Card Liquidation Tips and FAQs · LetsGetFunded Starter (Free)

Card Liquidation Tips and FAQs

Hey all, wanted to share answers to common questions and things to keep in mind when you are getting cash off your next card!

#1 - MOST important - don't deposit liquidated funds into an affiliated account (e.g. funds from Chase business card into Chase business checking).

The bank will see the similar charge and deposit amounts, regardless of whether a different company is sending the deposit... and you're at high risk of getting your checking account and credit card shut down.

Just make sure to send funds to a different bank and you'll have zero problems (e.g. Chase card to BoA checking).

#2 - Is liquidation risky or illegal?

Absolutely not, in fact balance transfer offers from banks are a form of "liquidation." Visa/MC/Amex and their associated banks would much rather charge ridiculous cash advance fees and interest rather than having you liquidate yourself or through a professional though.

Thus if you're billing yourself you'll want to say that one company is paying another for business services, and if using a third party you'll see the transactions are usually billed as consulting or other services, rather than explicitly "liquidation".

In addition, as the cardholder there is zero risk to your funds and 100% risk on the liquidator. You are protected by the bank for any credit card transaction you make - (as an aside, hopefully no one here is ever making personal or business purchases on a debit card!)

#3 - how do I report liquidation transactions on my taxes?

Your CPA may not have heard of a liquidation strategy before, but you can and should them what you are doing so they can record things properly. Both the credit card charge and ensuing deposit can go into the "Short-term Business Loan" category - in essence you are extending a loan on your credit card and getting repaid later with the deposit, so the two transactions cancel each other out. The remaining merchant processing or liquidation fee can be deducted as a business expense.

#4 - can I liquidate cards for myself?

If you have a credit card under LLC #1 and a merchant processor under LLC #2, you can try though there is risk of your processor getting shut down. Best case scenario here is to get an employee card for your spouse or an employee and run that card so your name is not attached, and keep the transactions small.

Especially avoid using Stripe or Square as your account will quickly get shut down when (not if) they catch on or you run too large of a transaction. In this case your funds and any payments from clients will be locked up for at least 90 days and possibly indefinitely.

If you want to run an unlimited number of transactions for unlimited amounts, use a professional liquidator. Avoiding all risk to your merchant processor, credit cards, and bank accounts is worth the small additional fee, especially since the points you earn on the transaction are usually worth over 2%.

Feel free to comment below if you have additional questions or need any more info!

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