Alright, this is going to be a bit of a magnum opus for me. This month I manufactured over $6000 to hit two minimum spending requirements for ~110,000 miles, and I earned $200 in the process. The process was a *bit* convoluted, but not difficult, really. I thought I would share it, in detail, for anyone who might be interested.
The process depends on your ability to earn
eBay Bucks - click on the link to read about the program in great detail. Basically, if you are an eBay user, you just need to sign up for the program. It gives you 2% back on every purchase you make on eBay - up to a maximum of $100 per transaction and $500 per calendar quarter. Several times per quarter, eBay will raise the rate to
10% back. This is when you need to strike. The eBay bucks are only redeemable on eBay, but there are plenty of highly liquid items that can be easily resold. Which brings me to the next step.
When you get an offer for the 5x eBay Buck (10% back), activate the offer, then use your rewards card
through PayPal (you don't get eBay Bucks if you don't pay with PayPal) to puchase something that can be easily liquidated and ships cheaply, like discounted gift cards or gold coins.
If you buy gold coins, you will need to make sure they are listed under Coins and Paper Money: Coins, and NOT under Coins and Paper Money: Bullion. Bullion is excluded from the eBay Bucks program. I suggest the
1 oz. Maple Leaf from APMEX.
The reason I went with gold coins is because it only took 5 purchases to max out my eBay Bucks for the quarter. If you go with gift cards, it will probably take a lot more purchases. On the flip side, I essentially gave up 2.5% of the potential rewards, since they are capped at $100 per transaction, and each transaction was about $1250.
Anyway, pick your poison, but
don't buy anything until you sign up for Ebates. If you aren't familiar, Ebates is an online rebate site that gives you a few % cash back when you click through their website to make a purchase. (You'll also get a $10 gift card if you sign up using the referral link above) You can use it at a lot of different online stores, inlcuding eBay, Amazon, Wal-Mart, etc. For eBay, the cash back is only 1%, but when you're making a $6000 purchase, that $60 is not something you'll want to pass up.
Okay, so now let's suppose you've bought 5 oz. of gold Maple Leafs, for say, $6425. You can subtract $500 in eBay Bucks (which you can spend on more coins or discounted gift cards) and another $64.25 in Ebates cashback. Congratulations, you've just bought gold at $1172.50/oz ($35 below spot price) delivered to your doorstep!
But of course, unless gold is part of your preferred asset allocation, you'll now want to get rid of it. Good news - APMEX (the company you bought from) will buy back the gold at any time at the spot price (they'll pay about $10 more than spot if you have $10,000 or more to sell). Just call them when you're ready to sell and they will lock in the price at the time of the phone call. You can ship it back to them via USPS priority mail flat rate ($5.25) with $5,000 insurance ($65), so that takes $70 off your profits. If you're feeling exceptionally entrepenurial, you may want to try selling on Craigslist, but I was looking for a safe bet and a quick liquidation, so I went with APMEX.
Now of course, I've been using gold as my example, and the inherent problem with gold is that the price is volatile, which means that it is possible that you may actually lose money within the week that it takes to purchase the gold, have it delivered to your doorstep, and call APMEX to ship it back. But the odds are equally good that the price will go up.
If you're willing to take a little risk, the odds are on your side, since you have a buffer of $35/oz. before you lose anything ($21/oz. if your plan is to ship it back to APMEX with insurance). Of course, there's no rule that says you have to pay for the insurance, if you're really confident in USPS (I'm not). I got lucky, and the spot price went up quite a bit after purchasing, which is why I came out $200 ahead. If you're really risk-averse, then I suppose you could short-sell an equivalent amount of GLD on the same day that you buy your physical gold, and whatever happens in the interim will be a wash - you'll be guaranteed to profit (minus trading costs, of course).
Keep in mind, of course, that
with most conventional manufactured spending processes you're guaranteed to lose money, and you risk having churns coded as cash advances instead of reward-earning purchases. Prior to doing this, I had been purchasing PayPal MyCash cards with $500 value at $4 a pop - losing 0.8% every time! Not only that, but I was constantly worried that PayPal would catch on and freeze my account - which is something they will do if you try to deposit a MyCash card and immediately transfer the balance to your bank. To me, it seems obvious which path is more desirable - it's the one that will usually result in a profit!
Bonus question for the tax gurus: Not considering the credit card miles, eBay Bucks, and and Ebates cashback, I bought 5 oz. of gold at $1258/oz. and sold it at $1195/oz. That's a loss on paper of $315. Can I claim it as an investment loss on my taxes? Food for thought.
Anyway, I hope this has been helpful to someone. I plan to continue doing this quarterly for as long as eBay keeps offering the 5x eBay Bucks. Good luck, and feel free to ask any questions if there's anything you don't understand.