the fees. Scammy McScamScam walks away with a cool $7,000 cash. The credit card victims dispute the fraudulent charges, and the gift card merchant gets tons of charge backs. They now have to have someone go through, and deactivate all of the cards. Then the person who paid $80 for their $100 card gets stuck with no valid card. This created extra work for the credit card company, extra work for the people whose cards were stolen, and extra work for Jet Blue. The exchange is left with their commission and comes out ahead, but this one apparently uses their commissions as insurance that it will be gin for 45 days. The person who purchased the discount is out their cash. So it appears only Scammy McScamScam and the exchange benefited by this transaction, yet only Scammy McScamScam did something illegal.

    Should exchanges be illegal? I don’t know. I would bet the majority, probably even closer to 99% of the cards sold there, are legitimate. And if the exchange had to hold every card for 4 months, and check with the vendor to make sure it wasn’t disputed before re-selling it, it would be cost prohibitive to stay in business.

    Anyway, long story short, paying a steep discount on a gift card comes with risks. This exchange takes on the risk the card will be good for 45 days, and the buyer takes on the risk that it will be good after 45 days. If it works, both the exchange and the buyer come out ahead. Of course, you can pay full price, and eliminate this risk entirely.

    1. You think? It might be cost prohibitive to GET into business if you had to wait 4 months, but considering the volume of cards that probably go through these places, don’t you think there’d be plenty of cards past the 4 month point to be sold? Once you’re in business, what’s the problem? Like i said, getting over the first few months, or even the first year, might be difficult, because you’d have to hold all those cards at first, but once you’d done that, it doesn’t seem like it’d be a problem. There’d just be a steady stream of cards after that.

      1. The problem is that many states (some states have laws prohibiting it, such as Cali.) start deducting inactivity fees or just expire after one year and some as early as 6 months. So waiting 4 months on something like an airline certificate your not going to use for a while might come close to already being worthless when you would purchase it at the 4 month window.

      2. I wouldn’t open a business like that. Not only do I have to wait 4 months to start selling, but no one would sell me their cards for resale if I didn’t pay them for 4 months, so I wouldn’t be able to get any cards to begin with. If I offered them cash up front, I would need a lot of start up cash, and would be taking 100% of the risk, again, not a good investment or busienss model.

    2. Close, First, Scammy McScamScam doesn’t actually buy the cards until after the sale and the transaction, at which time Scammy McScamScam has the money in their PayPal account, THEN they buy the gift cards (in most cases they are just eCertificate numbers) and emails them to the purchasers. Second, Scammy doesn’t buy $100 cards, that’s the magic amount especially in large numbers that set off fraud warnings at banks. Scammy McScamScam keeps the individual value much smaller $10-$30 each, you can get 50 $20 transactions on a single card and it won’t set off alarm bells until the card holder gets their statement.

      1. I agree on the amount, I was using $100 to make the math simple. However most of these exchanges require the seller to mail in the gift cards or submit the eCertificate’s in advance of the site listing them for sale.

        1. No they don’t unless it’s a card aggregator where your exchanging with the company X card for cash or a different gift card, most of the sites that are more like auction sites like pay pal, or just listing sites like Craig’s list and your dealing with customer to customer transactions, you just post what you’re selling.

          1. Tho OP today used Cardcash which is an aggregator and requires them in advance. I was only referring to the exchanges that handle the cards, not the auction/listing like sites, those are even more risky! You are 100% on how those sites work. Ill sell unwanted cards through an aggregator, I think it’s to risky to even sell through the auction/listing sites.

  12. These matters are for the FBI or your local law enforcement. Nothing here for a consumer advocate to do except WARN the public to stay away from these scams.

  13. I would be curious to know how what is your risk factor, i.e. the chance that a card is fraudulent? 1%, 5%, 10%? That seems to me very important to make an informed decision.

  14. The LW said her $100 was returned after her credit card company sided with her. Maybe I am foggy but why would she pay $100 for a $100 gift card from a re-seller known for selling cards below the stated value? And if she paid less why would the credit card company refund more than she paid? Of course, I could just be missing an important point here but the amounts mentioned defy basic common sense. If she paid $100 why not buy the card directly from the company–JetBlue in this instance. And I have yet to meet a credit card issuer that will refund more than the purchase price.

    1. I know… I had the same questions. I’d think the CC company would have refunded her $80, or whatever she paid. She shouldn’t have to absorb the fraud when all she did was pay for something without knowing it was fraudulent. But yeah… why pay $100 for $100. Unless something is written wrong in the article, I had the same confusion.

  15. I’m with people who are totally lost on “gift cards”. Not to even start going into ” second-hand market for recycled and unwanted gift cards”. What is exactly wrong with personal check in an envelope or a cash in the same if money is what you want to give as a gift?

    Just because you CAN pay with your cell phone (Starbucks app) doesn’t mean you HAVE TO. And no, it does not make it “cool” either. By the way, I do have Starbucks app but I see it as coins-in-the-pocket-removal tool, not “cool” or, God forbid, “necessary”.

    What’s wrong with people anyway?

    1. What’s a check?

      Haven’t you heard of apple pay now, soon you’ll be able to buy everything with your iPhone, we have it in Japan already for a long time, though it’s a different system (it uses an app version of your metro card).

      1. It’s a tool, nothing more and nothing less. Tools are not “cool”, they are just tools. If somebody gets a hard-on over a 10 dollars bill, they have some SERIOUS problems to discuss with their psychiatrist. As long as there are alternative tools, they are not even “necessary”.

        Check is a tool that allows transfer of funds from one person’s bank account into another person’s bank account. With a huge plus that the said amount can be used for ANYTHING, just like apple pay. Which cannot be said of gift cards.

        1. iPhones are tools, iPhone 6’s are very cool. If you don’t think so take a day trip to Tokyo and ask any Japanese girl/woman/female, assuming you can get them to look up from their iPhone.

          (FYI: Nail guns are tools, and their cool)

          We call that quick pay, bill pay, pay pal, or a wire transfer, with apple pay you’ll be able to touch phones and transfer money from accounts. In addition, it’s somewhat old but we have this stuff called currency, which you can use for anything, but you have to carry it around with you and has a 100% fraud and theft liability policy, which means you are 100% responsible for unauthorized transactions and loss.

          1. You lived in Japan for too long. It is not uninsured, my insurance company is called Smith&Wesson and it is very effective. To bad it didn’t open franchises in Japan.

          2. We have SBI (money gram) and western union. The closest we get to an american bank is Citi Bank, but they wont let american do anything at their branches. We don’t have branches of Wells Fargo, Smith and Wesson, Chase, Bank of America, etc here.

    2. What’s wrong with a personal check? We for starters you disclose your bank account name and number as well as your signature. And of course your address is probably on the check. If it gets lost or stolen that information is in the hands of criminals.

      On the recipient side, a trip to the bank may be needed unless of course your bank uses mobile deposits. And of course, if the recipient doesn’t cash it timely, it makes your own reconciliation more difficult.

      1. You just made an excellent case for dissertation “Why would I pay $100k to go and live in the ’60s” .

        Do you bike with a helmet on, too?

        🙂

  16. If it was the merger of those two cards that triggered the fraud detection that was a very expensive $17.

    Has Christopher ever had a case where the person had trouble with a single card? It always seems to involve multiple cards. My vibe is that if you’re going to regularly engage in these deals you basically need to accept that some percentage are going to be blocked.

    1. I have a certain relative that swears by the sites, and always gives us all gift cards she gets from them for the holidays. I never merge them, and every once in a while one simply won’t work. Maybe it was used first by said relative? Maybe it was reported stolen? I don’t know or care. I’ve suggest that she not use the sites, but it falls on deaf ears. I’ve even said I would rather get a paper card and a hug and no need to give me gift cards, and I still get them. I have warned her that she could get scammed, and I could see her going to CE for help despite being warned. I have been instructed by other relatives to drop the subject. (I think its more likely she spent it first, than her being scammed, but you never know).

  17. You guys need to learn how to use gift cards the right way 🙂
    When Chris moves to Boarding Area, you will get to read about Manufactured Spend.
    Welcome to a new hobby.

        1. Those extreme coupon shoppers are the ultimate hero’s in manufactured spending. “Let’s see your total is $923.46, after your coupons (and an hour later) your new total is $.07”. My fiance thinks the show is made up, I tell her “no, but only in the USA”.

          1. I have a cousin who’s goal in life is to be one of those extreme couponers from TV.

            I always wonder about the waste, they buy so many of the products they can’t possible use them before they go bad. Even sunscreen and fluoride expire. They also have to buy a bigger hosue or build a shed to store their horde, plus extra refrigerators and freezers. And then who wants to drink 1,000 bottles of sugar water or eat 100 jars of peanut butter, or eat mac and cheese for every meal for a year?

          2. Most of them don’t actually keep most of the items, they resell them to wholesale sites, or donate them for the tax benefit, you get to write off the actual value not what was paid, so they bought a $1000 of tax deductions for a couple bucks. A friend who’s a teacher and makes $40,000 a year, his wife’s goal is to manufacture enough deductions to write off his whole tax liability for as little as possible. If you can get a $1000 worth of products for $1.00 than you can write off $40,000 for $40 in spending, and thats assuming you don’t have any other deductions.

          3. A $ 1,000 donation at a 30% tax bracket will generate a tax credit of $ 300 thus reducing your tax liability by $ 300. If someone has a $ 10,000 federal tax bill after their other creditsdeductions, then they need to donate $ 33,333.34 to generate a credit of $ 10,000.

            More importantly, when you have “extreme” deductionscontributions, you need to document your donations per item. For example, we are in the process of donating clothes and we are inventorying the items for taxes.

            I am not a tax attorney or CPA but I do have to question the tax basis of the donation. If you can get $ 1,000 of goods for a $ 1.00, I don’t see how you can claim a value of $ 1,000 without acknowledge on your tax return a short-term capital gain of $ 999. Maybe we have a tax attorney or CPA who reads this blog that will tell us.

          4. I’m not a tax attorney by any means. However, if the goods were obtained in an arms length transaction open to the general public, e.g. coupons, I doubt if there would be any capital gains. But that’s pulling from a tax class 20 years ago.

          5. As a former financial consultant, here are my $0.02, however I am no longer fully apprised on every detail of current tax code, do don’t file your taxes based on this comment.

            Donation deductions are capped at 30% to 50% of AGI depending on numerous other factors. Most physical items (non-financial) are generally capped at 30%, meaning the extreme couponer couldn’t claim more than 30% of their AGI as a donation.

            The capital gains you mention do not get realized by the person making the donation so long as they held the item for a minimum of 1 year. So they would need to hoard their items for a full year to be able to donate for market value, otherwise they would need to claim a STCG on the $999. Many of those items would expire within the year. Also, “market” value takes into account depreciation and there is no way that I am aware of to calculate depreciation on food/household items. Also the couponer would need an appraisal for fair market value if the total of the donations exceed $5,000. Most of this applies to capital, and not food/household items, but the volume of this food puts it into capital territory, so it becomes a grey area.

            Typically, donated value can not exceed what was paid for the item, however there is some grey area there as well. Although, it does say if a food item is purchased with the intention of being donated, one can deduct the purchase price. While this is meant to help people, it would also limit the extreme couponer to actual purchase price making the capital gains deal moot. Also, when donating household items, one must itemize in full like AZ mentioned, and there is a new line in the tax code that low value consumer items can be removed at the description of an auditor.

            The fines for improper donations vary from 20%-40%. I would say claiming any of these extreme donations would open one up to an audit, and most likely, the auditor would cap the donation at the actual purchase price.

            So if people do this out of the kindness of their heart I am all for them. If they do it to be able to write it off on their taxes, then their time would probably be better spend working and making money.

          6. I know that some extreme couponers will donate the food and sundries to a local food bank, homeless shelter, their church, etc.

            One time when I was in Fry’s (one of the Kroger’s brands in the western portion of the United States), I saw an extreme couponer who was doing it for the Wounded Warrior Project.

    1. Oh I LOVE manufactured spending, it’s big here in Japan. I still think the classic example of the guy using his awards credit card to buy US $1 Sacajawea coins at cost (with free shipping) from the mint, getting the points on the card and then depositing the coins into his bank account, paying the bill and repeat was genius. Didn’t that guy bank something like 10 million points or something?

    2. Have learned something new as I had not heard of manufactured spending. Obviously I am not a well-educated mileage accrual kind of person.

      1. Next time give yourself and your family AMEX BLUEBIRD. Just go to Walmart (Money or Service Center) and there are boxes hanging on the wall (free) that are called Account Set-up Kit. Add funds at checkout. That’s it, it is ready to spend. Give it away and the recipient can go online and register to get a permanent card.

        Then read the instructions in the blogs of Boarding Area to find out how you can use Bluebird to liquidate those gift cards you bought with your mile earning credit cards. You are now ready to recycle money and earn miles and points in the process 🙂 If you are even lazier than me, then use AMEX SERVE instead of Bluebird.

        If you are gonna play this game, you need to play it smart and within your span of control. It can be addicting. There is no MS Anonymous and please don’t go to Elliott to complain later. 🙂

        1. I will stick with the old fashioned way of earning miles. Flying and using my branded cc. MS sounds way to complicated for me.

    3. This is how we do it:

      We go to Fry’s to buy gift cards with our airline or hotel branded credit card. We will receive 2x to 4x for Fuel Points (i.e. $ 50 gift card is between 100 fuel points to 200 fuel points)…thus saving 10 cents per gallon for every $ 100…in addition, we get the miles or points for our respective frequent flyer or guest account.

      We only buy gifts cards (i.e. BassPro Shops, Subways, etc) that we are going to use within a week.

  18. Why would this be JetBlue’s problem to solve? She didn’t buy it from them, but through a 3rd party. Play the game, be prepared to get burned!

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