Post 9 – Manufactured spend basics

Credit card spending is one of the best and easiest ways to earn a boatload of airline miles, especially now with all of the offers out there for 40, 50, or 100,000 miles/points at card signup.  But some of those offers require upwards of $15,000 of spending in a 3-5 month period.  If you’re like me, you don’t spend anywhere near that kind of money in that kind of time frame.  Luckily, there is a concept that is wide spread in the miles and points universe called Manufactured Spending.  We’ll go into the details here for you and hopefully you’ll be on your way to earning tens of thousands of miles in no time!

1. How to choose your best program.
2. Understanding the ins and outs of your program.
3. Earning with program partners and redemption.
4. How to earn apart from flying on planes.
5. The hidden DNA of credit cards.
6. Not all points and miles are the same.
7. Aspirational rewards and good mileage values.
8. Importance of status and elite benefits.
9. Manufactured spend basics
10. Searching for deals. Mistake fares. Mileage runs.
11. HUCA

What is Manufactured Spending?

For all intents and purposes, manufactured spending is spending money without actually buying anything.  You’re literally spending on … nothing!  I know that might be kind of hard to grasp so here’s a simple example.

You go to your local grocery store to pick up milk, eggs, bread, etc.  You’re spending money on those items and you’ll consume those items.  But as you are about to leave you look to your left and see a giant gift card rack.  Gift cards from Domino’s Pizza, iTunes, and others.  But also on the rack are the “Happy Birthday,” “Congratulations,” and “Happy Graduation” prepaid visa gift cards.  This, is the start to your manufactured spending journey.

But, how is buying a Visa gift card the start to manufacturing spend?  Because essentially you’re buying money with money.  You buy the gift card with your credit card, and you’re given cash in the form of a prepaid visa gift card.  Now, you still owe your credit card the money for that purchase, but you have all the money in the gift card.  So, simply use the gift card for your daily spending instead of your credit card.

Why Manufacture Spend?

There are a couple of situations that this works in your favor.  First, if your card has a high introductory bonus spend offer, and you only have a few months to hit that high mark, buying gift cards can be a way to get that spend quickly.  Then, you’ll have a few extra weeks or months to spend the gift cards and pay off your credit card bill.  Secondly, if you have a credit card that has a category bonus for spending you can earn 2, 3, or even 5 times the miles!  For example, if your credit card offers you 3x the bonus points at grocery stores, buy some prepaid gift cards at the grocery store, then use them for your everyday spending everywhere you go.  Bingo, you just earned 3x the bonus points everywhere you shop!

Ben and I have a card that offers 5x the spending at office supply stores, so we head to local office supply stores and pick up prepaid gift cards and gift cards for all of the other stores we shop at (including gas stations and clothing stores).  We earn 5x the points for the spend and take those gift cards and spend them everywhere we go.

Other than gift cards…

So, maybe prepaid gift cards aren’t your thing because you’re convinced that you can’t possibly spend your way to those limits.  There are other ways to get around this conundrum.  A couple things that we’ve done in the past include eBay, BlueBird and reselling.  I’ll briefly go over those to give you a few ideas,

eBay Basics

eBay has been around for years, and is a great way for people to buy and sell things at a discount.  Recently eBay has introduced their own rewards program called eBay bucks, where you can earn between 2-10% back on the purchases you make.  To not rehash all of that here, check out the post HERE that we did a few months back.

BlueBird from Walmart

Walmart introduced their prepaid debit card a few years back and has been a huge hit among manufactured spenders.  The prepaid cards that we mentioned earlier could be loaded onto the BlueBird card and then you were able to pay off the credit card you used to purchase the gift cards.  As recently as last week, Walmart started shutting down accounts who were used by people who did excessive MS (manufactured spending) so maybe approach this one with a little bit of caution.  If you want to know some of the specifics as to how it worked, write us a line or leave a comment below and we will work with ya.

Reselling

Reselling is a practice as old as time.  You’ve heard the old adage of “buy low, sell high” and that’s really all that it is.  Finding products to sell and get them at a low price is the hardest part.  Once you do, the two largest places to sell products are eBay and Amazon.  We haven’t ventured into Amazon selling yet, so I can’t speak to that.  I’ve read other blog posts about people who sell on amazon, everything from success to horror stories.  Effectively you get the product, send it off to an Amazon distribution center and then they package and ship it out for you.  The problem here is that Amazon takes quite a large chunk of the sale price our for managing the entire process.  If you’re running on low margins, this could be troublesome.  eBay is the other options, as you take care of all the packing, shipping, returns, etc on your own, and even though they still take a percentage of the same price, it’s typically much lower.

Recently we were at our local Staples store and found iPad covers on clearance for $6 a piece.  Using our card to earn 5% cash back and also combining with staples own rewards program of 5% cash back, the price of the covers fell to $5.40 each.  I found out that they were selling on eBay for around $15-18 each, and since our cost was so low, I put the selling price at $13.99 each.  A week later, we had sold all 15 covers, shipped them out, and score a profit of $2.86 on each item.

So sure, $40 profit in a week is nothing to get too excited about, but, not only did we earn the $40 profit (thats over $2000 a year) but we also spent money on our credit cards, at a negative cost.  So, multiply this over a bunch of different products and bingo, you’re a reseller.

Paying Rent with a Credit Card?!

Recently there are two services that have come out for allowing people to pay their rent and other bills with their credit card for a small fee.  Plastiq and RadPad are both services that allow you to pay your rent with your credit card, and they’ll send a check to your landlord.  Easy, breezy, and it’s an easy way to get a few thousand in spending a month.  Because of the cost involved, you might not want to do this every month, but sometimes paying a $30-40 fee is the best way to make sure that you don’t miss out on your bonus.

Review

Don’t let the idea of spending 3, 5, $10,000 or more in such a short period of time get you flustered.  Not only is MS a great way to meet minimum spend goals, but it’s a really great way to earn miles on the cheap (sometimes as low as 1 cent each).  If you’re in this miles and points game for the long haul, MS is going to be an integral part of your mileage earning strategy.

Have you done any MS and if so, share your experiences below!

Author: Jon Nickel-D'Andrea

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