Note: As of October 13, 2015, the Target REDcard (REDbird) can only be loaded with cash in-store at Target. Gift cards and/or debit cards no longer work to load REDcard. For more info, see: Here is the REDbird memo, “Cash is the only tender guests can use”
Earlier this week I published “Manufacturing spend: What’s safe?” That post focused on ways to avoid getting shut down by banks and other credit card issuers when manufacturing spend. In response to that post, a number of people asked specifically what is safe with regards to the Target Prepaid REDcard, AKA REDbird. The question is usually focused on how to avoid credit card shut downs. The fear is that frequent high dollar REDbird loads paid for with a single credit card will be looked at unkindly by the credit card issuer. Another topic with regards to REDbird safety, though, is how to avoid getting your REDbird card shut down. This has become especially interesting since some people have reported that their accounts have been shut down (see “Real or hoax? Your Target Prepaid REDcard Account has Been Closed”).
The Target Prepaid REDcard is a reloadable prepaid Amex card that is so similar to another Amex product, Bluebird, that many have taken to calling it REDbird. One feature that makes REDbird particularly appealing is that most Target stores allow reloading the card with a credit card, for free. And, those credit card reloads always count as purchases by credit card issuers. This means that REDbird reloads can be used to meet minimum spend requirements, earn credit card rewards, and meet big spend bonus requirements. Once money is loaded, the card can be used as an Amex credit card, or as an ATM card for cash withdrawals, or to pay bills online, or simply to withdraw money back to your bank account. Reloads are limited to $1,000 per transaction, $2,500 per day, and $5,000 per calendar month. Even though each person can only have one REDbird card in their own name, many people manage more than one card thanks to spouses, friends, or relatives who allow them to use their accounts. In this way, it is possible to exceed the $5,000 monthly limits. More information can be found in the posts listed at the bottom of this article.
As I wrote in the previous post on manufacturing spend safely, I don’t really know what is safe and what is not. I don’t work in the banking or prepaid card industry. I have no inside knowledge of… anything. So, for those who don’t mind taking advice from someone who knows almost nothing about this subject, what follows are my best guesses as to what is safe…
Credit card safety
There are a few reasons why a credit card issuer may shut down accounts with heavy REDbird reload activity. One is that they may consider you a bad credit risk. If you regularly load more to REDbird each month than you earn (based upon the salary and other income information you gave when applying for your credit card) or suddenly spend much more than you have before, the card issuer may fear that you won’t always be able to pay back that much money. This risk can be ameliorated by spreading load payments across multiple cards from different card issuers. It may also help to pay off your balance mid-stream to keep the card issuer’s overall exposure low at any given time.
Another potential issue is “perk abuse”. If you have a card that offers a grocery store bonus, and if the Target store you load at is coded as a grocery store, you will likely cost the card issuer a lot more (in the form of rewards) than they earn in transaction fees. In those cases, a guideline I’ve proposed is to limit the card issuers losses to $2,500 per year, or less. With a card that offers 5% cash back at grocery stores, that means a limit of $50,000 “grocery” spend per year.
Another issue is that frequent round number charges at Target (e.g. $1000, $1000, then $500) may simply look suspicious to your card issuer. One solution is to mix up the load amounts. For example, rather than loading $1000 at once, you could load $672 at one time, and $328 another time. Personally, I would find that difficult to manage. An option I far prefer is to buy Amex gift cards online (and get cash back) and then use those gift cards to reload REDbird. In this way, the credit card issuer will see only one large Amex gift card purchase at a time and will have no way of knowing (or caring) about your in-store reloads. For details about Amex gift cards, please see: The complete guide to Amex gift cards.
Keeping REDbird alive
It is extremely common for prepaid card companies to shut down accounts of those who use the products “not as intended.” I first experienced this in 2012 when my NetSpend card was shut down (details here) and, since then, I’ve had similar experiences with GoBank, Mio / My Vanilla, and PayPal (and I’m sure I’m forgetting about others!). The only prepaid company that hasn’t shut down any of my accounts has been American Express. That said, it is perfectly reasonable to expect that Amex will examine your account sooner or later… To reduce the chance of having your REDbird account closed, I recommend the following practices:
- Always keep a balance on your REDbird account. After all, you never know when you’ll need it to buy stuff at Target (and get 5% off).
- Use the card often at Target and/or Target.com for regular purchases.
- Let time elapse between loading and unloading your account. A week or two should suffice.
- Unload via a combination of bill pay, ATM withdrawals, and withdrawals to your bank account. Make bill pays in realistic amounts. Do not unload the exact amount you recently loaded.
- Do not bill pay the same credit card that was used to reload REDbird. I have yet to see any evidence that bill paying the credit card used for the reload is a real issue, but you never know.
- Consider using the card for some regular spend outside of Target as well.
- When loading online via debit card, use only a real bank debit card. While it may be possible to occasionally sneak in a prepaid debit card, doing so is very likely to get your account flagged.
Read more about REDbird: