Sunday, September 21, 2014

Oren's Money Saver Beginner's Guide Part 4 - Manufacured Spend

Check out the other posts in the Beginner's Guide Series

Part 1 - Introduction
Part 2 - Maximize Savings Through Credit Cards
Part 3 - Savings Without Using Credit Cards

Manufactured Spend

What is Manufactured Spend?  Manufactured Spend is a way to create credit card spending (and the points that come with them) while keeping your fees to as close to zero as possible.  Usually, this involves buying American Express/Visa/Mastercard Gift cards, but not always.

Some of these techniques are lucrative and don't require much time commitment. Others require more time or aren't as lucrative.

In general, manufactured spend is most lucrative for sign up bonuses where you need to spend a certain amount of money to get a very large bonus. It is less lucrative on your credit card's category bonuses, but it can still be worth it.  Most of my personal Manufactured Spend is on the credit card category bonus type.  It can really add up over the course of the year

Ongoing vs. Limited Time Offers

There are two types of manufactured spend; ongoing offers and limited time offers

Limited Time Offers

Sometimes, a store will run a promotion that works very nicely for manufactured spend.  For example, in 2013 Office Max ran a promotion that gave you $15 off $150 of American Express gift cards.  The promotion negated the fees and in fact you made money before any credit card bonuses.  These types of promotions can be very lucrative, but they are by nature limited time offers so you can't count on any specific deals.

Ongoing Offers

Ongoing offers are where it's at and where you want to be.  The problem with ongoing offers is that sometimes they turn into limited time offers, like Amazon Payments A"H.

Here are a couple of ongoing offers.   
  • Serve
    • $1,000-$1,500 a month of no fee credit card spending, depending whether you have the app formally known as ISIS.  Withdrawals are simple as well.  See this post for more details. 
      • No specific credit card required, but don't use a card that is processed by American Express, unless you don't want the credit card points.  You will receive rewards with your Fidelity American Express since it is processed by FIA Card Services, not American Express.  Confused?  Me too.  
    • Some grocery stores sell Variable load Visa/MC/AMEX gift cards that can be loaded with up to $500 for a $6 fee.   American Express Blue Preferred gets 6% cashback at grocery stores so you will get $24 cashback after fees for every $500 you buy (4.8%).
      • $75 annual fee is well worth it, but cuts into your profits.

  • The Power Trio
    • Combination of 5% cashback at pharmacies, Paypal Business Debit and Serve.  'Nough Said.

  • $200 Visa Gift Cards at Staples
    • These come with a hefty $7 fee (3.5%) so why on earth would you buy these?  The Chase Ink series of business credit cards gives you 5% cashback at Office Supply stores so you will get 1,035 Ultimate Rewards points.
    • If the card is a Visa Card, you will get an extra 1% cashback for signing up with  Those points can be transferred to lucrative airline and hotel partners if you have a Chase card that earns Ultimate Rewards points with an annual fee. You need to travel a lot to make this worthwhile.  I don't personally go this route because even I think it is too annoying.  Check out this post from Dan's Deals for more details.

  • 5% categories with Specific Credit Cards
    • Chase Freedom
    • Discover it
      • Same thing as Chase Freedom for 3 months of the year and also have online purchases for 3 months of year.  Visa gift cards can be bought online for 5% back.
    • Citi Dividend

Our last discussion in this series will revolve around liquidating all of the gift cards you just bought after this post.