Pen Pals and payPal

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The loyal3 experiment continues down a predictable path.

When I first found out about this opportunity, my feeling was that it had to be a short-lived one. As I saw it, a financial/tech start up had decided to make a devil’s bargain along the lines of “We’ll allow you (read pay for you) to run up credit card bills on our goods if you agree to check out our set up, build up our usership, and spread the word.”

Fair enough. But like most mere mortals, they underestimated the fees associated with underwriting the manufactured spending community’s credit card bills.

We are not cheap dates.

So first they canceled the ability to spend $2500 on a credit card on a single stock at one time.  Which gave birth to my “buy the haystack” strategy whereby I simply bought nearly every single available stock, every single month, and sold them in short order on a recurring basis.

But I was hardly surprised last week to receive a letter warning me that my account had been flagged.

Based on our review, we have determined recent activity in your account may not be consistent with appropriate use of the LOYAL3 platform.

When I pressed them for details on what exactly they were concerned about (so that I might become a more “consistent” customer) I was informed of this shocking practice….

We unfortunately encountered customers’ whose only interest was in collecting credit card points as evidenced by their constant recycling of purchases and sales and subsequent withdrawals, showing no true interest in investing, let alone investing in companies they loved.


You don’t say!

Which raises the question, what next?

And for me, at least, nothing changes. I will continue using loyal3 in a manner that is consistent with my values (such as they are.) The only change I have made is that I will not sell my Berkeshire Hathaway shares as I have somewhat of a nostalgic attachment to all things Warren Buffett. And I’m willing to entertain this nostalgia, particularly in bite sized $50 increments.  Perhaps this will convince loyal3 of my appropriateness for ongoing membership in their revolutionary platform.

Or not…

At times like this, I find it is important to remind myself of why I chose to experiment with loyal3 in the first place. Let’s be frank. It wasn’t to cement an emotional attachment to specific corporations. And it wasn’t because investing in this manner made any sense to me as a long-term strategy. It was to meet minimum spending requirements on credit cards, and to rack up miles. And lots of them.

And so, if the door slams shut on me, I will have lost nothing, but I will have gained many miles.

But let’s move on to some more actionable intelligence.

The other new leaf (aside from Loyal3, and Isis Serve) that I have recently turned over in my miles game repertoire is the incorporation of PayPal into my spending rotation.

Now admittedly there is nothing new under the sun here. I originally read about this angle in this excellent post from the Miles Professor.

Let me simply report how I use the various PayPal products. (all of the specific components are well described by the Miles Professor in the above linked post.)

  • Step one: buy a $500 PayPal My Cash card for $503.95 with a credit card. (at this point I am $3.95 in the hole, ignoring the miles/cashback earned.)
  • Step two: load $500 onto my PayPal account online using the above card.
  • Step three: load $500 onto my Isis Serve card online using the payPal business debit card that I recently applied for and received. In this step I earn 1% cashback ($5) credited to my PayPal account. So now I am $1.05 in the black, plus the miles/cashback earned.  (The limit to step three is $1500 a month of online debit loads onto Isis Serve.)
  • Step four: send any remaining balance on my PayPal account to my wife’s PayPal account. And withdraw my wife’s PayPal account balance to our bank account.

Which is pretty nice no?

Full disclosure, there are lots of reports from the manufactured spending community about payPal being pretty draconian when it comes to account shutdowns.

But I’m not too concerned because my feeling is that I am pretty conservative on the spectrum of manufactured spending, on account of my own self imposed rules.

Plus the down side, in the event that I do get my payPal account shut down is not that harsh.  It  is only that my money is inaccessible for a short time and I lose the ability to use a service that I don’t otherwise have much use for.

But the Miles Professor won an actual manufactured spending tournament this year, so she’s a real pro’s pro. And here are her payPal safety tips….

So there you have it. It’s spring time in Miles Game land. But it feels more like fall. Because there’s a dense blanket of new leaves on the ground.


Spring is upon us…

Isn’t it time you got busy turning some new leaves over?

As always, I eagerly anticipate your questions and comments, so go ahead, fire away….

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19 Responses to “Pen Pals and payPal”

  1. Eric June 10, 2014 at 6:48 am #

    Alexi, I was hoping you would describe a manufactured spending tactic that I had not already discovered, and you didn’t disappoint! Thanks for sharing. I will dig deeper into the materials referenced in your links, but I have two initial questions: (1) Are you aware of any credit cards that treat the purchase of the PayPal My Cash Card as a cash advance rather than a purchase? (Somehow any transaction with the word “paypal” in it seems more likely to be coded as a a cash advance than “Amex Serve”); and (2) Why do you have anything left over in your paypal account? Don’t you limit the loads to the $1500 that can be transferred over to Serve? Or are you just referring to the small leftover amounts from the cash back bonuses?

    • Miles Dividend M.D. June 10, 2014 at 12:56 pm #


      As with buying one vanilla cards or vanilla reloads at a drugstore it just shows up as a “drug store purchase.”

      The credit card company seemingly has no way of knowing what you purchase. They merely know the amount and the location of each purchase. I usually set the cash advance limit on all of my cards to zero anyway to prevent this from happening accidentally.

      In terms of the leftover money question, you can load up to $4000 a month on to your PayPal account with my cash cards. So if you and your spouse have 2 PayPal accounts that’s a possibility of $8000 of manufactured spending a month. (Or an additional $5000 a month after loading $1500 onto two separate serve cards.)


      • Eric June 10, 2014 at 1:13 pm #

        Thanks. Initially I didn’t realize the My Cash cards were not sold directly by PayPal. So the key will be finding a store that sells them that will accept credit cards as payment. I imagine that will get more and more difficult. While it lasted, I was doing Serve credit card loads at CVS, but as I’m sure you know that got shut down.

  2. Robert June 10, 2014 at 9:27 am #

    Thanks for the write-up. I do use PayPal for ebay auctions (getting rid of junk!) so wouldn’t want to lose that account. But as long as this is played moderately, seems like it would not be a problem.

    • Miles Dividend M.D. June 10, 2014 at 12:58 pm #

      That is probably accurate Robert. If anything your non manufactured spending transactions should make your paypal account appear less suspicious

  3. Robert June 11, 2014 at 6:18 am #

    So. I just got my first IPO notice from Loyal3 this morning; I assume you did too, Alexi. It is for GoPro (maker of Hero helmet cams). Skimming through the prospectus, it looks like the company has reserved 1.5% of the stock offering for Loyal3. Thus, most of the IPO shares will be distributed according to traditional IPO routes. The Loyal3 amount is small. Since 17,800,000 shares will be offered in total, that makes 267,000 allocated to Loyal3. With price estimated to be in the $21-24/share range, that makes the Loyal3 portion worth ~$6.4MM. If everyone signed up for an average of $500, that would be enough for 12,800 Loyal3 clients. It will be interesting to see how this plays out. I think I’ll take a flyer on $500 in the name of research. Remember, they let you put IPOs on credit cards up to $10,000 (vs. $50 for other shares).

    • Robert June 11, 2014 at 6:53 am #

      I just signed up for some GoPro on Loyal3. An interesting aspect is that there is a 2 hour window to confirm the reservation under certain circumstances (basically if the price ends up being much above/below the range they believe it will be). You must have $350 cash in your Loyal3 acct to participate in IPOs. They charge your credit card (or bank acct) right away to get that $350 balance if you don’t already have it in your account. They charge the rest at the end of the 2 hour window. I plan to go through with this, but there is an interesting aspect of this: you could potentially sign up and let them bill the $350 and then cancel your reservation the next day. Unless they credit your credit card for it, I assume this would effectively let you manufacture $350 spending with no risk. That’s pretty small beans, but thought I’d mention it. The remainder of your reservation amount is charged at the end of the 2 hour window, so it doesn’t appear that you could do this cancelation and get manufactured spending above $350, since the charge would be spent on the IPO stock.

    • Miles Dividend M.D. June 11, 2014 at 8:55 am #


      I have three things to say about this IPO angle.

      1. It is pure speculation, not investment.
      2. Warren Buffett wouldn’t touch this with a 10 foot pole
      3. The dividend family is in for 3500 bucks.


      • Robert June 11, 2014 at 9:21 am #

        I did $1000. Agree it is speculation. I intend to dump it quickly. Given volatility of IPO stocks, it might make sense to reverse dollar cost average the sale since we have little control over timing or sale price when dealing with Loyal3. Since no commission cost, I don’t see much downside to spreading out the sale in this way. Thoughts?

        • Miles Dividend M.D. June 11, 2014 at 10:47 pm #

          Robert, I don’t have an opinion on the DCA angle. Seems like a coin flip to me. I guess if the odds favor the stock value rising over the time of your DCA cycle, you win, if not, you lose.

          I have no idea what the actual odds are though.

  4. Robert June 26, 2014 at 6:12 am #

    Well, that was a bust. I reserved $1000 but was only allocated $177.58. Alexi, what did you get? I’m curious if it was the same percentage of your reserved amount as I got. i.e., for $2500 you should have gotten $443.95 if they allocated shares proportionally to the reserved amount.
    The price was at the upper end of the expected range, indicating strong demand. It will be interesting to see if there is a price pop when it starts trading today. GoPro gets to ring the NASDAQ opening bell this morning in Times Square.
    In general, one of the problems with Loyal3 is scale. Everything seems to be small beans. I thought maybe the IPO route would be a way to get significant spending, but apparently not (at least if the stock is in demand).

    • Robert June 26, 2014 at 8:46 am #

      I see that GoPro popped to over $31 at opening today. I have put in a sell order so it should sell this afternoon. I’m guessing Loyal3 won’t like this and may not allocate me any in the next deal. I suspect they may need customers to hang onto stock for it to be interesting to companies to allocate stock to Loyal3 in the first place. (i.e., for brand loyalty). But with the limited control over timing of sales, and with the inability to get enough of this to be worth my time, I don’t particularly want to hang around for the bloodbath that awaits most IPO stocks in the days after they open.

      • Robert June 26, 2014 at 3:50 pm #

        I got confirmation that my shares sold at $31.30. The 30% return in <24 hours is obviously nice. The small allocation, however, means this was strictly a "play" exercise.

        • Miles Dividend M.D. June 26, 2014 at 11:24 pm #


          The whole concept of loyal3 is somewhat “let them eat cake-ish,” letting the little gut pick up the crumbs…


    • Miles Dividend M.D. June 26, 2014 at 11:31 pm #

      Yup, I got $443. At this rate I should earn one plane ticket for every 15 IPOs!


      • Robert June 27, 2014 at 8:38 am #

        Thanks for the info; it will be interesting to see if they keep the simple proportionality in the future or if their allocation algorithm takes into account how long the customer held stock from previous IPOs. So…maybe the strategy should be to reserve $10,000 (the max) and then if demand is not high, drop it during the 2 hour window. I’m assuming that as with this one, high demand IPO’s will cause Loyal3 to send out a “freeze” notice before the 2 hour window, notifying customers that they can no longer sign up for the IPO.

  5. Rich November 2, 2014 at 3:22 pm #

    Hi Alexi,

    Thanks for all the great writing/posts lately! A question on your Step 3, making the debit deposit to Serve online with a PayPal debit card (I assume it is the My Cash card?). The main Flyertalk page about Serve specifically warns against using Paypal and other pre-paid debit cards for online loads, and recommends only using bank issued cards, or strong risk of shutdown.

    Is this in fact what you have been doing, and have you still been successful?


    P.S. – As an avid Braves fan & part time Giants fan, I about fell out of my chair when I saw your great Hunter Pence clip in your more recent post! What a great Series.

    • Rich November 2, 2014 at 3:27 pm #

      sorry – I meant to say (I assume it is the PayPal Business Debit Mastercard card?). Does this one count as “bank issued”?

    • Miles Dividend M.D. November 2, 2014 at 11:17 pm #

      I will be writing about my approach in detail in the coming posts, but I do use Paypal Mycash cards to load my Paypal account, and the Paypal business debit card to auto load my Isis (Softbank) Serve account.

      No issues on either end yet…


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