Life After Vanilla: The Next Frontier of Manufactured Spending

Life After Vanilla: The Next Frontier of Manufactured Spending
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Image courtesy: Aero Icarus
 

We only very rarely talk about manufactured spending here, which is why we didn’t cover a major development with Vanilla Reloads from a couple weeks ago. These are reload cards that can be used to replenish the balances on many prepaid debit cards, including Bluebird by American Express. Until recently, it was possible to purchase Vanilla Reload cards at CVS stores with a credit card. That meant it was possible to earn miles and points while reloading my Bluebird!

Why go through this hassle? It’s possible to write checks from a Bluebird account, which meant that I could pay my mortgage, utilities and income taxes through the account. By loading it with Vanilla Reloads purchased on a credit card, this allowed me to effectively earn miles and points on expenses that I’d otherwise pay from a normal checking account without such benefits. Vanilla Reloads have a $3.95 load fee, but can be purchased in increments of up to $500. By maxing out each Vanilla’s value, I could reduce the effective premium I was paying to about 0.8%. Because I valued the miles and points I was earning by paying these unavoidable expenses via Bluebird more highly than 0.8%, it was a profitable venture.

Bluebird accounts can be loaded with up to $1,000 per day and up to $5,000 per month. Many true manufactured spenders would load their account up to the max and then simply pay their credit card bill with this very same money. I preferred to use it for true expenses and rarely hit monthly load limits, but certainly profited from the extra miles and points purchasing Vanilla Reloads allowed, especially when working to conquer minimum spend requirements.

Unfortunately, CVS joined Walgreens and several others in the ranks of going cash only on Vanilla Reloads. Recently, I’ve taken to purchasing Visa gift cards at a local grocery store and then loading these cards to my Bluebird in person at Walmart. Walmart Money Center kiosks allow Bluebird to be reloaded using debit cards at the same rate as Vanilla Reloads: up to $1,000 per day and up to $5,000 per month.

However, this two step process of purchasing gift cards at the grocery store then driving to Walmart is much more complicated than stopping by CVS, which was just a couple minutes away. Plus, the prepaid Visa cards at the grocery store have a higher activation fee that chips away at the value of minting new points versus just paying bills directly from my checking account. I started to investigate if a better option might be available.

Introducing Amex Gift Cards

For a while, I’ve watched the fine folks at The Frequent Miler talk about Amex Gift Cards and announce various cash back and extra miles opportunities for purchasing them. However, I’d never taken it seriously as an option before because Amex Gift Cards can be a pain to deal with. They can’t be loaded to a Bluebird account directly, you can’t withdraw money from an ATM with them and they’re only usable on purchases where American Express cards are accepted.

Furthermore, Citi, Discover, First Bankcard, US Bank and others sometimes code Amex gift card purchases as cash advances, opening up buyers to exorbitant interest rates they won’t see coming. Paying for them with American Express, Barclays, Bank of America, Chase, HSBC and CapitalOne Venture cards seems to be generally safe, as of April 2014, registering as a purchase instead of a cash advance.

Compared to the straightforward alternative of purchasing a Vanilla Reload and adding its value to my account in seconds from my phone, they seemed like a huge pain to deal with. However, I’m glad I gave them a second look, as there’s an unexpected amount of value here possible with less effort than I thought.

Earning Bonus Miles On Amex Gift Cards

What makes American Express Gift Cards stand out is the fact that several online shopping portals actually offer bonus miles for purchasing them. As The Frequent Miler reported recently, Barclays’ new RewardsBoost shopping portal is offering 4 miles per dollar on Amex Gift Card purchases. This portal is only open to Barclaycard Arrival cardholders. I have one, since it’s one of my favorite travel cards.

Miles earned with Arrival can be applied toward any travel expense: you simply pay for it with the card, then wipe out the expense later. That means I can wipe out all or a portion of expenses like my recent stay at Hard Rock Las Vegas up to six months after the fact and receive a statement credit.

I explain Arrival in detail here and show how to redeem Arrival miles here.

Alaska MileagePlan Shopping, Delta SkyMiles Shopping and TopCashBack are also running promotions on Amex Gift Cards worth 3 miles per $1 or 3%, making them a good option for those interested without an Arrival card. I’m trying to illustrate a best-case earnings scenario, so I’ll assume below that you went shopping via Barclays’ portal.

Visa gift cards can only be ordered in increments of up to $500, but Amex Gift Cards can be ordered in amounts as high as $3,000. That makes a huge difference when it comes to activation fees, shipping and so on. Better yet, using the promo code SYNCGIFT when purchasing Amex cards actually removes the activation fees entirely for now, leaving you responsible only for the value on the card and shipping.

To purchase the Amex cards, first log in to your Barclays account (or to another participating shopping portal):

Click on the RewardsBoost link, then click on Gift Cards to the left side, before selecting American Express Gift Cards from the list of retailers:

When you click through, you might see gift card values limited to just $500. To fix this, use your American Express login, if you have one. You do not have to pay with an American Express card; simply having one will unlock cards up to $3,000 in value.

I selected two gift cards – one worth $3,000 and the other worth $2,000 – because we’re going to eventually use these to fund a Bluebird account, as you’ll see shortly. I applied the promo code SYNCGIFT to the order, as well, to wipe out the activation fees for both cards:

On the next screen, you can see our grand total for $5,000 worth of gift cards comes to $5,008.95, including shipping.

Because our expenses on Amex gift cards are so low, this was actually a super profitable venture. Remember, not only can we earn 4 miles per $1 for shopping through the RewardsBoost mall, but we can also earn points on the actual purchase! You do not have to use an Arrival card or an American Express to make this purchase; any Visa, MasterCard or Amex can be used. In this case, I’d prefer to use Arrival and effectively double dip, since the card earns 2x miles on all purchases, including this one. That works out to a total of 6 miles per $1 earned on these gift cards.

Because each mile in Arrival’s program is worth 1¢ toward any travel expense, that’s basically like receiving 6% off this order. On such a larger order amount, I’d earn a total of 30,000 miles, worth $300! Even better, Arrival gives back 10% of all miles redeemed for use toward future redemptions, so this is more like receiving $330 worth of credit.

It cost us $8.95 to purchase $5,000 in gift cards and effectively receive $330 worth of free travel for our trouble. If you have a way to use these Amex Gift Cards, stop right here and congratulate yourself on a job well done. If, like me, you’d prefer to refine these into something more useful, continue on:

Turning Amex Gift Cards Into Visa Gift Cards

With your Amex Gift Cards in hand, you could simply head out to a local store and purchase Visa Gift Cards. However, this is a hassle, especially in this kind of quantity. I’d prefer an online vendor to take some of the work out. GiftCards.com is a good solution. They sell prepaid Visas in amounts up to $500 a piece. Remember, we can’t simply buy six $500 cards with a $3,000 gift card, as that leaves no money to cover the activation fees and shipping. Instead, with the $3,000 card, we’d purchase six cards of $493.

I picked this Koala design because it was cute and it doesn’t scream “Gift Card”. I’ve never had trouble using prepaid Visas to load my Bluebird account before, but have read accounts of employees giving some miles collectors trouble for using a gift card instead of a true debit card for reloading purposes before. A card with a custom design like this is unlikely to raise any eyebrows at the cash register.

I selected the standard carrier for all cards and put my own name on each:

Though a regular postal delivery option for a flat rate of $1.99 was available despite the number of gift cards I added to the order, I was uncomfortable selecting a method without tracking capabilities given the value of the shipment. As such, I selected the cheapest option with tracking, USPS Delivery Confirmation, which is available for a flat rate of $7.45 to my ZIP code.

This led to a grand total of $2,995.15 for the order, in which I’d receive $2,958 worth of Visas to use. I planned to purchase an Amazon.com gift card with the remaining $4.85 on the card and simply apply it to my account, which is my preferred way of liquidating small balances left on gift cards. Therefore, the total expense to convert the Amex Gift Cards to Visas was, in my eyes, $37.15.

For the $2,000 card, all but 75¢ would be used up in purchasing four cards with $493 on them each and selecting Delivery Confirmation shipping. That doesn’t leave enough behind to buy an Amazon gift card, so I consider the 75¢ to be a loss. That means a net loss of $28 converting the $2,000 Amex to Visas.

In total, we spend about $65.15 turning $5,000 of Amex cards into $4,930 of Visa cards and a few dollars of Amex credit. However, those cards can now be loaded into Bluebird at Walmart and used in a variety of circumstances as a prepaid debit card with a PIN number where Amex gift cards – which ring up as credit cards – wouldn’t be accepted.

We made $330 of travel credit purchasing the Amex gift cards in the first place, so even after taking into account the fees involved in converting them to Visa cards, we’d walk away with $264.85 in profit in the form of Arrival travel credit.

If you value Alaska or Delta miles at greater than 2¢ each and purchase your Amex cards through their shops at the lower 3 miles per dollar rate, you could actually walk away with even more profit once you take into account the miles earned on the purchase itself.

This might seem like a lot of hassle. It is, at least when setting it up. But remember: up until receiving the prepaid Visa cards, you never had to leave home. We left a few bucks on the table in this scenario by not driving to the grocery store to buy gift cards, but also saved time. All that would be needed once the Amex cards arrive would be to activate them, immediately use them to purchase the Visas online, then wait for them to come in the mail a few days later.

The biggest pain points to this process are 1) Wrapping your head around the concept of jumping these hoops and 2) Making a few trips out to Walmart over the course of a month, should you want to liquidate your cards by loading them into Bluebird as I do. For just a few miles at a standard rate, this wouldn’t be worth it, but when there’s a promotion like the one Barclays is running or the 3 miles per $1 options offered by Alaska and Delta, it just might be worth going to the effort, given how much free travel you stand to earn.

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About PointsAway
Casey Ayers is a consultant and entrepreneur with a passion for travel. After amassing enough miles and points to travel anywhere in the world for almost free in less than six months, he developed PointsAway as a way to help others make travel dreams big and small come true.
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