Tuesday, May 14, 2013

Manufactured Spending

     Even dilettantes in the miles & points world know that the big points offers come from credit card signups.  However, these offers often come with sizable spending requirements.  A couple of years ago, I signed up for an Amex Business PRG card for a 75,000 MR point bonus.  That card required $10,000 in spend over 3 or 4 months.  Others may require $5-10,000.  That's a lot of money for the average household.  Even putting as much ordinary spending as possible on cards, many folks might struggle to reach $2,000 in monthly spending.  That's where "manufactured spending" comes in.

     "Manufactured Spending" is a term-of-art that's arisen in the miles & points world to denote various techniques for artificially inflating the amount that you spend on credit cards in a given month.  There's a whole forum devoted to it over at Flyertalk.  "Manufactured Spending" can take several forms, from "moving forward" spending by purchasing gift cards that you intend to use later to buying cash equivalents and using them to pay off your credit card bills.

     The single most useful tool for the beginning points-seeker is Amazon Payments.  A few years ago, Amazon introduced "Amazon Payments" in a move to compete with Paypal.  AP will allow you to send money (using your credit card) to anyone else who has an AP account.  You can send up to $1,000 per month without paying any fee at all.  I've heard that some people even have "AP clubs" in which someone sends a payment to a friend, that friend sends a payment to a third friend, and the third friend sends a payment to the first friend.  All-in-all, AP is very simple way to manufacture spending to meet credit card sign-up offer requirements.

     Other methods are more esoteric and are discussed at great length on Flyertalk.  One that recently ended was Wells Fargo's Prepaid Visa card.  Wells Fargo allowed the card to be funded up to $2500 with a credit card.  They charged a $5 fee to do so.  That worked out to a 0.2% fee.  Since the card was a debit card, the loaded funds could be quickly liquidated through ATM withdrawals and money order purchases.  Sadly, Wells Fargo changed the rules so that the card can now only be funded with Wells Fargo credit cards.

     The lesson to take from this is that you needn't be scared off from taking a card offer simply because the initial spending requirement is high.  Of course, before manufacturing any spending yourself, be sure that you have the discipline to pay off your cards every month.  The Banks count on CC users paying interest.  Once you start doing that, the points & miles game quickly becomes a losing one.

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