I thought I would take a little time and explain the general concepts of manufactured spending for those of you who are new to the miles and points world, or maybe just new to this concept. So here is beginner’s guide to manufactured spending. This is intended to be a great starting point for those who are interested in learning how this is done, but is not intended to be a complete list of every potential method. Please understand that you should do your own research and ensure you are comfortable with any thing you choose to proceed with. Also, you are welcome to post in the comments any methods you find success with or any questions you have.
Also, once you have read this page you can click the manufactured spending category, located on the left side of the site, to find any additional posts I may have made recently regarding manufactured spending opportunities.
What is Manufactured Spending?
Manufactured spending is the process of purchasing something that is the equivalent of cash such as gift cards, money orders, and other items with a miles/points credit card. The goal is to earn miles or points for these purchases and then quickly and easily liquidate the funds and use them to pay back the credit card. While it doesn’t necessarily have to be a cash equivalent, these are generally the easiest and most common methods.
Manufactured spending is an ongoing and ever-changing game. Many different methods come and go. The most well know example was purchasing $1 coins from the US Mint and then in turn depositing them into the bank to pay off your credit card. This deal has long since died but many new methods continue to rise up. The most prevalent in recent days are gift cards that can be liquidated via various methods.
What are the Most Common Methods?
This is by no means an all-inclusive list, but rather a small sampling of some common methods. This should be more than enough for you to get your feet wet and start doing your own experimentation to find many other methods that may work for you.
Vanilla Reloads: These were the poison of choice for many when you could buy them at stores that gave you a category bonus such as using a Chase Ink card at office supply stores to earn 5x points/dollar. These days have drastically diminished since Office Depot stopped carrying them and many stores are no longer willing to accept a credit card for the purchase. But the opportunities are still there at other stores and with other cards for those who are willing to look hard enough.
Vanilla Reloads are fairly cheap at $3.95 each.
I will discuss how to liquidate the funds further down in the article.
Visa/MasterCard Gift Cards: The Vanilla days are slowly giving way to the Visa & MasterCard days as it becomes harder and harder to find Vanilla’s at stores that give a category bonus. Since April 1st, most Visa & MasterCard GC’s now come with PIN functionality that allows for them to be liquidated via other methods besides purchasing things. Any purchase that requires a PIN based debit card can now (in most cases) be done with these gift cards.
Gift cards come with a purchase/activation fee ranging from $3.95-$6.95 and therefore you are getting the best value per point by purchasing the higher value cards and/or purchasing them at a store that earns some kind of category bonus on your credit card. I do buy any cards that are less than $500 as a general rule of thumb and at a store that I earn more than 1x points/dollar. Higher value cards can be found online and you can possibly earn money buying them, such as one option discussed in this post: Get Paid $15 to Buy $1,000 Visa Gift Card Through Gift Card Mall!! Other temporary offers come around that allow you to buy the cards at no fee such as the one described in this post: Chase is Temporarily Waiving The Fee For Chase Visa Gift Cards Ordered Online!
I will discuss how to liquidate the funds further down in the article.
Amazon Payments: Amazon Payments is one of the simplest options to manufacture spending. You can sign up for a personal account and then send money to any other individual with an Amazon Payments account via credit card up to $1,000 per month. You just need to sign up for an individual account. To send money you just login, select send money, and MAKE SURE you select goods/services rather than cash advance. This will post to your credit card as a purchase and will earn miles and points. Amazon will not charge you a fee if goods/services is selected.
Once the funds have been transferred into the other persons account, they can simply withdraw the funds via ACH directly into their account where the funds can be used to pay back the credit card. Make sure you only do this with someone you trust 100% not to walk away with your money!
Buying and Reselling Items on Ebay/Amazon: I am not going to dive to deep into this, but you get the gist of it. I know many people who shop for highly discounted or clearanced items that they can turn around and sell either at a break-even price or even for a small profit and pocket the miles earned on the initial purchases. You can significantly increase your points earning by utilizing shopping portals such as the Ultimate Rewards Mall and others. Remember to research your purchase to ensure that you will actually be able to recover your money after buying and paying the seller fee’s on Ebay. I do not do this much myself and you should be aware of the inherent risks involved before trying this.
How Do I Liquidate Vanilla/Visa/MasterCard Gift Cards?
Bluebird from American Express: Bluebird is a prepaid Amex card that can be loaded via Vanilla Reloads or Visa/MasterCard PIN based debit cards. This can be done at any Wal-Mart with no fee and a daily limit of $1,000 and monthly max load of $5,000. Loading the card online costs $2 per load with lower limits and negates the points earned, therefore should not be done.
Bluebird in turn functions as a typical checking account with the ability to use free online bill pay to send payments to anyone at no cost including paying off credit cards, making mortgage or rent payments, etc.
Money Orders: Money orders can be purchased at Wal-Mart Money Centers for a minimal cost of $0.70 per MO and can be purchased for up to $1,000 each via a PIN enabled debit card such as the Visa gift cards. You can use money orders or Bluebird to pay bills that could otherwise not be paid via a credit card and earn miles/points in the process.
Cash back at Stores: This can be another potential way to liquidate the money on a Visa or MasterCard debit/gift card. This method can be hit and miss and depends on a variety of factors including the bank issuing the card, the store you are using it at, etc. You simply go to the store and purchase something, run the card as debit and enter your PIN, then select the amount of cash-back you want. I find this method too tedious and with the other methods available it seems unnecessary to me, but it can be beneficial to some.
Is the Cost of Manufacturing Spending Worth It?
This is the big question you have to look at before deciding whether or not you will utilize any particular method. First you have to determine how much a particular type of point is worth to you. This is highly personalized and depends on how you redeem your miles/points.
For example, lets say you want to take a trip to Sydney, Australia in 1st class. At the saver level with AA you can get these tickets for 125,000 miles round-trip. That same ticket if purchased with cash would price out between $13,000 and $14,000 depending on the time of year. But for a conservative estimate we will use $13,000.
$13,000/125,000 = $0.104 per point!.
But let’s say I took the same trip but I don’t like to burn more miles than I have to so I chose to fly economy at a price of 75,000 miles round-trip for a ticket that would price out about $2,500.
$2,500/ 75,000 miles = $0.033 per point
This is just one particular scenario and is not an actual valuation for AA miles in general. To me they are worth less per point than either of the above scenarios. Another consideration in determining the value of a miles/points currency to you is what you would actually pay for that ticket, and I’m assuming that most none of us would spend $13,000 on a 1st class ticket making that valuation way over-stated. Domestic award travel is going to have an even lower value per point so you are better off using your lowest valuation and going from there.
For me traveling in coach/economy all the time, I need to acquire my miles at a much lower price per point than the person only flying international 1st class in order to justify the spending and get a great deal. My rule of thumb is that it must be at a bare minimum of 75% less than I value that currency at before I will even consider it. So if I value a particular currency at $0.02 per point, I am not going to even consider a scheme to buy or manufacture the points unless the price comes out at less than $0.005 per point.
Also different miles/points currencies will have different values to you and therefore what might be a good price per point for one, may not be a great price per point on another.