vsftpd: 530 Login incorrect

Back up the config file before making a change;

sudo cp /etc/vsftpd.conf /etc/vsftpd.conf.back

and then edit vsftpd.conf (with vi or nano)

nano /etc/vsftpd.conf

Then make the following change

pam_service_name=ftp

Save your change and restart the ftp server (if you use nano hit CTRL+O & enter to save then CTRL+X to exit)

sudo service vsftpd restart

Source: VSFTPD configuration problems with 12.04

By default vsFTPd uses the file /etc/pam.d/vsftpd. This file by default requires FTP users to have a shell listed in /etc/shells and requires them not to be listed in /etc/ftpusers. If you check those 2 things your probably find what the problem is.

I did not need to change the vsftpd.conf. Only needed to make sure that a shell was set in my /etc/passwd file, that also was lited in /etc/shells.

So basically after useradd without a shell I needed to make sure the home directory was created and that the user had /bin/bash as it's shell.