Remember that MS false alarm I wrote about yesterday? Unfortunately, this isn’t another one. I just got word that at the end of this month, giftcards.com will stop offering cash back on Visa gift card purchases. To be precise, they’re ending affiliate commissions. So unless some really great shopping portal is eager to win over the loyalty of the travel hacking community by eating the cost of the cash back fee, we’re all SOL. The good news? You still have a week to take advantage of the 1.25% cash back rate. More good news: You will still earn cash back on MasterCard gift card purchases – 1.5% to be exact. UPDATE: This change also applies to GiftCard Mall orders.
Normally I’d blame the whole ecosystem, but I’m pretty sure this one is my fault. I promoted this heavily, I got a ton of traffic writing about manufactured spending (and I’m still at it – optimizing this post). Apparently, giftcards.com is doing this specifically to target gift card churners. That’s completely ridiculous on several fronts.
For starters, manufactured spenders are a huge boost to giftcards.com’s business: Combined, we probably spend millions of dollars on gift cards every month. These are gift cards that are a total rip-off for the average consumer when you factor in the various fees, shipping cost, etc. Really, the average consumer has no business buying Visa gift cards – especially not online. And especially not now that there’s no cash back portal that will off-set the fees.
As far as risk goes, people in this hobby are buying gift cards through legitimate means: Our own credit cards. If giftcards.com was cracking down on scammers who use stolen credit cards to cash in on someone else’s credit line, that would make sense. But our gift cards are legitimately purchased. We’re literally every retailer’s favorite kind of customer: Big spenders who are also low credit risks.
There is, of course, one small thing that could have tipped the scale against us. Inevitably, giftcards.com generates more revenue from customers who don’t bother shopping though a cash back portal like TopCashBack or Yazing. That can’t be cheap for them. Especially not since we also liquidate every penny on our cards and we do it via debit transactions. Gift card issuers make substantial profits from unused balances. There’s zero change of any of us not spending our cards down to the last penny because we’re always using them to buy money orders for the same amount.
Since we’re using our Visa gift cards as debit rather than credit cards, I’m sure gift cards.com collects a lower transaction fee. They probably count on those fees to recoup some of the 1.25% cash back they’re giving consumers. Not to mention the commission they pay to cash back portals. It probably wasn’t cheap for them to pay out so much cash and then get very little of it back off the one transaction most of us make with these Visa gift cards.
For the time being, shopping portals will continue to pay out 1.25% cash back on MasterCard gift cards. That should help you reduce manufactured spending fees. Buying money orders with MasterCard gift cards is a little tricky, since it only works on the fourth swipe. You’ll just have to buy Visa gift cards elsewhere and work in one MasterCard per transaction to keep your costs down. Office supply stores frequently have Visa gift card sales, while Safeway offers double gas rewards. My favorite method of acquiring Visa gift cards? At my local mall. In $10,000 increments, and a cash back card worked in to off-set the fees.
Anyway, if you haven’t hit the $30,000 monthly limit at giftcards.com yet, you still have time to take advantage. You can place up to two $2,500 orders per day through giftcards.com. As for which credit cards to use for these purchases, I recommend cards that earn more than 1 point per $1 spent. Or one that pays out an annual spending bonus. Now might be the time to wrap up some of that $40,000 spend on the Amex Hilton Ascend for Hilton Diamond status. Or risk the wrath of Chase and try to earn the Companion Pass. The possibilities are endless (the spending, sadly, is capped at $30,000).
Are you rethinking your gift card churning strategy now that giftcards.com is largely off the table?