Manufactured Spending Techniques with Gift Cards

Hopefully by now, you’ve read a few of my previous articles and have gotten started in the process of travel hacking. If you haven’t, you can start here:

I’ve already discussed the low hanging fruit of manufactured spending, like Amex Serve. Serve allow you to “spend” $1,000 per month in your pajamas at home. A Very easy, very valuable way to meet minimum spend requirements for Amex credit card bonuses.

However, there are times when you will need to manufacture spend more than $1,000 per month. This would occur if the credit card has a high minimum spend requirement, or if you apply for multiple cards at once and are trying to meet multiple spend requirements. No worries, there are ways to “spend” more.

Most of these other techniques involve gift cards in some form. This is because it’s relatively easy to turn gift cards back into cash, which can be used to pay off the credit card balance. I won’t discuss every single option available, as there are many, but I will talk about a couple of the best methods that take the least amount of time.

American Express Gift Cards

Update: As of 8/26/15, portals are not paying cash back for cards over $200. That effectively renders Amex gift cards dead for manufactured spending. Skip this section and read below under Visa Gift Cards.

American Express (Amex) gift cards are the favorite manufactured spending method of many travel hackers. This is because you can actually make money during this manufactured spending process. Here is how that works:

  1. Liquidate Amex Gift CardApply for a credit card with a great signup bonus, and get approved.
  2. Use that credit card to buy American Express gift cards through an online shopping portal.
  3. Receive Amex gift cards and liquidate them as quickly as possible.

The shopping portals will pay you cash back or extra miles when you purchase the gift cards. This may seem insignificant at first, but it is not. It is a fantastic opportunity to earn lots of miles/points while getting paid.

How about a real life example? Let’s say you apply for the excellent offer on the Chase Ink card offering 50,000 Ultimate Rewards (UR) after spending $5,000 in 3 months.

No, let’s get crazy and say you went and applied for both the Chase Ink and the Chase British Airways (BA) Visa (Compare Both Here), which offers 50,000 miles after spending $2,000 in 3 months. That means you need to spend $7,000 in 3 months to get 100,000 bonus miles between both cards. No problem:

  1. Apply and get approved for each
  2. Buy $5,000 of Amex gift cards on the Bold and $2,000 on the Barclay card through an online portal
    • Earn 2% cash back or miles from the portal** (which is $140 on $7k purchase)
    • Earn 100,000 total miles from the signup bonuses (50k Chase UR + 50k BA miles)
    • Earn 3,000 more BA miles for the $3,000 spend (BA card is 1x mile per dollar on all purchases) and 5,000 UR for the $5,000 spend (Chase Ink card is 1x on generic online purchases)
  3. Liquidate $7,000 of Amex gift cards as quickly and cheaply as possible

As you can see from the example above, you earn the portal rewards in addition to the normal credit card rewards and any signup bonuses. All in all, you’d net 108,000 miles and $140 cash minus the $3.95 fee for each Amex gift card that you buy. Not bad…

A Few Caveats

  • In my example above, I used 2% cash back from a portal. This is not a guarantee and portal rates change constantly. You have to compare the current rates before you make a purchase, and the best place to do that is CashBackMonitor
  • There are purchase fees and shipping charges, but premium shipping is free for the first 90 days, per account.
  • The process is not always so neat, and it can get downright annoying. Sometimes Amex cancels orders for no reason at all, and you’ll be forced to try again. The failed charge is often pending on your credit for a week…
  • Most credit card issuers code Amex gift cards as a purchase, which is what we want. But a few (some Citi cards), will code it as a cash advance, which should always be avoided.
  • For more details and real life examples, read this entire Flyertalk thread.

How to Liquidate Amex Gift Cards

You probably don’t want $7,000 in gift cards laying around the house, so let’s talk about liquidation.

Unfortunately for us, Amex gift cards do not, will not, and cannot ever have a pin code (like a debit card). This is problematic because many of the easiest and most efficient liquidation methods require a pin to be run as debit. Despite that problem, we still have a number of options available to us:

Normal Spending – Amex gift cards can be used as credit at any place that accepts American Express.

Merchant Gift Cards** – You can use Amex cards as credit to purchase other gift cards that you might need. This presents another opportunity to use a cash back portal and earn a little something on the exchange. For example, ShopDiscover portal frequently offers 10% back at Kmart and Sears. Simply use your Amex gift card to pay. Note, this method only makes sense if you are planning a purchase at another store and were going to spend the money anyway.

** For these methods, you need to first register your Amex gift cards in your name. This is required when you run them as credit online. To do so, call Amex (1-800-297-7327), and talk to a representative, or do it online. Tell them that you would like to register your name and address to your Amex gift card.

Visa Gift Cards

Visa Gift Cards (VGCs) are both a method of liquidation and a manufactured spending opportunity, depending on how you go about the process. They are far more valuable than Amex gift cards because VGCs will have a pin, and can be used as debit (which allows many additional liquidation methods, see below).

Continuing from above, you can use Amex gift cards to purchase Visa gift cards. In that way, the Amex gift cards simply act as an intermediate step that provides additional cash back/points along the way (no longer working since portals aren’t paying cash back).

Some people prefer not to mess with portals, shipping, and the whole Amex process, so they choose to buy Visa Gift Cards directly with their credit card, cutting out the profits and hassles of Amex. This is fine too. Either way, you will end up with VGCs to liquidate.

Fees

VGCs are not free to purchase. However you buy them, you will pay an upfront fee. Most of the time, this falls right around the 1% mark. This is why people choose to first buy Amex gift cards. It helps offset the cost.

Please realize that 1% is not a lot in the grand scheme of things. For our $7,000 example above, you would pay roughly $70 in fees if you simply bought VGCs directly with your credit card. That’s nothing considering the cash value of the 108,000 miles earned could be more than $2,500 in travel, depending on how you value the points/miles.

How to Purchase VGC

The easiest method of purchase is through CVS pharmacy (if you have them in your area). They sell a variety called the OneVanilla Visa Gift Card, and it looks like this:

vanilla visa gift card

 

As you can see, the maximum amount you can load on each card is $500. Each card carries a $4.95 upfront fee. Which is $9.90 in fees per $1,000 of VGC, which is very close to the 1% I mentioned above.

To hit the $7,000 minimum spend requirement in our example, you need to purchase 14 VGC. Don’t try that at 1 store, in 1 day. The limit at CVS is $2,000 per 24 hour period, per person.

You can choose to use your credit card directly, or your Amex gift cards that were already purchased. To make things easier for yourself, opt for personalized Amex gift cards when you purchase them if you are going this route. They come with your name printed on the gift card, which pleases cashiers.

If you don’t have a CVS nearby, many grocery stores carry regular Visa Gift Cards that are pretty much identical. They still have a $500 max per card and a $4.95 – $5.95 purchase fee. Most people recommend only buying one at a time, because some stores have started being weird about the process and require manager approval for transactions exceeding $500. If you must, just go to another store and buy them one at a time. But don’t try to buy 10 at once, and then make a scene when they don’t allow it.

How to Liquidate VGC

There are far more ways to liquidate VGC than there are for the Amex variety. This is because they have a pin and can be used as debit. The pin number for Vanilla Visa cards from CVS is set upon first use. The first time you use the card, you set the 4-digit pin. Super easy. Many of the other Visa gift cards have the pin preset as the last 4 digits of the gift card. If a pin is not present, you will need to call the issuing company and set a pin. Also easy.

I’ll list the liquidation methods in order of attractiveness.

Load Your Serve Account – Walmart recently announced that you can use debit cards to reload your Serve account in all stores. This is excellent news. All you have to do is walk up to a cashier and say “I need to load my prepaid card.” Then hand them your Serve card and tell them how much to load.

*Note that Vanilla VGC sold at CVS and Walgreens no longer work at Walmart, so do not try. The VGCs bought from grocery stores will still work at Walmart to load Serve.

The Serve limits are $500 per swipe, $2,500 per day, $5,000 per calendar month. Notice how perfect this works out if you have multiple $500 prepaid cards that you can use at Walmart.

Once you transfer the money from Visa GCs to Serve, use the Serve online bill pay function to directly pay off your credit card. (See my tutorial)

Use Walmart Bill Pay – Walmart Money Centers actually have a process that allows you to directly pay off your credit card in store with a debit card (VGC). Tell them you want to use CheckFreePay at the register. The price is usually $0.88 or $1.88, depending on the card. This method used to be gold, but many Walmart stores have stopped supporting many payments to credit card issuers. You have to check your local store to see if this is still viable.

I often choose $1998.12 as the amount of my Walmart bill payments for several logical reasons:

  1. If you bill pay more than $2,500 (some reports now say it’s $2,000 max) in one day, you will likely have paperwork filled out in the store noting your identity and contact information (including SSN). It’s not worth it, so just keep it under that amount.
  2. VGCs and many other gift cards are $500 denominations. Walmart only allows a maximum of 4 swipes per transaction (this is true for any transaction). So you can use the 4 swipes with (4) $500 VGCs for a maximum of $2,000.
  3. $2,000 minus the $1.88 charge equals a payment $1,998.12.

American Express cards cannot be paid through this method!

And Just like above, Vanilla VGC from CVS or Walgreens will not work at Walmart!

Check this Flyertalk thread for more relevant data.

Buy Money Orders – You can easily purchase money orders at Walmart, grocery stores, or gas stations with a debit card (VGC). They usually cost between $0.50 and $1.00 per $1,000.

Make the money order out to yourself or your spouse, and deposit into your bank account(s). Be careful on the volume you are doing, and build a good relationship with your bank, or this method might look suspicious.

Summary

To recap, here is what I do:

  1. Apply for several credit cards with big signup bonuses and get approved (Compare Cards Here)
  2. Use those cards to purchase American Express Gift Cards through an online portal (no longer working)
  3. Use my credit card to purchase Visa Gift Cards
  4. Liquidate VGC
    1. Load my Serve account(s) and use Serve to pay off the original credit card(s)
    2. Use Walmart Bill Pay to directly pay off the credit card(s)
    3. Occasionally buy money orders and deposit into my checking account(s)

I know there was a lot to chew on here, so take a minute break, then read it again. It will all start to make sense.

Travel hackers, did I miss anything?

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