What is manufactured spending?
Manufactured spending is a spending technique where in order to achieve a credit card bonus, or in order to boost ones credit card rewards points/miles, an individual goes and buys something, usually a debit card, then redeems that debit card in order to pay off the credit card as quickly as possible, thus “harvesting” the reward points without paying the interest on the credit card.
Is this a legitimate way of earning miles and or points?
Yes and no. While there is no law as of yet regarding this process that prevents you from doing it, there is fine print in your credit card contract that does prohibit the purchase of “cash equivalents” with your card. This means debit cards. Search around your credit card rules, it is there.
Do people do manufactured spending?
Yes. This technique is practiced by a growing sub-culture of travel aficionados who believe that it is a rather quick and painless way to rack up large numbers of hotel and airline miles in order to enhance or expand their travel options.
What happens if I am caught?
Well, I am starting to hear tale from people who are having their credit card accounts closed and their points forfeited. Your not going to jail. But, suddenly finding all your report points forfeited and your account closed, is quite painful.
What is the best way to achieve all those reward points?
Organic spending. That is always your best way of gathering points. Now, that said, have I done manufactured spending? Yes. But, I offset it by making sure that credit card I am doing the manufactured spending on is also used exclusively for months afterwards as I offset the manufactured spending with a heavy, and I stress heavy, dose of organic spending; gas stations, restaurants, malls, etc.
How would the credit card companies know you are manufactured spending?
Suppose on your credit card application, you put down you make the Average Joe salary of $32,000.00. Suddenly, the credit card company sees you spending, thousands of dollars, every day at the same grocery store, drug store, or the same convenience store, this will trigger their algorithms that something is amiss. This could cause the credit card company to audit your spending. If they see the same transactions over and over and over, for example the same charge $506.95 (a $500 debit card and $6.95 activation fee)… Well, it does not take a genius to know what is going on here.
What variations are there on Manufactured Spending?
Ah, now we are thinking outside of the box! A growing number of Average Joes engage in what is referred to as “retail arbitrage.” They use their credit cards in order to buy items that are on clearance or deep discount from a traditional box store, thus incurring and demonstrating an organic spending pattern and getting their reward points without issue. Then they resell these items on eBay or some other online platform, (I use to sell items at a flea market) with the hopes of recovering all of their initial outlay and making a profit.
Are there other ways to do Manufactured Spending?
Absolutely! Honestly, there are any number of things you can do. You can pay your household bills with credit cards. You can pay your mortgage with your credit card. You can pay for college with your credit card. Really, the credit cards of today are so versatile, there is nothing stopping you if you want to earn points and/or miles. You just have to be careful that you always pay that bill off!