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Should You Use Cash Back Rewards To Cover Manufactured Spending Fees?

A few weeks ago, I wrote about how to eliminate manufactured spending fees. I cited tools like the iBotta app, gift card promotions, shopping portals, and cash back credit cards. When cash back portals reduce payouts and I have no other options, I can always count on my cash back cards to help me off-set Visa gift card fees. In my post about eliminating Visa gift card fees, I mentioned the substantial rewards you can earn with a 2% cash back credit card. But the question is: Should you use these rewards for travel or apply them towards covering more gift card fees? I think that’s something everyone should consider and the answer will vary depending on your travel goals and redemption choices.

Discover It Miles Credit Card 3% Cash Back Bonus First Year

Maximizing the 3% Cash Back Bonus

To recap, I used the example of purchasing $9,500 worth of mall gift cards. Why $9,500? Because you can buy up to $10,000 per day, including fees. I personally don’t like having odd-numbered gift cards, so I stick to $9,500. This $9,500 Visa gift card purchase would incur $75.05 in gift card fees and roughly $6.65 in money order fees. Meanwhile, you would earn $189.52 in cash back rewards. After fees, you’re left with a $107.82 profit. Do you pocket these funds or use them to fund another round of gift card purchases with a rewards credit card? That depends on which card you use and how you value your miles

Airline Credit Cards

For $107.82, you can cover the purchase and liquidation fees for $12,500 worth of Visa gift cards.  That’s 12,500 – 18,750 worth of airline miles, depending on the airline credit card you use. Is that worth more than $107.82? Absolutely! In fact, most people value airline miles (i.e. American, United) at 1.4 cents each, minimum. That brings the value of these miles at $175 – $262.50. Save up your points for a first class or business class award and they’re worth even more. So yes, I would definitely use rewards from a 2% cash back towards off-setting Visa gift card fees rather than using the cash for direct travel purchases. The only exception is if you need funds for a mileage or mattress run. In that case, it might make more sense to put the cash towards covering those fees than buying more airline miles. YMMV. Literally!

Chase Ultimate Rewards Cards

For $107.82 you can earn a lot of valuable Ultimate Rewards points. For starters, you would earn 18,750 UR points with the  Chase Freedom Unlimited. Transfer those points to your Chase Sapphire Reserve account and they’re worth $281.25 towards travel. Transfer those points to one of Chase’s many awesome travel partners and you can book free flights, up to 3 nights at a Category 1 Hyatt hotel or one night at a Category 4 Hyatt property

Still have a Chase Ink Plus card? Then you can churn $3,300 worth of Visa gift cards purchased from Staples for a total of $101.25. Total points earned? 16,500. Not as great as the return on the Chase Freedom Unlimited, but still worth noting if you’re trying to max out the annual $50,000 office supply store bonus.

American Express Credit Cards

The reason I’m singling out the Amex Everyday Preferred Card is because of the 50% bonus points paid out when you make at least 30 purchases in a billing period. The Business Platinum Card also offers a 50% bonus on purchases over $5,000. So $12,500 worth of Visa gift card purchases on the Amex Everyday Preferred Card could amount to 18,750 Membership Rewards points. You would even come out ahead by redeeming these points for a gift card (valued at $187.50). Of course, I wouldn’t recommend this option. But you’ll definitely get more than $107.82 worth of value by investing that amount into churning Visa gift cards which will result in 18,750 Membership Rewards points.

Starwood Preferred Guest Credit Card

Putting $107.82 in cash back rewards towards Visa gift card purchases would earn you 12,500 points through the SPG Amex Credit Cards. That’s enough for up to 6 nights at a Category 1 SPG Hotel or one night at a Category 5 SPG hotel. Save up 20,000 points, transfer them to an airline partner and you’ll end up with 25,000 miles. Or transfer SPG points to Marriott and get 37,500 points you can put towards free nights or Air + Hotel awards. The point is, you’ve got lots of great options. No matter which one you choose, you can get way more than $107.82 in value out of 12,500 SPG points.

Club Carlson Premier Rewards Visa Signature

I get it: Club Carlson is on thin ice these days. But the Club Carlson Premier Rewards Visa Signature Card remains one of the best credit cards for earning free nights via credit card spending. The card pays out 5 points per $1 on non-bonus category spending. Spending $12,500 worth of gift card purchases on this card would earn you at least 60,000 Gold points. What are 60,000 Club Carlson points good for? You can redeem up to 6 free nights at a Category 1 Club Carlson hotel. More into high-end hotels? You can redeem 50,000 points for a Category 6 Club Carlson hotel or save up another 10,000 for a top-tier Category 7 award. The point is (no pun intended), that you’ll get way more than $107.82 worth of value by channeling your cash back rewards towards gift card fees to earn Club Carlson points.

Final Thoughts

Cash back credit cards are great for earning rewards. But I would absolutely consider putting the cash towards covering manufactured spending fees incurred via mile-earning credit cards. In many cases, the value of the points and miles earned exceeds the value of the cash you’re spending to earn those points. While it pay seem difficult to part with ~$100 earned via 2% cash back credit cards, investing that money in more gift card purchases with a travel rewards credit card (and thus off-setting the fees) is a better option.

But I want to hear from you: Do you incorporate cash back credit cards into your manufactured spending strategy? Do you keep the cash back or use it towards off-setting other gift card fees?

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Ariana Arghandewal

24 Comments

  1. Giftcards.com hasn’t been working for 3 days now and can’t activate the cards that I’ve purchased. I wonder how long they would take to do their site maintenance.

  2. Ariana, When you say giftcards, are you meaning those from giftcards.com or from Staples. The only place I know for lliquidation of these is at WM.

    • I’m referring to several different gift cards, but mainly Simon Mall and Staples. The costs I’ve referred to in this post would actually be less if you work in gift cards.com visas.

  3. Dear Ariana,
    I have been regularly reading your blogs for a while now. One question that has bothered me, is as to how you buy your gift cards. I usually buy them at topcashback and giftcards.com and all that I can buy in one transaction is $2000 ($500×4)card amount + ($6.95 x 4) card fee + $ 7.45 shipping cost = $2035.25.
    I get a cashback from topcashback for $20.28. So I totally pay $14.97 in total. That’s approx. $7.50 per 1000 miles in rewards.

    I read from your above blog that you pay only $75.05 gift card fees for $9500 miles.
    My questions are :-
    1. Do you buy thru topcashback and get cashback also on your purchases
    2. How do you buy $9500 in one transaction
    3. Am I doing it right? Is there a better way?

    Please suggest
    Thanks
    Amiksh Patel

    • I like Fidelity since it’s not tied to any other rewards credit cards (i.e. I can MS freely). The Discover It Miles is also great since you earn 3% cash back the first year. Citi Double Cash is also a good option.

      • I just saw that fidelity gives only 1% cashback, whereas discover it gives 1.5% travel credit , Barclays gives 2.2% travel credit upon redemption and citi double gives 2% cashback…..Which according to you is the best deal

        • Fidelity has a 2% cash back card. Discover pays out 1.5% – except that amount is doubled during the first year. Barclays offers 2% travel cash and you get a 5% rebate on redemptions. The best card is the Discover It Miles. You get 3% cash back the first year, no annual fee, and there are no minimums for redeeming points (Barclay Arrival has a $100 minimum).

  4. Can you buy visa gift cards through chase shopping portal and get the extra 2% back in points?

  5. And if yes are these Simon mall cards easily liquable like the cards of giftcards.com? any catches?

  6. Am I crazy or does this post make zero sense? Why would you just not use the travel rewards credit card from the get go instead of the 2%?

    • Several reasons. One, you have more flexibility with cash back than with miles. Some people only use miles for economy class travel – those people might sometimes be better off with 2% cash back cards, especially when booking cheap fares. Let’s say you’ve put $25,000 on an airline card – you end up with 25,000 miles, which is enough for a roundtrip economy class ticket to anywhere in the US. That same amount on a 2% cash back card gets you $500. Are you certain you can get $500 in value out of 25,000 miles? Sometimes there are cheap fares (i.e. $250 RT between the West and East Coast). In that case, you would have been better off putting $25k on a cash back card and earning $500.

  7. Thanks for this post.

    I don’t have anywhere near the GC liquidation bandwidth that you do (via WM) but this has made me rethink my strategy for earning SPG points funded by Barclay Arrival CB.

    Between managing the 15k/mo limit at GCM.com (with 2% CB); and GC.com/Simon/CVS GCs with net fees, its quiet a challenge coming up with a fully optimized strategy.

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