Credit Card Spend in 2016 and Beyond.note¶
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Credit Card Spend in 2016 and Beyond
January 7, 2016 by
There was a time when the US Mint sold dollar coins online at face value, with free shipping, and
allowed customers to pay with credit cards. The coins were incredibly popular. People bought the
coins in huge quantities, paid with rewards earning credit cards, deposited the coins at local banks,
and then used the banked funds to pay their credit card bills. This deal, for many, was the
“manufacturing spend” opportunity of a lifetime. Unfortunately, the Mint’s goal of adding these coins
to circulation didn’t pan out. Few people used them as intended. So, following , the
Mint shut down the deal in 2011.
The end of fee free Mint Coins didn’t end the practice of manufacturing spend. Far from it. But there
was no longer one single unlimited and free approach. Instead, people branched out into many
approaches: funding new bank accounts with credit cards; buying money orders; loading prepaid
card accounts; etc. Then, in 2013, .
With the development of gift card PINs, the new standard for manufacturing spend went like this:
Both steps (buying and liquidating) often incur fees, but it is usually possible to keep those fees low.
As long as your total fees are less than 1%, the rewards earned from most decent credit cards are
worth the cost. In some cases, credit cards offer far greater rewards (
), so it’s OK to spend more than 1% when manufacturing spend.
Shifting sands
The problem with the current state of manufactured spend is that there is no solid “current state”. I
described, above, a general approach that many people use, but the specifics change every day:
stores stop allowing credit cards to be used to pay for gift cards; options for liquidating gift cards dry
up; and other manufactured spend opportunities, , come and go. While
, the trend is unquestionably negative. Opportunities are dying faster than they
appear.
Manufacturing spend with higher fees
As opportunities for low-risk and low cost manufactured spend dry up, those who want to continue
manufacturing spend will have to look beyond the current standard techniques. One approach is to
accept higher fees. As found in the post “ ,” there are many options
that include fees ranging from about 1.9% to 3%: pay friends with PayPal or Venmo; pay bills
including mortgage and rent; pay taxes, etc.
Greg The Frequent Miler
media exposure
Visa and MasterCard gift cards suddenly became PIN enabled
Buy Visa/MC gift cards with a credit card. See:
.
Best options for buying Visa and MasterCard gift
cards
Liquidate gift cards. See: .Beginner’s guide to buying & liquidating Visa & Mastercard gift cards
such as those that offer 5X rew
ards at grocery stores or drug stores
like REDbird new opportunitie
s occasionally arise
How to increase credit card spend
1.
2.
The key to making the “higher fees” approach work is to make sure that you are earning rewards that
outweigh those fees. For a nearly complete list of options for increasing rewards, please see:
.
A simple example of earning rewards that overcome high spend fees, is a
. Let’s take the as an example: Earn 40,000 points after
$3K spend in 3 months. Since this card offers 2 points per dollar everywhere, you should have a
total of 46,000 points after meeting the minimum spend requirements. Points are worth 1.05 cents
each towards travel (thanks to the 5% points rebate), so those 46,000 points are arguably worth $483
in travel. If you use a service like Plastiq to meet the spend requirements, you’ll pay 2.5% in fees.
2.5% of $3000 = $75. $75 is a cheap price to pay for well over $400 in travel.
Another common example is to use cards with great category bonuses. Take the
, for example. They offer 5 valuable Ultimate Rewards points per dollar at office supply stores,
and for cell phone, cable, and internet services. Staples, which is an office supply store, sells Visa
gift cards online with a 3% fee for $300 denomination cards and a 3.5% fee for $200 cards. If you
have an easy and cheap or free way of liquidating those cards, then the 5X returns are clearly well
worth the 3% to 3.5% cost. To see why Ultimate Rewards points are so valuable, see:
Manufacturing spend with increased risk
Instead of accepting higher fees, another option for manufacturing spend is to accept higher risk. In
return for accepting risk, you may actually make a profit in addition to earning credit card rewards.
Some higher risk manufactured spend techniques include: reselling; making loans via credit card,
and funding fantasy sports league play with credit cards.
How to
increase credit card rewards
new credit card signup bon
us Barclaycard Arrival Plus standard offer
Chase Ink business
cards
Membership R
ewards vs. Ultimate Rewards vs. ThankYou Rewards. Which is best?
Reselling: The basic idea is to buy low, with a credit card, and sell high. Ideally you’ll either
make a profit or earn enough points & miles to make up for any loss. Fulfillment by Amazon
(FBA) is a key service to use to decrease the work involved. Obviously, reselling takes a lot of
work and there’s always a risk of losing money. For more details about reselling, please see my
recent post: . Also check out these resell-focused blogs:
, , , .
Re-dipping my toes into reselling Taggin
g MilesBig HabitatOren’s Money SaverMiles Per Day
Going forward
As options for low cost and low risk manufactured spend disappear, I expect that many readers will
lose interest in manufactured spend. Personally, I don’t mind branching out. It is the higher fee and
increased risk options that are most likely to stick around long term. The reselling option, in
particular, seems like one that can never go away. Sure, opportunities for reselling at a profit may
decline as more people get involved, but I don’t see that as a deal breaker. Reselling is just hard
enough, and risky enough, to keep the hordes away. Now its time for me to dust off my old Amazon
Seller account…
Loans via credit card: I’m aware of two good options here. Kiva allows you to make microloans
with a credit card with no fee. Unfortunately, they do not allow lenders to earn interest, so the
best you can do is break even. For details, please see: . Another
option is Kickfurther ( ). Kickfurther is a
platform that lets companies seek short term funding from the Kickfurther community by offering a
return on investment (such as 8% profit in 10 months, for example). With Kickfurther, you will
earn a profit with each offer that you fund as long as the company pays out as promised. You can
fund offers with a credit card, but you’ll be penalized 1.5% when you withdraw funds to your bank
account. One huge problem with Kickfurther is that the best offers tend to be fulfilled within
seconds of being active. You can read more about Kickfurther in
.
Kiva: loans, points, and miles
if you use this referral link, you’ll earn $5 to get started
this Kickfurther investment guid
e
Fantasy sports leagues: If you like the idea of sports gambling, read this Travel Summary post:
. I haven’t tried it. I’m not
interested, but I expect many readers may be. Please take Travel Summary’s caution
seriously:“If you have a gambling problem, stop reading this post and call .”
A New Way to Manufacture Spend: Daily Fantasy Sports Leagues
1-800-522-4700