Welcome to the Travel Hacking from Scratch Series – a series dedicated to getting those new into Travel Hacking up the curve as quickly as possible. Below is the layout of the series with links back to already published articles.
Today our topic is Manufactured Spending – the Holy Grail of how to earn points quickly by living in the gray area of credit card earning.
| The Benefits of Travel Hacking |
| Earning Points |
| Credit Cards – Which Card and Why |
| Category Bonuses |
| Churning Credit Cards |
| US Credit Cards (ITIN) |
| Referral Bonuses |
| Manufactured Spending |
| Using Your Points |
| Alternatives to DIY |
| Understanding the Power of Partners |
| Weighing Convenience vs Cost |
| How to Avoid High Taxes and Charges |
| Sweet Spots |
| How to Travel Better |
| Why You Need Status |
| Leveraging Status |
| Understanding Your Rights |
| Beyond Travel – Financial Freedom |
What is Manufactured Spending?
In the simplest terms, Manufactured Spending (MS) is a method to “manufacture” spending on your credit card in order to earn points. We call it “manufactured” because it is outside the realm of your day-to-day spending. To make MS viable, your method should carry little or no cost.
There are many methods of MS but all methods flow through the process laid out below.
Why It’s Hard to Find Any Concrete Information on MS Online
Imagine one day you are sitting in traffic on your way to work. This is the same traffic you face on a day-to-day basis and you’ve finally reached the end of your rope. Rather than just sit in the traffic jam, you decide to try a new route and low and behold, your new route is actually much faster than your normal route. You’re so happy with the new route that you tell a few of your co-workers around the water cooler. They take your new route the next day and shave a bunch of time off their commute. They, in turn, tell a few friends and now the number of people that know about the route grows exponentially. With a couple of weeks, your new route is as congested as your original route.
This is why people don’t share MS methods, especially online where they can’t vet the people they share the information with. This is why it is so important to network amongst the Travel Hacking community.
Prior to writing this, I had hinted that I would be writing an article on MS. In turn, I was contacted numerous time by people that were desperate to keep their methods secret. I can understand that concern because I too share that same concern. Without knowing who is reading this blog and whether or not they are trustworthy, it would be foolhardy for me to lay out the step-by-step methods on how to reproduce an MS method because it would be immediately shut down by the retailer or the banks.
Essentially what MS is, is a method to find and take advantage of weaknesses within systems. Everything that I do with MS is not illegal and is within the terms and conditions of the programs but it does challenge the spirit of what these programs are trying to achieve.
I’ve always said that if you can understand the MS mindset, you can start to find your own methods. That’s why I’m going to walk you through some older MS methods and give you the rationale for why it worked, the economics behind the method, and how it eventually ended.
I think that this approach is a good middle ground that protects the existing MS methods so they remain viable but gives those that aren’t in the know an understanding of what to look for in an MS method.
Previously Active MS Methods
As I mentioned previously, it behooves MSers to keep currently active MS methods alive by not making the method publically known. The methods I will write about here are no longer active or only marginally active so don’t expect to make hay but if you can internalize the philosophy around these previous methods, hopefully, you’ll be able to find some methods on your own.
CIBC’s AC Conversion Card
Introduction
Back in around 2017, CIBC launched a new product called the AC Conversion card. It was a card that was done in partnership with Air Canada (I believe AC was only involved with branding if I remember correctly) and was intended to help those that traveled a lot to hold multiple currencies on one credit card.
I never fully understood the product because CIBC charged 2.5% in foreign exchange funds when you loaded a currency other than Canadian dollars. I suppose that the intent was for the consumer to load foreign currencies (at a 2.5% premium) and then use the card in the country of choice without incurring further FX fees … but why not just make the foreign currency transaction at the time of purchase?
The Opportunity
To allow for flexibility, the AC Conversion (ACC) card allowed for free ATM withdrawals of up to $2,000 per day if you used a CIBC bank machine.
What allowed this product to be leveraged was that the ACC allowed for Canadian dollar loading through credit cards, specifically Visa and Mastercard branded credit cards.
Take the two points above into consideration and essentially, what you had was the ability to load Canadian currencies onto your ACC card using a Visa or Mastercard, and then withdraw that money for free if you used a CIBC bank machine.
Because there were no fees involved, this was considered a “frictionless” MS method and it allowed many people to rack up points like there was no tomorrow.
How It Ended
Eventually, CIBC started to see that people were loading and unloading their ACC cards without using them for foreign currency purchases, so they started to put restrictions in place to stop this from happening. At first CIBC placed a limit of $100 loads per day for Canadian dollar loads but over the course of about a month, they eliminated Canadian dollar loading altogether.
Current State
The AC Conversion card is still an active product but due to CIBC’s actions, there are no MS opportunities left with the product.
Tilt
Introduction
Tilt was a startup online crowdfunding website that allowed friends, family, and acquaintances to pool money for any purpose they so desired. For example, if you were planning a ski trip with friends, and you needed a pool of money to cover off the group’s food for the trip, you could use Tilt to pool your funds.
The Opportunity
With Tilt, there were a few categories that allowed for money pooling without fees. One of them was if you wanted to Collect Money from a Group. As you can see from the image above, this activity attracted no fees. That meant that if you could get a group of friends together to contribute to a pooled activity and you trusted that the person who created the Tilt pool, you could send money to the pool using your credit card for free. The idea here was to put your money in a pool and for the pool leader to withdraw the money to their account and redistribute the funds.
This is again an example of a “frictionless” Manufactured Spend method and one that not too many people knew about.
How It Ended
In 2017, AirBNB acquired Tilt in a $12MM cash purchase. This purchase was not for the Tilt platform, but rather, the talented employees that worked for Tilt. AirBNB saw that Tilt was not profitable but had a surplus of Payment Experts that they desperately needed for their own company. In essence, the $12MM purchase was to ensure that AirBNB retained that talent.
Current State
Shortly after the AirBNB purchase was publicly announced, Tilt shuttered its service.
Royal Canadian Mint
Introduction
Many years back, the Royal Canadian Mint sold legal tender face value coins at par and if your order was over a certain amount ($99 if I’m remembering correctly), you would receive free shipping. Because these coins were legal tender, you could deposit them at any bank that accepted specialty coins and you would receive a deposit the funds back into your bank account.
The Opportunity
The Mint placed a limit of 5 coins per denomination of coin to protect itself from MSers. That meant that you could purchase 5 x $100 coins, 5 x $50 coins, 5 x $25 coins, etc, but you could do that all in one order.
There were a couple of ways you could take advantage of the opportunity even with the limits. The first was that you could simply max out an order and then do it again and again every single day but comically, you didn’t even need to do that. Back when this was viable, the Mint’s IT system was not actually set up to enforce limits, so even though the terms said each order’s maximum was 5 coins, you could actually add quite a bit more.
As you can imagine, once people found out about this, it was a free-for-all. There are many stories out there of people doing over $1MM in Royal Canadian Mint purchases. Outside of hauling thousands of pounds of coins to a bank, this was a frictionless transaction. You would purchase the coins using a points-earning credit card, receive the coins, deposit the coins, and use the funds to pay your credit card bills.
How It Ended
A couple of things happened that ended this treasure trove of MS. The first thing was that as more and more people started to understand this method, the Mint started to see their fees increase from banks. You see, banks charged the Mint money every time someone deposited a specialty coin. This wasn’t a big deal when it first started because across Canada, it was rare for someone to use a specialty coin as legal tender to purchase a chocolate bar but as more and more people MSed with this method, the number of returned coins skyrocketed.
The Mint tried to assuage these costs by actually placing a limit on purchases through improvements to their IT systems but ultimately too many people were simply purchasing and returning the coins through banks that it became untenable.
The Mint ultimately removed face value coins from their online stores but as I understand it, there are still some coins that can be purchased in person at either the Ottawa or Winnipeg Mint locations. This is unconfirmed so don’t go flying out to Winnipeg or Ottawa without confirming this information.
Currently Active MS Methods
There are a few currently active MS methods and in my experience, there’s always something out there if you are in the know. What I am going to write about below are some legitimately active methods. These methods conform to their intended uses so I wouldn’t say that they are groundbreaking by any means and they do attract a fee, but they are reliable and a good way to constantly grow your points and miles.
Plastiq
Introduction
Plastiq is a service that allows you to pay for services using your credit card even if the company you are trying to pay doesn’t accept credit cards. Plastiq does this by taking a credit card payment from you and then sending either a wire transfer or cheque to your intended payee.
The Opportunity
Depending on who you want to pay, it may take a bit of legwork to get started but it’s viable and unlikely to get shut down. The trade-off is that you do pay a transaction fee of up to 2.5% but there are many promotions that provide a cheaper rate. You can also sign up through my referral link which provides you with 500 Fee Free Dollars (FFD). This means that if you make any payment to any vendor you want, you won’t pay fees on the first $500 of the transaction.
For example, if you sent a payment to your personal trainer for $500, you would not pay any bills because your first $500 is fee-free.
Tips and Tricks
With the American Express Gold Business card, you can denote three retailers as your “preferred suppliers”. This designation earns you 2x Membership Reward points for every dollar spent and as luck might have it, Plastiq is one of these suppliers.
In the example above, if you used your American Express Gold Business card to make your payment to your personal trainer, you would have no cost (because of your Fee-Free Dollars) and you would earn 1,000 Membership Rewards points (if you select Plastiq as your preferred supplier).
If you want to be on top of what promotions are out there with Plastiq, I would recommend that you keep an eye out for any emails from Plastiq. If you can’t be bothered to check your emails, you can always hit the Support button on the bottom left-hand side of any Plastiq webpage to ask a representative if there are any promotions currently ongoing for payments. In my experience, they are very willing to help you find the best promotion for your specific need.
With Plastiq, virtually anything is payable by credit card, including your rent. I remember back in the day, it was such a pain to pay my rent either in cash or with a cheque. You can use Plastiq to take care of your rent payments automatically as you can schedule payments. Not only is it more convenient, but it also means that you earn miles and points for something you have to pay anyway.
Gift Card Purchases at Grocery Stores
Introduction
In my previous article about which credit cards you should get and why I dropped a pretty big hint that you should pick up the American Express Cobalt Card. The reason for that is the American Express Cobalt card earns 5x Membership Reward Select points when you use it at restaurants and grocery stores.
These points can be used in a multitude of ways, including transferring to Marriott points (my preferred use) but there are many more ways to maximize their usage.
The Opportunity
The great thing about the Cobalt card is that many grocers take American Express AND sell gift cards. That means that if you were to purchase $1,000 in gift cards, you would earn 5,000 in Membership Reward Select points. If you used those points to redeem for American Express’ Flexible Points Travel Program, those points would be worth $50.
You could also use those points through American Express’ Fixed Points Travel Program.
With the Fixed Points Travel Program, in combination with the Cobalt card and purchases of gift cards, you could purchase $8,000 in gift cards and earn 40,000 Membership Reward Select points, enough for a Long Haul flight with Canada or the US (maximum base fare of $700).
I know what you are thinking. What am I going to do with $8,000 in gift cards? Well, you could resell them of course. Whether it be through Kijiji or an online gift card reseller, you should be able to recoup most of your money with a bit of legwork. There’s also always the option of purchasing pre-paid or reloadable Visa or Mastercard at some grocers. Some of these tend to have fees associated with them but they are transparent and easy to understand. Do the math for yourself and see if it makes sense to dive into these kinds of cards.
Tips and Tricks
Whenever I am looking to make a purchase for something on Amazon, I ask myself, “should I purchase an Amazon gift card at a grocery store rather than purchase directly from Amazon?”. Most often, the answer is yes.
Here’s an example of how I might stack earning of points for a $1,000 purchase on Amazon.
- Many gas stations code as 5x for Cobalt purchase for some reason so I would go to Shell and buy 2 x $500 gift cards with my American Express Cobalt Card = 5,000 Membership Reward Select points + at Shell, gift card purchases qualify for AirMiles but only to a maximum of 10 per $100 spent. If you wanted to really maximize your value, you could buy 10 x $100 gift cards and earn 100 AirMiles.
- Take the gift cards back home and load them onto my Amazon account.
- Go to a cashback site like Great Canadian Rebates or Rakuten and search for Amazon.ca as a retailer. There’s usually a cashback offer from both of these cashback sites – search for the most lucrative (at time of writing, it’s up to 8% cash back from GCR) = Up to $80 cashback on $1,000 purchase
So for a purchase, you were already planning on making, you would walk away with 5,000 Membership Rewards, 100 AirMiles, and up to $80 cashback. Not too shabby.
Conclusion
When I first started in this hobby, there were very few resources available to Canadians that wanted to learn more about Travel Hacking and specifically Manufactured Spending. As you evolve in understanding of what MS is and how to spot opportunities, you start to realize that MS opportunities are all around you. You just need to know how to look.
Much like the people that scour garage sales for antiques, you need to know what to look for in order to find it.
The fastest way to accelerate your learning is to build a network of like-minded people that can search and experiment with you. Look for conferences, meetups, and experts you can talk to.
I can’t promise that I can be of any assistance but if you want to bounce some ideas off me, you are free to reach out to me via my Contact Page.
Hopefully, this article has opened your eyes to the possibility of MS and how you can get started.