Tag Archives: manufactured spending

A Quick New Year’s Reminder: Do Your Own Research

Happy 2015! I can’t believe it’s already 2015. I’ll post one of those year-end summary posts when I get around to it (probably around the same time I finish up my Vietnam/Cambodia trip report, as well as all the other ones that have been marinating in my notes).

I’ve been home for the holidays, and I found myself at Target to pick up a present for a family member. Since I was at Target anyway, I decided to wander over to the gift card/prepaid card section to see what they had on offer, and lo and behold I found a stack of prepaid REDcards aka Redbirds. I was giddy because I had recently given up on my Serve card due to my unwillingness to deal with Amex wanting a picture of every single one of my credit cards that I tried to use for online loads, and Redbird is a great replacement for MS.

But according to the internets, there’s no indication that Redbird is even available in this state. The Amex store locator doesn’t list the state as having any participating stores, the lengthy Flyertalk thread doesn’t mention this state as being somewhere you can buy the cards, and I didn’t see any blog posts about this (and yes, I am confident that I bought the correct card). If I hadn’t taken the extra 5 minutes to check the gift card rack because I blindly believed what I read online, then I wouldn’t have been able to get a Redbird of my own.

If you’re still trying to think of a new year’s resolution, perhaps it should be to do some of your own research to develop new MS techniques. A big trend in 2014 was the clamping down on public information–it’s still there, but you have to work much harder to get it. But it’s going to be much rarer to find blog posts with step-by-step instructions.

Why Club Carlson is Best for Lazy MSers

There have been a number of posts recently about MS for hotels (see posts on the Frequent Miler, Saverocity, and Travel is Free (all great blogs btw)). In the past, I haven’t really focused on hotels since I’m a cheapskate and will do things like book overnight trains or sleep in capsule hotels or crash on people’s couches to avoid paying for hotel rooms. But as I get (slightly) older, I admit that I’m focused more on hotel redemptions, so these posts are helpful.

But a lot of these posts talk about how MSing on 5% cash back cards is best because it’s rare that you can get more than that value out of hotel co-branded credit cards. I totally agree. I would much rather earn 5% cash back than hotel points. But to get 5% cash back, you can’t just do your MS in your Cathay Pacific pajamas–you actually need to get your butt off the couch, put on some real clothes, and go outside (typically to grocery stores or gas stations).

Take Amazon Payments: it’s probably the easiest form of MS around. Granted, you’re capped at $1k per person per month, but you can do it from anywhere. But you’re not going to get a 5x multiplier. There’s another MS technique that’s relatively easy for me since I live close to a certain bank branch. But again, no 5x for that. So if 5x isn’t an option, what should you do?

I’ve said it before on my blog, but Club Carlson doesn’t get nearly the love that it should in the miles/points blogosphere. The Club Carlson credit cards are crazy good. 5x points would be meh by itself, but the extra free night for every award stay makes this card awesome. As long as you stay in increments of two-night awards, it’s like you’re doubling the value of your points. I’m heading to Sydney in a couple of weeks, and I’ve got 4 nights booked at the Radisson Blu Plaza (2 nights from my personal account, 2 nights from my business account, which is slightly dubious, but that’s another topic). Total points cost: 100k Club Carlson points. You can get that from $20k in unbonused MS since you get 5x everywhere. $20k of MS on a different unbonused card (like a 2.22% cash back card) would be $444 cash back. That’s good, but I doubt you’re going to get 4 nights at a nice hotel in a great location in Sydney for $111 per night.

Obviously, if you can get 5% cash back instead, the calculation is totally different. 5% back on $20k is $1000, and you can probably find a hotel for less than $250 per night that you’d prefer. But for those of us who are lazy and aren’t willing to go to the grocery store for our MS, Club Carlson is a pretty great program (with the normal caveat that their geographic footprint is more limited than many other hotel chains).

(Inefficient) Manufactured Spending to Hit Minimum Spend Requirements

In my mind, I arbitrarily divide manufactured spending into two camps: that which you do on an ongoing basis, and that which you do to meet minimum spend requirements. I don’t really do much of the former (mostly because I’m lazy, but also because I don’t have a car and live in SF where there’s a specific lack of many of the places that are critical to other people’s MS schemes), but the latter is a necessity if you want to take advantage of some of the most lucrative offers. Example: the Citi Executive AA card, which used to be incredible at 100k miles for $10k of spend, but is now still good at 60k miles for $5k in spend.

For someone like me, $5k of spend in 3 months is a lot. Unless I’m buying airplane tickets (which usually occurs in sporadic, unpredictable bursts), I probably won’t naturally hit that much credit card spending even if I put all of my expenses on one credit card, so I generally need to supplement my spending to hit credit card minimum spend requirements. But because the rewards for hitting minimum spend requirements are so much higher than normal, it’s worth it to me to pay more to accomplish these targets.

To be more concrete, for ongoing MS to be worthwhile, you generally need to get the cost below 1% or 1 cent per dollar “spent”. If it’s much higher than this, it generally isn’t worthwhile to do, since your ongoing credit card rewards are probably worth around 2% back (granted, there are many exceptions to this). On the other hand, for an offer like 60k miles for $5k in spend, you’re effectively getting 13 miles per dollar for your first $5k in spend. If you value AA miles at 1.5 cents per mile, that’s nearly 20% back, which means your manufactured spend could cost nearly 20% and you’d still be willing to do it to meet this minimum spend requirement.

Given the much higher return for meeting minimum spend requirements, you can employ different, less efficient methods to generate spend. Instead of buying cash equivalents and converting those cash equivalents to cash, you can just pay to process a credit card directly and eat the fees, which are normally around 3%.

There are numerous ways to do this, although I don’t necessarily recommend them. Here’s an example that I actively discourage: there’s a certain tech startup named after a shape that allows anyone to sign up to process credit cards, and they’ll send you a free reader that you can plug into your phone. They charge 2.75% per swipe, and the funds get deposited in your bank account the next day. If you need to spend $5k quickly, you could swipe your own credit card and pay $137.50 in fees. This isn’t worth it for ongoing manufactured spending, but it’s totally worth it to get 60k AA miles (that’s like paying 0.23 cents per mile) from the sign-up bonus. It’s also incredibly straightforward, as the money gets deposited into your bank account, which you can then use to pay off your credit card. No other intermediaries or social security numbers required.

Again, I actively discourage this approach using this specific company. I personally have never done this, but there are enough horror stories online about people getting their accounts disabled and money held for 6 months by this company that the risk isn’t worth it for most people (you also don’t really have a leg to stand on if this happens to you since this behavior is against their terms of service, so they have every right to shut you down and hold your money). However, this space has a number of competitors, and people have had success doing similar things with other companies. Tread carefully.

All manufactured spending carries risks, and you need to figure out what your risk tolerance is. Will you be okay if $5k of your money gets tied up for 6 months? $10k? What about longer? You need to answer these questions for yourself and only do what you’re comfortable with.