Secretive jet-setters drawn into alluring yet risky financial activity. Legal money launderers. This is how a recent Bloomberg article characterized credit card churners.
While it’s a slightly hyperbolic description for your casual churner, who’s more likely a suburban dad trying to get his family a discounted trip to Disneyland than the next Wolf of Wall Street, the characterization is not far-fetched for a more aggressive breed of churner who utilizes a technique called “manufactured spending” to reach minimum spend requirements.
Let me back up.
If you’ve read our recent articles on credit card churning, you know that the tantalizing sign-on bonuses almost always come with a stipulation: you need to spend a certain amount within a certain time period in order to receive them. The amount is usually feasible; a common offer is 50,000 airline miles if you spend $3,000 in three months.
The tricky part comes in when you start applying for more than one offer in a short time period. If you come across three amazing offers in one month, you may be looking at trying to spend $9,000 in three months, which is difficult for many.
How Do You Hit Those Minimum Spend Requirements?
Assuming you’re already using these credit cards for all of your daily purchases and you still don’t think you’ll hit the minimum spend, here are some additional purchases you can put on your credit card.
Buy Gift Card With Your Credit Card
If you know you’ll have a big purchase eventually but not immediately, go ahead and buy a gift card for a place that sells what you’ll be buying. Just make sure you can still pay off your card in full. Alternatively, you could buy gift cards for things you know you’ll continue purchasing regularly in the future, such as gas.
Pay Your Bills With Your Credit Card
Your mobile, cable, internet, and utilities companies may already allow you to pay your bills using a credit card without tacking a fee. Even if they do tack on a small fee, it’s usually worth paying. You can also pay your Home Owners Association fees using a credit card, or even pre-pay HOA fees for several months in advance. Use your credit card for your income taxes, property taxes, and insurance bills as well. A website called RadPad allows you to also pay your rent online using a credit card, even if your landlord doesn’t accept credit cards, although a fee will apply.
Pay Off Loans with Your Credit Card
You can pay student loans using a credit card through Navient, although they charge a $15 flat fee. You may be able to use your credit card to make auto loan payments, depending on your lender.
Pay For Business Expenses With Your Credit Card
If you are often required to make purchases for work using your company credit card, consider using your churning credit cards instead of the company card. Just make sure to check company policy and be certain that they will reimburse you; some employers require purchases to be made on your company card.
Manufactured Spending
If you’ve done all that, and you still aren’t going to hit the minimum spend requirements, it’s time to look at manufactured spending. A technique that allows you to, in theory, spend money without actually spending money, it involves making purchases on your credit card that can be turned into cash and then using that cash to pay off your card.
Start small. Try manufacturing $50 or $100 in spending first and see how it works out. More importantly, never devote more money than you can float to manufactured spending, in case something happens that delays your money. I can’t say it enough – the first rule of credit card churning is always pay off your credit card bill in full every single month.
It’s also very important that your manufactured spending is not processed as a cash advance in order to avoid additional fees and hits to your credit, and it can happen sometimes if you’re not careful. Read more about this here.
Funding A Bank Account With Your Credit Card
A handful of banks out there will allow you to open a new checking account and fund it with a credit card. Of course, there is a limit (usually $500-$1,500), and you can only do this once. But it’s an easy way to manufacture $1,000 if you’re close to hitting a minimum spend. However, sometimes this transaction is processed as a cash advance, which you want to avoid, so read up on what banks do and don’t process it as such.
Buying Gift Cards with Your Credit Card
This is perhaps the most talked about form of manufactured spending, although it has seen increasing limitations in recent years.
If you can find a place that allows you to use a credit card to purchase, say, a Visa giftcard, and they allow you to purchase them in high amounts ($500+), you may be able to make this work. Sometimes, you may go to a store that doesn’t have a corporate policy against using credit cards to purchase gift cards and still be turned away by a clerk or manager who is worried about people using this technique to commit fraud, so it can get tricky.
Even if you get the cards, you’ll still have to liquidate them to pay off your credit cards. Many cards can be used as debit cards once you set a PIN for them, at which point you could use them to purchase a money order or load up a reloadable prepaid card that allows you to pay credit card bills with them. If you’re lucky, and your bank allows you to pay your bill using a debit card, these gift cards might actually work directly.
As you can probably tell, this is a complex technique, and we encourage you to do more reading before jumping in.
What do you mean by Manufactured Spending? I’m at a loss as to what that would be.