Reflections on PayPal and My Cash warnings

PayPal's compliance department is sending warning e-mails

It's no secret that I'm a huge fan of PayPal My Cash cards as a tool for manufacturing spend in two of my favorite bonus categories: drug stores and gas stations. Unlike some more aggressive users, I've never withdrawn My Cash funds directly to a bank account, preferring to use the money to fund Bluebird, buy money orders, and make bill payments.

On October 9, the first report I'm aware of appeared, describing a warning e-mail sent from PayPal's compliance department about withdrawing My Cash funds directly to a bank account. On October 17 a reader forwarded me the e-mail he received, and on the 18th I received an identical e-mail for each of my PayPal accounts.

In other words, this is not a warning e-mail narrowly targeted at those who deposit and immediately withdraw PayPal My Cash funds. Rather, the compliance department seems to have adopted a relatively broad filter to identify users who may or may not have have exhibited the behavior described in the compliance e-mail.

Does this require action?

The compliance e-mail concludes with the following:

"If you think we've made an error, here's how to contact us.

  1. Log in to your PayPal account.
  2. Click Contact Us at the bottom of the page.
  3. Click Send us under Email Us.
  4. Follow the instructions to complete the steps.
We value your business and appreciate your attention to this matter."

This raises the question of whether those of us who have used My Cash funds immaculately should e-mail PayPal and protest our innocence, in the hopes of receiving another month, year, or decade of impunity.

That's a judgment that is going to depend on the individual. Personally, I've already maxed out my PayPal My Cash loads for the calendar month, so any changes in monitoring and compliance won't affect me until next month in any case. Consequently, I'm going to sit tight and wait for more datapoints to come in, as they inevitably will.

It seems likely to me at this point that many who received the warning e-mail, myself included, don't in fact have anything to worry about since we've used the cards more or less as intended. If, on the other hand, in the coming weeks we start to see people report accounts closures, I'll know I need to consider scaling down my My Cash usage.

No, PayPal still can't be "trusted"

I've ranted before that "trust" is the wrong framework to think about your relationship with your bank, your loyalty program, or your landlord. Save "trust" for your partner, your friends, and your kids (well, maybe not your teenagers).

When I write about PayPal, I always include the caveat that while they have been very, very good to me, many folks have well-founded grievances against their arbitrary account closures and long hold times for the withdrawal of frozen funds.

That warning still applies.

But since it's one of the easiest ways to manufacture bonused spend on cards like the US Bank Flexperks Travel Rewards and American Express Hilton HHonors Surpass cards, it's remained a tool in my arsenal, and I hope it continues to for a long time to come.

First MyVanilla Debit shutdown!

A few weeks ago I reported on my experience using MyVanilla Debit cards. A lot of people are concerned about having their cards shutdown, since it's so valuable to have a way to easily liquidate Vanilla Reload Network reload cards after reaching your $5,000 monthly Bluebird load limit.

I explained how I had gradually increased my MyVanilla Debit usage, loading and unloading about $2,000 per week to each of my 3 cards.

Well, one of my cards was finally shut down yesterday soon after I loaded $1,000 and did a bank cash advance in the same amount. 

What happens when you're shut down?

The most important thing to know is that a MVD shutdown only affects the closed account. While the folks at MyVanilla do have my Social Security number, so in principle they could link my three accounts (and in fact they do, since that's how they impose the 3-accounts-per-person limit), in fact they do not proactively close all your active accounts: only the one that triggers the shutdown.

When an account is shutdown, you will no longer be able to log into that account. That's why it's extremely helpful to have your MyVanilla Debit account loaded into Mint or a similar banking website so you still have access to your balance and transaction history (more on that in a second).

How do you get your money back?

If you call the phone number on the back of your closed card, most people seem to have success having their account temporarily reopened to allow the customer to get a bank cash advance or use an ATM to empty the account, which keeps MyVanilla from having to mail a check for the account balance.

Additionally, there are reports that while your account is in that temporary reopened status, it's still possible to load Vanilla Reload Network reload cards, giving you one last shot to push a large amount through the card before losing it. 

Finally, some but far from all shutdown users report that after their account is "temporarily" reopened, it in fact remains open and can be used normally. 

What triggers account closure?

This is a question I obviously don't have an exact answer for. I was loading and unloading much more money to my closed account than the vast majority of MyVanilla's users. On the other hand, there are definitely people who load and unload even more than me. 

Fortunately, I did have my MVD login credentials loaded into Mint, so I still have access to my transaction history, which I'm more than happy to share with my readers. This is for my closed card account, for roughly the last month. CA means a cash advance from a bank teller, WM means a Walmart bill payment: 

  • October 5: Load $1,000
  • October 7: CA $950
  • October 14: Load $1,000
  • October 14: WM $1,000
  • October 17: Load $1,000
  • October 18: CA $1,000
  • October 22: Load $1,000
  • October 24: CA $1,000
  • October 27: Load $1,000
  • October 28: CA $1,000
  • October 31: Load $2,000
  • October 31: WM $2,000
  • November 5: Load $1,000
  • November 6: CA $1,000
  • November 8: Load $1,000
  • November 8: CA $1,000 (shutdown)

In summary, my total amounts of the 3 transaction types are: 

  • Loads: $9,000
  • Cash advances: $5,950
  • Walmart bill payments: $3,000
  • Balance at account closure: $35.04





What Next?

These cards are incredibly lucrative, so of course I'm sad to see one go, but fortunately I still have 2 active card accounts. For now my plan is to stop doing bank cash advances and stick to Walmart bill payments, which I believe are somewhat safer since they're processed as ordinary purchases (i.e. MyVanilla makes money off them). That may be an overreaction, since there's certainly some safe level of monthly cash advances. With only two remaining cards, however, I'm not willing to play Guinea pig to find out just what that level is!