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I want to use my credit card to put money on a pre-paid debit card, transfer it to my bank account, and pay off the credit card with that money so I can get points.

I read that transferring more than $10k into your bank account in less than a year like this can raise red flags.

What should I expect?

Cash. The $10K law is for literal cash. An envelope of $100 bills, or bag of smaller denominations. Not movements of money, the kind that occur all the time. I am retired, and make regular transfers of over $10K. Direct transfers from broker (IRA/401(k)) to my local bank. No red flags.

That said, try your plan for one small cycle and let us know how it goes. The prepaid cards come with a fee, typically $5, which is 1% of the $500 gift card. But, the next step, getting the money back off, is also not frictionless. You can't easily just turn the card back to cash to deposit.

You are on the right track to maximize card points, however. If/when you see a deal which offers a bonus or large cash back on Pharmacy or Grocery stores, this may be the path to take. But you'll be left with a stack of these cards to use for your natural purchases for the next months.

(Anecdotally, some time ago, a bank offered a credit card with a 90 day period of "10% cash back on grocery store/pharmacy purchases". I purchased $50K worth of gift cards, 100 cards with a value of $500 each, and got $5000 cash back for doing so. There was a $5 fee per card, for a total $500 cost of the transaction.

We then used the cards over about 18 months for normal spending. By the time I exceeded $30K, the bank pulled the offer. No new customers would get this deal. But still honored their 90 days with me.)

TLDR: Just don't let it look like you're structuring.

The $10,000/year thing isn't that. The $10,000 is per transaction. There's no "per year" requirement, but there is an "over a period of time" thing because of structuring. Structuring is when you evade the $10,000 limit by breaking a large deposit into a series of smaller deposits, say five deposits of $8000 each made on 5 days.

So the banks and Feds care about patterns of deposits that look like structuring. If your deposits are far apart, say every 2-6 weeks and of varying amounts, that won't raise any red flags. If you deposit between $2000 and $8000 every day for years, under the business name A1A Car Wash, they're not going to care about that, it's obviously a business.

That said, the government is on the watch for other ways to launder money; i.e. Convert cash into deposited funds without drawing notice to oneselves. If you could have also bought those gift cards for cash, then it will appear to banks as if you did buy them for cash and are now laundering. They will not know that you did not pay cash and did charge them on a credit card.

However, they will not care if the amounts of money fall substantially under $10,000 over a several-month period. Nobody cares about money laundering at such a small scale; there would be 1000 other ways to do that. E.g. Just pay your rent with cash.