Update: As of September 4, 2015, shopping portals are no longer offering cash back on large denominations of Amex gift cards, so I would advise against this method of manufactured spending.
There are several reasons why American Express gift cards are better manufactured spending tools than Visa and MasterCard gift cards. I’ve outlined some of them before, but it comes down to what matters: It’s cheaper.
American Express gift cards have a high purchase limit (up to $10,000 every 14 days), they are easy to unload, and you have the ability to not only eliminate purchase fees but earn a profit when ordering these through a cash back portal. But first things first, here are the basics you should know about American Express gift cards:
Purchase Limit. You can purchase up to $10,000 worth of consumer American Express gift cards every 14 days. These gift cards come in increments of $25-$3,000 but shopping portals don’t pay out cash back on denominations over $2,000. When you make your purchase, you do have to provide your SSN, which is how they track your daily maximum. At the moment, Extrabux is the only shopping portal still offering cash back on Amex gift cards purchased in denominations over $200.
Business gift cards come in the same increments, but purchases are capped at $100,000 every 14 days (try spending that without setting off a fraud alert). Instead of your SSN, you’ll have to provide your business tax ID number at check-out.
Fees. Amex gift cards have a low fee of $3.95 per card. You are also liable for a $5.95 – $8.95 shipping fee per order. Sometimes shopping portals will offer promo codes that waive the shipping fees. Other times, Amex will offer their own codes – do not use these unless they’re also listed on the shopping portal page. Otherwise, you will not earn cash back on your purchases.
Where to Buy. You can purchase American Express gift cards online or at most grocery stores. Online is best, since you can earn cash back from shopping portals. In-store, you might get discounts that off-set the fee and earn in-store rewards.
How to Cash Out. The simplest way to unload Amex gift cards is through regular spend or by using them to purchase PIN-enabled gift cards that are then liquidated via money orders or Target Prepaid RED (aka Redbird) cards. Target Prepaid RED has a bill pay feature, so you can use the balance on the card to pay off your credit cards. I wouldn’t unload the entire balance this way – mix in some regular spending, use it at ATM machines to make card use look as normal as possible. Money orders can be deposited into your bank account or used to pay off credit card balances at your local bank brach.
Cashback Portals. There was a time when cash back portals offered upwards of 4% cash back on Amex gift card purchases. Most every shopping portal has since pulled Amex gift cards from the lineup or restricted cash back to gift cards purchased in $200 increments. The remaining portal, Extrabux, pays out 1% cash back on American Express gift card denominations of $2,000 or less.
If you purchase the maximum $10,000, you’ll have $19.75 in fees and a $5.95 – 8.95 shipping charge, bringing your total to $25.70 – $28.70. Through a shopping portal, you’ll earn $100 cash back (note: shipping and fees don’t qualify for cash back). Unloading these via PIN-enabled Visa and MasterCard gift cards will incur fees of $79 – $119, plus extra fees if you’re going the money order route. Factoring in the 1% cash back earned from a shopping portal will either leave you with a small profit or minimal out-of-pocket expenses.
Warnings. Keep in mind that several banks will code American Express gift card purchases as cash advances. If this happens, you will not only miss out on points, but you will be liable for cash advance fees. This Flyertalk thread is a good resource to keep track of which credit cards code these purchases as cash advances. Generally, it’s Citi that does this, but do take a look at the list first in case anything changes.
Also, don’t go overboard buying Amex gift cards. I generally keep my manufactured spending activities at or below $6,000 per card each month (though there are exceptions) and that has allowed me to stay under the radar. The last thing you want is for the bubble to burst because you got a little overzealous with gift card churning.
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