CC Rewards -- Manufactured Spend using a "purchase" at someone's business

[Candace]

In the credit card churning world, "manufactured spend" is when one makes a purchase on a credit card that is "manufactured", such as buying a gift card with the credit card, then getting the money back in some way like selling the card for cash. People do this to reach the spending levels required by credit cards in order to earn point bonuses such as "spend $4000 in the first three months and get 50,000 reward points". Buying and selling the gift cards might incur some small fees, but compared to the value of the bonuses, the fees are very small.

I was wondering if anyone ever does something like run their card at a friend's business in order to make a "purchase", and then get a check back from that business. As long as the friend's business is coded in a way that shows up as a purchase of goods or services, it should count toward the minimum spend. Both ways of manufactured spending seem unethical to me, but apparently people do this all the time and it works. It's not against the Terms and Conditions, although it presumably wasn't what the credit card company had in mind.

Has anyone done their churning this way? Does it work? Any pitfalls?

[swick]

I would think at the very least you would need to cover the portion your friend's business would lose in CC processing fees.

[CmFtns]

Technically the friends business made that amount as income so it could be a tax income reporting issue as well?

[Candace]

I would think at the very least you would need to cover the portion your friend's business would lose in CC processing fees.

Yes, I would cover those. The fees would be something like two or three percent. Compared to the value of the reward I would earn, that is small.

[Optimiser]

You can use Plastiq to pay your rent, mortgage or any other bill you want for about the same amount of fees with less moral ambiguity. Unless you live in a LCOL area or have a paid for house this would cover your $4,000 minimum spend pretty fast

[Candace]

Technically the friends business made that amount as income so it could be a tax income reporting issue as well?

The friend would refund the money, so there would be no income for him to report. But he would refund it in check form, as opposed to putting the money back on the credit card and undoing the purchase. So the credit card merchant fee would be the only expense of doing this.

That way the purchase stays on the card. It's not unlike when people buy gift cards using their credit cards, and then go convert them into money orders at WalMart or something. Then they deposit the money orders into their checking account, and use the funds to pay off the credit card bill. There are small fees incurred along the way, but they pale in comparison to what the points bonuses get you.

[Candace]

You can use Plastiq to pay your rent, mortgage or any other bill you want for about the same amount of fees with less moral ambiguity. Unless you live in a LCOL area or have a paid for house this would cover your $4,000 minimum spend pretty fast

Thanks, that looks like a few other similar schemes I've seen like using a Target RedBird (or a related product). After a few months they stopped letting people pay their mortgages with it. If this one still works, and is coded as a purchase rather than a cash advance, it looks like a good option. My mortgage payment is pretty cheap, but it would get me about halfway there in three months, and it's a legitimate expense.

Thanks again.

[ducky19]

Why even involve someone else? Get a Square and just run it yourself, seems that would be simpler.

[inline five]

Or just pay your spouse via PayPal. 2.9%. I've thought about doing this if needing to hit high spending levels.

Didn't know about Plastiq to pay bills. That's kinda an interesting concept. Especially to pay your mortgage if trying to rack up spend levels quickly. It's 2.5% so not much different then paying yourself via PayPal.

I had thought up an idea to use business cards with large rewards and spend requirements but I'm thinking it would quickly get shut down.

[Goldielocks]

I looked at this -- running the car through our "Square up" credit card device -- but!  3.5% fees.   I would not count it as income, as it is a device we bought for personal use - such as receiving money from groups when we fronted the cash.

The best bonus I have is 7% reward, which is not enough compared to other manufactured (or real) spend opportunities I can find (I only do one card every so often).

[ShortInSeattle]

Presumably your friend has CC processing fees, an accounting system and recordkeeping requirements, and possibly B&O taxes. If they are an LLC they need to maintain a hard line between personal and business transactions - this could compromise that. Additionally this behavior could flag an audit, or superficially appear to be a laundering scheme.

I think a wise friend would decline to participate.

SiS

[Candace]

I'll be using Plastiq. I only plan to use it toward earning large points bonuses in the months right after card signup, to get to the required amount charged. So I might pay 2.5% in fees, but the bonus I'm earning is worth about $1500 in travel spending (Chase Sapphire Reserve card with the in-branch application, 100,000 Chase Ultimate Rewards points).

If I use Plastiq as a boost to help get to $4000 in three months by charging, say, $2k worth of bills I'd normally pay without incurring fees (mortgage, utilities, others), that's 2.5% of $2000 ($50 extra in fees) to help earn $1500 in rewards. Not a bad deal.

I am happy to have a way to keep my friend out of it. He wouldn't be at real risk of self-dealing (or getting in trouble from self-dealing) because he wouldn't be gaining anything from it. But still, I wasn't all that comfortable with the idea. With Plastiq, I'll pay the same amount of fees that I would have been with my friend, but I'm paying legitimate expenses.

[ducky19]

Or just pay your spouse via PayPal. 2.9%. I've thought about doing this if needing to hit high spending levels.

This made me chuckle. Any time I have to write my wife a check, I always write "services rendered" in the memo line. In answer to her perennial question, yes... yes, I am five.  =)

[johnny847]

Why even involve someone else? Get a Square and just run it yourself, seems that would be simpler.

Because if you do so, Square will revoke your account. It's against their terms to charge yourself.

https://www.flyertalk.com/forum/manufactured-spending/1428398-what-pay-yourself-i-e-square-merchants-out-there.html