When you’ve got a stash of shiny new credit cards in the mail, a moment of panic hits as you think of the $10,000 spending requirement you have to meet in the next 3 months. For a newbie, the sound of the phone ringing at dinner time come to mind. Breathe easy – this is where manufactured spending comes into play. Below are some of the most frequently asked questions about manufactured spending. This series will expand on these and other questions.
What is manufactured spending?
Manufactured spending involves buying gift cards, prepaid cards, and money orders with rewards credit/debit cards, then liquidating them at minimal cost.
Why do people do it?
Manufactured spending is done to 1.) meet credit card spending requirements and 2.) generate frequent flyer miles and rewards points cheaply. Most people do this in order to secure business/first class travel for roughly the cost of coach.
What are the costs associated with manufactured spending?
There are various costs involved: Time, fees for buying the gift and prepaid cards, expenses for liquidating them. However, the cost of generating points through manufactured spending is often less than the cost of paying for travel out of pocket.
The costs also vary based on the method of manufactured spending. Travel Summary has a great post on the cost of manufactured spending.
How much manufactured spending is possible?
With so many gift and prepaid cards out there, one can generate hundreds of thousands of miles through manufactured spending. However, it’s important to be responsible in order to avoid account closures. I manage about $40,000 per month across various credit cards without setting off red flags.
What are the risks associated with manufactured spending?
If done excessively, manufactured spending can result in account closures. If you’re not tracking all of your manufactured spending activities properly, you could be losing money, accruing late fees and interest charges on credit cards. I don’t recommend going past $5,000 per month if you’re not an organized person.
How can you avoid the risks associated with manufactured spending?
You can avoid account closures by diversifying your manufactured spending across different credit cards and banks. For example, I put my $40,000 per month on various American Express, Chase, Citi, and Barclays credit cards.
You can avoid late fees and interest payments by keeping very close track of all of your billing cycles and ensuring that your credit cards are paid off on time.
Which credit cards will earn you the most points on manufactured spending?
This will depend on where you are purchasing your gift and prepaid cards. Some cards offer category bonuses at select merchants, increasing your earning potential on manufactured spending. I will cover this in detail in the next few posts.