Last month, we shared some of the more uncommon travel hacking techniques we’ve discovered, including the idea of “Spending Money That Isn’t Yours.” This month, we look at a specialized application of this approach – manufactured spending.
The basis of travel hacking by manufactured spending is to make a financial transaction with the objective of earning rewards points on a travel credit card, while returning that money to pay off the credit card bill. Let’s call it what it is – money laundering. But essentially, you are making a loan to yourself against the credit card and then paying off the loan. The only true net cost is the transaction fee.
The best way to do this is to use your travel loyalty credit card to purchase a “cash like” product. We like Visa gift cards because they are easy to find, you can get them in large denominations, and it is easy to utilize the debit card functionality to extract the cash (typically through a Bluebird by American Express bank account). Finally, you close the circle and pay off the loan to yourself.
Here is a step-by-step process to implement this travel hack:
- Go to Bluebird.com and set up an account.
- Go to a store that sells Visa gift cards and purchase them using a credit card that awards you points/miles. Look for cards that will allow you put $500 on each Visa gift card (the transaction fee will be $4.95).
- Now you must physically go to a Walmart store to load your Visa gift card onto your Bluebird account (either at an in-store kiosk or by speaking to a customer service representative).
- From your computer, log into your Bluebird account. You can either pay off your credit card via bill pay or write a check to yourself – either option returns the cash to you.
- Repeat steps 2-4.
The reward is significant! If you do the full $5,000 (the limit you can load onto your Bluebird in a calendar month), you’ll “spend” $5,049.50 per month and get 5049 miles/points, but that is only $49.50 in terms of net cost (so your cost per mile/point is $0.0098) assuming you use a credit card with 1-point or mile per dollar. During the year, that is 60,594 points/miles. Think of how many trips you could take with that!
A few final words. If you time this right, you’ll never be out any of the money – you can pay off your credit card with the money from your Bluebird account before the credit card bill is due. You may encounter questions from store clerks about what you are doing. It’s not worth arguing. This is legal, but sometimes they can be difficult. It’s best to go to another store or come back at another time. You might read about this manufactured spending travel hack on the Internet using something called Vanilla Reload. Due to changes in April 2014, you can no longer use credit cards to purchase Vanilla Reload, which has made this hack more complicated. If you’re going to try it, just stick with the Visa gift cards.
If you look at many travel reward credit cards, they can offer huge bonuses for meeting a minimum spend. For example, some credit cards will give you 50,000+ points/miles once you spend $1,000 with them. The Starwood American Express will also give you Gold Status once you spend $30,000 in a year. This travel hack is a great way to meet those minimum spending levels.