Premise
2016 was the year I thoroughly explored churning and, more specifically, manufactured spend. This is the art (or the Hobby) of purchasing near-cash items (Visa Gift Cards, aka VGCs) or resalable items (iPads, tvs, etc.) to pay off credit cards, earning rewards points at a very low per-point cost. I found this link on r/churning, and read it thoroughly as a how-to guide for manufactured spend. The standard practice is to purchase Visa Gift Cards with a rewards credit card, and then purchase money orders to deposit to your bank. This earned plenty of free travel!
Experience – Manufactured Spend 2016
I started off small, rationalizing it that if I was unable to churn 1 $500 card, I would only be out $4.95 for the card fee, and the time spent. I could load my Serve card at the nearest Rite Aid, giving me an excuse to get out of the house and get some exercise, and later I was able streamline my process as best I could. Many, many regular runs to CVS, Walgreens (for diversity), the Post Office, and my various banks helped grow the final total. It was an exhilarating experience, especially reaping the benefits and continually optimizing my MS routine to lower my costs or improve efficiency.
Additionally, being able to see tangible rewards was always the highlight. When I am able to book hotels for my parents, allowing them to enjoy and travel more, or booking luxury hotels for my lady and her parents to experience, I remind myself how fortunate I am to have found such a wonderful Hobby.
It also fuels many of the stays (particularly Starwood) that you see on my blog. And while I may not be one of the “big-time” churners, doing $100K+ a month, I think I am doing a decent amount given my purchase restrictions and limitations.
Statistics and Analytics
Overview – In 2016, I churned $133,000, which comes to just over $11,000 per month, beating my initial $100,000 stretch goal. This does not include another $8,500 that I churned on my lady’s behalf. Each month I churned a different amount. I’ll only be speaking about my churning and some interesting tidbits.
Loading – The first $7,000 (14 cards) went to Serve loading my prepaid card. The remaining $126,000 went to money orders at various post offices all around the country, varying between $500 and $2500 at a time. They were then deposited in one of my various bank accounts.
Visa Gift Cards – Of the 283 total cards, 17 of them were the lady’s, and 266 of them were mine. 128 of those cards (46%) were from GiftCardMall, where I liberally used GivingAssistant to get between 1.25 and 2% cash back on all my purchases. This played a big role in cutting my churning cost, and I expect my overall CPP to be somewhere in the 0-1% range, rather than the 1.1-1.2% range. Post offices have since changed their systems to no longer accept GiftCardMall VGCs. Sad!
Credit Cards – Of my 266 cards, 117 (44%) were on my personal Starwood Preferred Guest card, and 122 (46%) were on my business Starwood Preferred Guest card. Combined, nearly 90% of my churning was done on SPG cards, with the remaining 10% split over various cards to hit minimum spends or get some other points (CSP, United, Fairmont, JetBlue, Freedom).
Overall Cost Calcuation
Card Cost – Assuming a $5.95 cost per GiftCardMall VGC (128), and $4.95 cost per VGC purchased from CVS or Rite Aid (138), the total cost for the cards comes to $1,444.70 (266). This ignores the earlier $3.95/card paid at CVS, or the random $2 discount per card for GiftCardMall sales.
Money Orders Cost – Assuming an average money order cost of $1.10 per $500, which is somewhere between the initial $1.20-$1.25 per $100, and the average 80c per $500 that you get from purchasing a $1,000 money order, the total cost of money orders (for 252 cards) comes to $277.2. So far, the total cost is $1722, based on the previous assumptions
Offsetting Revenue – Cash back from GiftCardMall played a huge part in offsetting many of the above costs. Backing out non-GCM purchases and charitable donations (I make some of those), GivingAssistant paid me $1,526 in cash back.
Result – My net cost, for ~$133,000 in churning in 2016, was about $196. This is about 0.15 cents per point, where I redeem the points for anywhere between 2-5cpp. At an average yield of 3cpp, I would have made about $3,800 profit. Lastly, now that I’ve written it out, it seems quite low – most likely due to its redemption for standard hotels rather than pricey first class or international travel. This also does not include the insane amounts of time, energy, gas, and car wear & tear that I needed for churning.
Next Steps
I have already started in 2017 with gusto, with a new goal of $180,000 this year, or $15,000 per month. Many factors, listed below, constrain my churning ability, but I will see how far I can go.
- Walmarts – no KATE or VGCs purchasable with credit card
- CVS – Limit $2,000 purchase per 24 hour period
- Walgreens – Limit $500 purchase per day
- Post Office – Limit $2,999 in money orders per day, $3,000+ requires filling out a form (don’t want to do this). Over $10,000+ they report the purchase to the government. For what reasons, I don’t know.
Conclusion
Manufactured Spend and Churning are worthwhile hobbies, and it has been a very fun yet strenuous experience last year. However, being able to provide travel to others is one of the highlights of the Hobby, and so I will continue to do so.
Featured image from Pixabay of a goal destination for my churning: Disclaimer: This post may contain affiliate links which, should you click through and/or make a purchase, grant me a commission. Also, I only post in the best interest of my readers. Lastly, thank you for supporting my blog and my travels.
What do you think of my musings on my manufactured spend? Let me know in the comments, or reach me directly at TheHotelion@gmail.com! Like my posts? See more here, on TravelUpdate! Follow me on Facebook (The Hotelion) or on Twitter and Instagram: @TheHotelion
I love this site! I have loved researching this topic and now I am ready to go….I live in MA. I can go to Stop n shop for the Prepaid Visa cards – purchase with my United Mileage plus card and then purchase Money Orders at Walmart….Planning a trip next year to Australia with my family
Exactly! I’d recommend buying with Chase Freedom Unlimited though – you’d get 1.5points for each $, which you can convert with Chase Ink/Sapphire to United. Thus you earn 50% more! Thanks for reading – be sure to check out all my other posts?
Are you purchasing $250 VGC at Giftcardmall? Or was this when they offered $500. I’m interested to know what you’re doing now. Been using Simon for a while for $500 VGC.
I’ve been using GCM a while back for $500s, but recently just CVS/WG $500s. Have not had easy access to Simon.
Thanks for the great article. I am a newbie and
have questions here. Did you write your name and address on money order or
leave it blank when depositing them in your
bank accounts? Can I just send MO I buy in post office to credit card company (
eg Citi, Amex or Chase) as payment? Wouldn’t this way be easier without messing
around bank account? If I have to deposit MO in bank account, is there any bank
you know that would be more linnet to MO?
Just name. You can but I haven’t done so. I would recommend depositing in a bank that you don’t particularly care about!
The reason $10,000+ is reported to the government is because of the Bank Secrecy Act of 1970, which was put in place to prevent money laundering. While it’s perfectly legal to buy money orders via CC and deposit into accounts, be careful!!! “Structuring” (defined as the practice of executing financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by law) is very illegal and can get you in a lot of trouble. (i.e. purchasing $2,999 at post office to avoid paper work, or depositing in to multiple accounts to avoid getting shut… Read more »
Of course. I don’t do anywhere close to $10,000 per day
With GiftCardMall VGC not being able to get a MO at the post offices. Is it still beneficial to MS thru CVS/Rite Aid? You are paying $4.95 per card. How are you going about reducing the cost?
not much else – Cost being $4.95-$5.95 per card, and another $1.25-1.60 per money order, comes to about 1.1-1.2% cost of sale. Which still is quite good – top of the line hotels in Starwood cost ~$300, or you can transfer for flights and such. Because you redeem anywhere from 3%-13%, that 2-12% spread is pure profit.
How did you use GivingAssistants to pay you chase back? Did you use the portal to buy the GC’s?
Yes Portal -> GiftCardMall -> 1.25%-2% CB on full purchase price. Net positive wins!
I am looking into this method to pay off school loans. Employer has reimbursed me for education, so I have about $12,000 ready to pay off a loan and am hoping to somehow meet some minimum spends with it. The school loan holder will not take credit cards, but will take Debit cards. I am trying to find out if any debit card with PIN will work or if I have to use a personalized one. Have any advice on doing this. I am brand new to MS and to mils/points. Until now I didn’t feel financially secure enough to… Read more »
Can always try with one $500 card – you’d be only out $5 if it fails. I’d would recommend you calling/contacting your registrar/bursar to see if they have advice. Don’t tell them exactly what you’re doing, but ask as you did “any debit with pin”. If they require a personalized one, I could see buying one on GCM – gift card mall – and getting the 1.25-2% back an even better for you. Let me know how it goes. Best of luck.
I began dabbling in MS via VCG late last year. While I understand the etiquette dictates that you do not say you are paying with a gift card, what do you say when you are buying $2500 across five cards? Buying larger MOs would have saved me a little money, but I never quite figured out how to broach the matter, and was turned away at some Wal-Marts. In one case, the representative became very nervous as she hastily cancelled the order. I thanked her for her time and calmly left. Also, I found some MOs could be deposited by… Read more »
To your first point, I’d like to pay with my debit cards – $500 on each card. It’s easier/faster for them to do all in 1 transaction. I used to do separate, but together is faster & cheaper = win win. Walmarts are different – I have had no success there. Lastly, I’ve had different experiences at different banks, as well as even branches within the same bank. Some require full address on the MO, some require just the name. None have accepted via mobile deposit – which is just as well as I prefer in person deposits. let me… Read more »
Thanks for the quick response! To clarify, I typically take the VGCs, account for the price of the MO, and come out to exactly $500. So the Walmart MOs were $0.68, and I’d ask for a MO at $499.32. I never asked for a MO at $999.32, and tried to split the payment across two cards, as that always seemed like asking for trouble. But you seem to have done that with no real trouble. I’ve just never figured out that next step. I’m lucky in that I found two grocery stores where MOs were $0.40, so that still comes… Read more »
Certainly. I only go to post office and order $2500 at a time. I pay the fee in cash so when I ask for / deposit – it’s always round numbers. Splitting across 5 cards is no trouble at post offices i’ve found, esp when they know what you’re doing. I get it to about 80c/$500 for money orders which is probably as best as I’m going to get – most groceries/walmarts are always cash only for me.
Great review. Since the Post Office no longer accepts GiftCardMall VGCs to purchase MOs, which brand of VGC should you purchase (e.g. Simon Malls?) to guarantee that your MO purchase will go through at the GPO cash register? Many thanks for your insight.
Certainly. I use OneVanilla from CVS/WG. I haven’t tried the Simon Malls/Materich ones simply because they’re not convenient for me.
It’s never a guarantee – sometimes the PO system doesn’t work, randomly, and it’s a time thing rather than a location thing. When that happens I always recommend waiting a day or two and trying again. It’s happened a couple times recently where I’ll show up but cards aren’t accepted, but will try again later and it will work.
Thank you for the OneVanilla tip. I have also encountered similar challenges at the post office using VGCs. Therefore, do you tend to purchase $1000.00 denomination MOs at the post office using two OneVanilla $500.00 VGCs, or $500.00 MOs using one $500.00 VGC? Or perhaps a random number in-between e.g. $873.89. I am curious if the $ amount of the MO triggers the PO system to not work at certain times.
I cannot speak to the $ amt – sometimes the issue is it says I have no funds on my card – despite actually having funds. I usually purchase $2500 at a time, which is 2 $1Ks and 1 $500. The $500 one is $1.20, and the $1000 is $1.60, making it cheaper to buy $1K vs 2 $500s. I used to do 5 500s in separate transactions, but it’s a lot faster and easier to do $2500 in one transaction – 2 $1K, 1 $500, 5 cards.
Thank you for taking the time to explain your system. I have encountered an occasional problem when I purchase a $1K and the second $500.00 VGC displays “no funds” at the register. i have found the 5 and 5 option more expensive but a higher chance of success. Hopefully a replacement for GiftCardMall VGCs will appear on the MS horizon.
Interesting – I usually test 1 $500 first to make sure it has no issues.
Daniel,
How do you buy money order $1k at a time? How do you load money to one vanilla card?
The most on a vgc i can buy with a credit card is $500.
Thx
Thanks for your comment. At PO you can split it over several cards. I typically buy 2 1Ks and 1 500 using 5 500 VGCs.
You load money onto VGC by purchasing them with CC
Thanks for your comment. At PO you can split it over several cards. I typically buy 2 1Ks and 1 500 using 5 500 VGCs.
You load money onto VGC by purchasing them with CC
Daniel,
Where do you buy 1k vgc? The most i see is $500 vgc. I thought all stores dont allow you to buy or load vanilla reload cards with cc.
I buy $500 vGCs with CC at CVS/Walgreens. I redeem them two at a time for a $1000 MO.
Hey Daniel,
Do you have a process or system on how you deposit money orders at the bank without them questioning you?
For instance if you habe 10k worth of money order, whats the largest amount you deposit? 5k and 5k next day or a lump 10k at once? What if they ask where you got the money order from?
Thanks
Great question. I only do anywhere between 3-6k at once. They never ask where comes from. If you do 10K at once they have to fill out a form, which is a hassle.
Such good information and advice 🙂
Thanks!