Welcome to the 5th part of the “Around the World for Free” series!
In this part, we’ll be talking about manufactured spending and how it can help you obtain those credit card bonuses faster without using that much money to meet the minimum spend.
Finally, “Around the World for Free” is a multi-part series that is posted weekly, so make sure you tune in and check out the other posts whenever you can!
What is Manufactured Spending
Manufactured Spending is the process of creating spend with a miles or points credit card through the means of purchasing a cash equivalent. The goal is to earn miles or points from the purchases and then use liquidate the purchases to pay back the credit card.
Typically, the cash equivalent is something like a gift card, money order, etc.
The ways to manufacture spend change as companies patch up loopholes, but the most well known example was the purchasing of $1 coins from the US Mint and then depositing them into your back accounts to pay off your credit card.
How to Manufacture Spend
Currently, the most common method of Manufactured Spending is by purchasing gift cards from retailers like CVS or Simon Mall, then liquidating them by purchasing Money Orders from USPS or Walmart, depositing them into a money-order friendly bank, and using those funds to pay off your credit card.
To put it into a list, it would look like this:
- Purchase Gift Card with Credit Card
- Purchase Money Order with Gift Card
- Deposit Money Order into Bank Account
- Use Funds from Bank Account to Pay off Credit Card
The Method I use to Manufacture Spend
While there are many ways to manufacture spend, I’ll be going into how I use the method explained above to generate spend for easy points and miles.
The Manufactured Spending Process
To put it simply, here is the process I take to manufacture spend:
- Identify Card To Manufacture Spend On
- Purchase Gift Cards With Card at Simon Mall(only purchase an amount of gift cards you can float, in case something goes wrong).
- Liquidate Gift Cards into Money Orders at Walmart
- Deposit Walmart Money Orders into my Simple Bank Account
- Use my Simple Bank Account Funds to pay off my Card
Identify Card to Manufacture Spend On
The card that I manufacture spend on is usually the card I have to reach a minimum spend on. If I don’t have a card to meet a minimum sign-up bonus on, then I will either sign up for a new card for more bonuses or place my manufacture spend on the card that would generate the most points and has the most value, which is my American Express Starwood Preferred Guest Business Card.
If you took a look at The Point Guy’s Point Valuation Chart, you will see that Starwood Points are valued at 2.7 cents per point. Starwood Points are actually the highest in the point valuation chart because of how hard it is to obtain them.
Purchase Gift Cards with Card at Simon Mall
The easiest way for me to obtain gift cards, the cash equivalent, is to head to my nearest Simon Mall.
Luckily for me, there are plenty of Simon Mall’s around the area and I can easily drive to one within ten minutes.
One thing you’ll have to think about before purchasing the gift cards is how much money can you float without getting yourself into a financially bad scenario. By float, I mean how much can you handle if something were to go wrong.
For example, let’s say that I can handle at least $2,000 in damages if something goes wrong, then I should only float $2,000, so if something does go wrong, I can fix it easy with my stash. You could also think of this as an emergency fund.
Personally, I can float around $10,000 – $20,000 a month.
Anyways, once I’m at Simon Mall, I would request to purchase 5 gift cards at $500 each. The reason I choose 5 is because once you purchase over 5, you have to fill out an anti-fraud form for Simon Mall’s record keeping and since I don’t like filling out forms, I try to avoid it.
Finally, since I am purchasing 5 gift cards and each gift card purchase has a fee of $3.95, the total cost of the gift cards with fees is $2,519.75.
Liquidate Gift Cards into Money Orders at Walmart
Once I have the gift cards, I drive to the nearest Walmart in order to liquidate my gift cards by purchasing money orders.
I may be wrong in this, but I believe you can only purchase 2 money orders a day at $1,000 each for a fee of $0.70 per money order.
I’ll ask for a $999.30 money order, which will bill to a total of $1,000.00 after you add the $0.70 money order fee, and then pay for it through a split payment on two of the gift cards I bought.
Deposit Walmart Money Orders into my Simple Bank Account
Once I finished buying the money order, I just have to deposit into my bank account.
For this, I have a dedicated bank account for doing manufactured spending as some banks like Chase, Bank of America, Wells Fargo, etc would close your accounts with them if you do deposit money orders frequently with them.
Simple also has an awesome online deposit system, so I would just deposit the money order via my phone in my own home.
Use my Simple Bank Account Funds to pay off my Card
And finally, the last step, once the funds clear into my bank account, I would pay off my credit card using the credit card institution’s online bill payment system.
Is Manufactured Spending Worth It?
Now, is Manufactured Spending worth it?
Well, let’s do the math.
Let’s say I spend $5,000 on gift cards, that means I would be purchasing 10 $500 gift cards with fee of $3.95 for each of them, totaling up my amount of fees to $39.50.
$5,000 in gift cards would mean I have to purchase a total of 10 money orders at $1,000 with fee of $0.70 for each of them, totaling up my amount of fees to $48.50 ($39.50 + $7.00).
For $48.50 in fees, I would generate a total of 5000 points from $5000.00 in purchases with the Starwood Preferred Guest Business Card as I would earn 1 Starpoint for all other purchases.
5000 Starwood Points would be worth $135.00, when valued at 2.7 cents per point according to The Points Guy’s Point Valuation.
Finally, if we subtract our profit from our fees, we would have a net gain of $86.50.
Repeat this a few times and you’ll have a lot of points to spend on free travel, so yes it’s definitely worth it!
Now imagine this scenario for credit card sign-up bonuses! You can easily fulfill a $5,000 minimum spend by only paying $48.50!
Manufactured Spending is a great way to earn and collect miles and points at a faster rate.
I have earned over 500,000 miles and points by manufactured spending, mainly because I don’t have much personal expenses. You can actually check out my monthly net worth reports to see what I spend my money on as well!
What do you think about manufactured spending? Would you do it to earn more points and miles to go on awesome vacations? Why or why not? Share your experiences in the comments below!
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Here is the table of contents for the “Around the World for Free” series: