Manufactured Spend/ing (or MS) has recently become one of the hottest miles/points topics. In short, MS is when you cycle funds through a credit card account for the miles. Typically, you purchase a money-equivalent item or product that you convert back into cash, then paying off your credit card bill. The time and fees you incur along the process is the cost of the miles.
I always receive lots of questions regarding whether we can do this in Canada. My answer is yes*. It is possible, but there’s lots of fine print involved. The best way to learn this is in person – at meet-ups and such. If you are are an avid miles/points user looking to take it to the next level, I strongly recommend attending a PointsU conference in the future. The last one was in Calgary earlier in November. As well, I recommend subscribing to rewards blogs like mine through daily newsletters.
Manufactured Spend, at the end of the day, is a complex and advanced topic. If you’re still starting out, you should pick up all the airline and reward credit cards, and you’ll have enough for your first trip before you even finish. It is much easier to earn 40,000 SPG points by picking up the increased bonus for the SPG Personal American Express and SPG Business American Express than generating $40,000 of spend.
Additional Reading: SPG AMEX Bonus Increased!
Let me briefly begin by providing a short history of manufactured spend in the United States.
Manufactured Spend in the US
There’s been a lot of insanely crazy schemes in the US. Pudding cups, mint coins, you name it. On a spectrum in the US, there are two ends – one who MS solely to meet minimum spends, which are significantly higher in the US. If you apply for several cards in a day, the amount of spend you would have to do within 3 months could pretty easily reach $20,000. On the other end, there are the people who were MSing for “income” – that is, putting through millions of dollars in spend a month to make money. Then there’s everyone in between.
There’s the question whether “points” are taxable as income, but I’m not an accountant and you should be seeking professional advice if you’re in that position. Here are the two biggest methods in the past few years. I might have missed a few details, but that shouldn’t affect much.
The gold standard back in the day were Vanilla Reloads, back in 2011. Vanilla Reloads were a prepaid card-like voucher you could purchase at stores like Office Depot. Chase, in the US has Ink Business cards that give 5x points on office supply and telecom merchants. The calendar year maximum for this was $50,000. This yields 250,000 points if you max out the category bonus.
After you purchased the card, you’d then load them on to a series of participating prepaid cards, one of them being Bluebird. Bluebird is an American Express product functions as an bank account alternative. You could do ATM withdrawals, make purchases, pay bills, and transfer funds like a typical bank account. This product was intended towards those who didn’t or couldn’t afford a bank account. You could then empty the funds on the bluebird card by bill paying your credit card or transferring the funds bank into your bank account.
The fees were $3.95 for a $500 reload. If you used a 5x card like the Chase Ink, you’d end up with 2500 points for $3.95, the bill payment being free. Chase points were (and are) more valuable than anything in Canada. The minimum value was 1.0 cent if you converted them into cash, and more if you transferred to airlines or hotels, so you’d make a minimum net profit of $21.05 per $500 load. The bill payment limit was $10,000 per Bluebird card, so you could easily rack hundreds of thousands of points without cycling too many funds.
So, basically anyone who read the internet or miles/points sites would be able to do this pretty easily. There were also fewer people chasing miles back then – The Points Guy and Chase Sapphire Reserve hadn’t become a household name just yet. Each person could only have one bluebird, although if you were MSing en masse, I know friends who had 20 cards going at once. The magnitude was simply insane.
Wells Fargo 5x
A few years ago, prepaid/gift debit cards were required to have pin numbers. You could “empty” any pin-enabled gift cards via Money Order or similar means. This clicked perfectly with a promotion with Wells Fargo credit cards, that gave you 5x points for the first six months of membership. The process then became finding stores and malls that would sell you gift cards en masse – tens of thousands dollars at a time, and cashing them out via money orders.
Money orders at Walmart were 70 cents per $1000 (with similar prices at other stores). The gift/debit card fees would be less than 1% of the gift card value. Furthermore, if you had a Visa Signature card, these points would be worth 1.75 cents towards flights booked through the Wells Fargo reward site. You could also cash them out at one cent. This meant, for every hundred dollars you spent in this cycle, you’d early at least $4 in value back, if not more.
A lot of people went crazy on this, as there were no caps on that 5x during those months You were then able to buy the gift cards, money order the funds out, and have it clear in the bank within 24-48 hours. For those with high five figure credit line, they sky was the limit. It became so extreme that people moved to cities where there were amenable Walmarts that allowed them to buy lots of money orders (as many stores incorrectly thought that these gift cards were either stolen or being used to launder money).
Both of these MS opportunities lasted a long time because of how deep the US market is. After Office Depot stopped selling Vanilla Reloads with credit cards, CVS still sold them. And Walgreens. And 7/11. And 30 other retailers. After Bluebird, there was Redbird (from Target), and Serve, and TD Buxx, and Green Dot, and etc. Just a ridiculous amount of prepaid products and cards, because a notable chunk of the US population didn’t have bank accounts. Instead of 5x Wells, there was 5x Chase, and other multipliers with American Express, Citi, Barclay, and Discover.
In every single scenario there are multiple variations of the product and the credit card you use while still being overall profitable. In Canada, we have essentially no psuedo-bank products like Bluebird. We also have no 5x category bonuses with reasonable limits. The only card that could compare is the Scotiabank Gold American Express, which earns 4x in several categories with a $50,000 cap. That’s why I advocate getting this card if you want to spend to earn more points.
What is Manufactured Spend in Canada?
There are limited variants of prepaid cards here. Furthermore, the only way to cycle out these funds are with ATM withdrawals or other methods where you are holding the cash. You can’t bill pay, or money order, or anything else. If you are MSing with prepaid cards, you are essentially paying for miles at a cent or less – nothing like where folks in the US were making both money and miles.
Furthermore, the credit card minimum spend amounts are much lower in Canada. The highest spend amount is $5,000 for the Business Platinum Card (that gets you 75,000 MR), and most cards have spend requirements in the 1-2k range. That’s very, very easy. If you aren’t spending even 1k a month on credit cards, you are literally failing when it comes to earning points, or you don’t meet that 80k personal income requirement for a credit card.
I only consider Manufactured Spend opportunities that do not cost me out-of-pocket. They’re all fairly unique – nothing like the standard buy gift card/cash out variant. I’m not recommend you don’t go and buy prepaid cards in Canada. With certain products, you’re paying around half a cent for a mile. I’d buy at that price all day long. I’m already satisfied with my mileage balances, however, so I tend to skip those.
And again, there are posts and content that briefly outline MS in Canada – but you will only get the real picture when you are talking with 20 other people who’ve done what you did – seeing what their challenges have been, and learning from each other. This doesn’t necessarily apply to MS, but to all miles and points deals around. There is only so much you can learn by sitting at a computer online. There are mind-blowing miles/points deals that are never even mentioned online – and they’re insanely spectacular.