Manufactured spending gets mixed reviews around the travel hacking community. Some travel hackers love it while others consider it to be a bit of a black eye.
Manufactured spending (MS) is a component of travel hacking that requires more time investment and risk but unlocks more opportunities for you to see the world for less.
With artificial spending, you can earn more points and build a credit card portfolio faster. But is the risk worth the opportunity?
What is Manufactured Spending?
Manufactured spending is the act of artificially spending money solely for the purpose of generating reward points or to accelerate meeting your minimum spending requirement.
You artificially spend by purchasing virtual gift cards, products, tools, or services at the lowest cost possible.
Think of manufactured spending as “spending arbitrage.” If you can earn 5% cash back for spending money at a store but it only costs you less than 1% to transact, you are inherently making money on that purchase.
Previously, you could purchase virtual gift cards to convert to cash which would enable you to earn points for virtually no cost.
That involved a bit of a run around the town. Now, manufactured spending continues to evolve.
Things to Consider with Manufactured Credit Card Spending
There are a few things you should know about spending money artificially before you get started. I’ll highlight some of the more important considerations, rules, and facts below.
1. Play the Long Game
Don’t go all-in with one way of manufactured spending right away. You should think about your role with MS and what is truly comfortable for you.
Travel hacking as a whole is a marathon and not a sprint. Take a long-term point of view.
2. No Credit Card MS Opportunity is Safe
You can’t think that every opportunity is going to work for the foreseeable future. You should be aware of fastly changing times. If there is something that works for you, stick to it. No need to get cute or aggressive. Also, with certain credit cards, you should avoid MS.
I didn’t do any credit card manufactured spending with my American Express Platinum card. I have done it with lesser-known credit cards to hit the bonus faster and move on. Credit card companies clearly know that manufactured spending cuts into their profits.
Things like money orders and loopholes like that are likely a thing of the past.
3. Cut Your Losses if Something Fails
You might not always come out ahead. Things change quickly. With credit card MS, you should simply cut your losses if something changes.
If you can still recoup some of your money, you should consider that. This will help you move on and keep a level head for future opportunities.
You don’t want to take a continued risk (if you don’t need to). People that have stretched beyond their limits have had complete shutdowns occur.
4. Be Considerate to Others
There are some retail stores, small businesses, restaurants, etc. that have different rules and policies across the nation. Even if you call a credit card hotline twice, you might not get the same answer twice.
If a customer service rep tells you that nothing works, be considerate and thank them for their time. Then, consider trying again at a separate location.
5. Don’t Let Your Spending Interfere With Your Finances
Again with the whole comfortability thing. You simply can’t start doing artificial spending if you aren’t comfortable with it. At times, you will be carrying thousands of dollars on your credit cards.
Don’t let this interfere or become a detriment to your personal financial situation. Stay creative and flexible. Always have enough in reserve to cover any of your spendings that is manufactured. You simply can’t afford to dig yourself into a hole financially.
The single highest priority with manufacturing your spending is liquidity. Without it, you can end up being completely left in the dust. Imagine purchasing something and being left with little value for it over time.
See Related: Ways to Save Money for Travel
Risks of Credit Card MS
You may have caught on to some of the risks based on what I mentioned above.
Here is a full list of what you need to know if you do consider participating in manufactured spending for travel hacking purposes:
- Time-consuming (you will find yourself in retail shops and speaking with customer reps at odd hours of the day)
- You could have your credit card account shut down or bonus points crawled back
- Risk of a full loss of money or non-profit generating opportunity
- Potential for personal finance damage if not done correctly
These risks are important for you to consider alongside the opportunity itself. Everyone is different and has different goals with travel.
If you want to build a rewards balance of millions of points, you might need to manufacture your spending to get there. Other people could get a million reward points solely from their work traveling.
Consider your personal finances first. Not what someone else says.
Is Manufactured Spending Illegal?
Manufactured spending is not illegal by any means. Some people question the ethics behind it. I wouldn’t worry about that. It’s sort of like finding a loophole or an opportunity for profit. That is why I call it “spending arbitrage.”
You are simply generating a benefit for you that is in excess of the cost to do so. There’s nothing wrong with that. There are a few ways to manufacture spending to generate credit card reward points. Let’s get into the execution aspect of this part of travel hacking.
Are there any laws against manufactured spending?
Manufactured spending is dangerous if the store owners or management can misinterpret your work. Money laundering and manufactured spending use similar techniques that have been responsible for increasing government risk with each case when these activities are occurring, particularly when it involves a personal bank account.
A bank or credit union has triggers against these types of conduct. If you conduct a cash transaction exceeding $10,000 you must complete a dollar report required by the U.S. Treasury.
Although it’s possible that some credit card firms have limitations on certain contracts, this may not be the case. You might even get arrested by police and entangled with the IRS, yet it isn’t something to dismiss lightly.
So, that is the big question about whether doing this to earn credit card points is actually worth it.
See Related: 21 Top Family Travel Hacks
Ways to Manufacture Your Spending
When you think about participating in manufactured spending, there are a few ideas and tricks. I’ll highlight some of the most effective ways to do MS below.
Convert Visa Gift Cards to Cash
With liquidating gift cards to cash your goal is to buy one of the Vanilla Gift Cards with Visa at a store of your choice.
An example is when Walgreens is part of the 5% cashback category with Chase Ultimate Rewards, you can buy $500 increments of Vanilla Visa Gift Cards with the goal of converting them to cash.
You can turn the gift cards into cash by trying to purchase a money order (this has since become much tougher to do) or you can resell your gift card online for a slight discount on the cash value.
These are the most common to do since they can be used at any store, in the event you can’t liquidate…
Manufactured spending started from one of the main loopholes of using your credit card to buy Visa gift cards to then turn around and buy money orders to start liquidating gift cards.
Purchase Store Specific Visa Gift Cards
You can purchase specific gift cards for stores, retailers, and online shops. To liquidate Visa gift cards into cash, you will likely need to simply sell them to a friend or someone online.
Here are some ideas of retailers that have an extremely high demand for products:
- Best Buy
Find opportunities where you can scale gift card purchases for some of the above stores. There are a lot of people out there looking to buy gift cards at these locations. Use a platform like GiftCardMall to sell your gift cards.
See Related: Best Credit Cards for Churning
Buy Highly Liquid Goods for Reselling
What items are as close to cash as possible? Things like brand-new TVs, iPhones, iPads, and other high-valued, high-demand electronics are pretty scalable when it comes to manufactured credit card spending.
At times, your credit card provider will offer bonus points for spending money at certain stores. Place like Best Buy, Target, and Walmart are opportunities that you will want to jump all over. You can buy new iPhones at scale with the goal of reselling them on Amazon.
Retail arbitrage has become a thing too. Amazon actually doesn’t offer the lowest prices. You can find goods in retail stores like Target
ViaTravelers tip: Buy your items through shopping portals such as Southwest’s Rapid Rewards Shopping or United’s MileagePlus Shopping. This will help you stack your rewards earning rate.
See Related: Best Travel Credit Cards to Consider
Purchase Event Tickets for Reselling
This is a full-blown business if you ask me. It’s a bit different than simply spending money to convert it into cash. However, certain events have significant liquidity associated with them. Imagine a sold-out Metallica show?
Purchasing event tickets will be hard for you to earn massive bonus points, but it’s somewhat scalable. It’s one of the rare options with manufacturing your spending that can actually generate an income along the way.
See Related: Miles App Review
Open a Bank Account
Did you know that there are a handful of banks that allow you to use a credit card to open them? You can open a bank account with Aspiration and get a $200 bonus for signing up.
This is a great way to manufacture spending to meet your minimum spending requirement.
It’s really not scalable because you can only do it with a handful number of banks and a handful number of times. Bank accounts are very sticky for a reason, meaning they are hard to close and come with the hassles of withdrawing and meeting certain deposit limits to avoid even more fees.
See Related: 18 Gift Ideas for Couples Who Travel
Use Bill Pay Services
There are a handful of bill pay services that will let you pay your mortgage, student loans, car payment, and many other major expenses with a credit card…
That catch? They charge an additional fee for their services. With this strategy, you need to make sure that you are actually generating a profit by spending with your credit card relative to the cost. If not, why even do it?
There are other opportunities that are just or more efficient. You can pay the price and not generate a profit solely to meet your minimum spending requirement faster.
That is one reason why people use bill-pay services like Plastiq.
See Related: Reasons Why Traveling is Important
Conclusion – Is It Worth the Time?
If you want to manufacture spending, you should consider how this fits into your priorities of travel hacking. Can you get the most bang for your time spent? For me, I simply don’t do it anymore because there isn’t enough of a return on investment (ROI) for my time.
Even with 5% rewards earning rates for certain stores or even stacking at 10%, I don’t want to risk the wait of something not working out along the way.
Let’s do the math: if you spend $10,000 at a 5% earnings rate (that might be aggressive since you will likely be capped out), you will only earn $500 of rewards points.
At the same time, it’s not worth me spending over $10,000 and being held responsible for selling off that much inventory. I’d rather stick to the other components of travel hacking like booking award travel, finding cheap flights, making money while traveling, etc.
What do you think about manufactured spending? Is it worth your time and energy?
Reach out to let me know if you think this is something that other travel hacking pros should consider.
Frequently Asked Questions (FAQs)
What is manufactured spending?
Manufactured spending (also called manufactured transactions) is a way for savvy credit card users to earn points, keep their credit score up, and be rewarded with things like fake money.
Use a free service like CreditKarma to monitor your score. Manufactured spending is the process by which someone conducts chargeback or returns in order to make purchases to make it look like they paid cash and in turn, collect points.
The thing about manufactured spending is that it’s not nearly as simple as swiping an item before returning it. Manufactured spending takes time, patience, and effort – but once mastered can produce huge rewards on frequent flyer programs!
To create the spend you are basically hacking the system of rewards by purchasing items at one store with your Chase Ultimate Rewards Credit Card so that you get cashback and then you “manufacture” the purchase by returning those items to a different store that returns as a credit (for things like holidays or big sales).
Once manufactured, all of these purchases will roll up into your credit card bill and can be manufactured over and over again.
What is manufactured spending at Walmart?
In a nutshell, manufactured spending is “the process of systematically buying and selling cards to generate ‘free money.'” It’s most often done by people that already have a high income. This was done at Walmart by using Visa Gift Cards to purchase money orders with the cost of the Visa Gift Cards and the money orders being less than the number of points generated from the transaction.
Is credit card churning illegal?
Credit card churning is not illegal but each credit card company has their own policy in regard to this practice. So, if you decide to pursue this strategy you’ll need to understand what it takes to be within the guidelines of each of your bank accounts and credit card issuer’s terms of service.