I share my weekly manufactured spending activity pretty regularly on this blog. It helps me track how many points I’m earning at what cost and gives readers an idea of how it’s done. That being said, I don’t think these posts directly address the risks involved in manufactured spending.
I have on occasion shared how I’ve adjusted my MS activities post-shutdown, but the topic deserves its own post. Here are five risks you should be aware of when it comes to manufactured spending:
Credit card shut-downs
I’ve covered credit cards that are safe for manufactured spending but the fact is, there is no such thing. At any moment, your accounts could get shut down. It happened to me after I used Walmart Bill Pay with my Barclay credit cards. I was subsequently shut down after years of unobstructed manufactured spending.
I know people who maxed out the 5x office supply store bonus on the Chase Ink Plus Card in two months without consequence. Then I had one reader who got shut down after carefully planning out his spending across 12 months. Credit card shut-downs can happen at any time when you’re manufacturing spend and it could have negative repercussions.
You’ll lose your credit history and your utilization rate might increase. You may get banned from getting new credit cards with the bank that shut you down. If you have a checking account with the bank, that might also get shut down. That can cause further hassles if you’re regular banking activity (mortgage payments, automatic credit card and bill payments) are tied to it.
Interest fees
When you’re buying gift cards in large quantities, it’s important to be able to liquidate them quickly. If you don’t do it in time to pay off your credit cards or you simply forget about the due date, you could be on the hook for hundreds of dollars in interest fees. Rewards cards, especially, tend to have higher interest fees than other credit cards. The potential for financial penalty is even greater.
Make sure you’re subscribed to alerts so your bank notifies you when payments are due. But don’t rely on that exclusively – use apps like mint.com as an added layer of protection. In addition to these tools, I also use a simple excel sheet to keep track of credit card payment due dates and other activities.
Ruining your credit
While it’s important to pay off your credit cards on the specified due date, it’s equally important to keep a low utilization rate when your statement closing date comes around. That way, if you max out your credit card on $1,000 Visa gift cards at Simon Mall, it doesn’t negatively impact your credit score.
On the aforementioned credit card spreadsheet, I track both the statement closing and due dates on all my credit cards. For example, the due date on my Citi Premier is the 28th while my statement closing date is the 2nd.
After paying off the card on the 28th, I don’t use it again for big gift card purchases until after the statement closing date. That way, my utilization rate stays nice and low – ideally under 30%.
Lost gift cards
After reading Rick’s recent post about losing gift cards, I was really surprised by the number of people who had lost gift cards or money orders without their knowledge. As organized as I am, it makes me wonder whether it’s happened to me. This is a definite possibility when you’re juggling tens of thousands of dollars worth of gift cards.
I’ve written about what to do about stolen gift cards, so keep that in mind in case you do (knowingly) lose one. And have a back-up plan in place: If you can’t afford to lose a $500 Visa gift card or $1,000 money order, reconsider manufactured spending as a way to earn miles. It could end up costing you more than you can afford to spend on travel.
Debt
What’s so scary about Rick’s lost gift card post (and comments) are the instances where people didn’t realize they lost gift cards and money orders. Until they turned up. If that happens to you and you don’t have the funds to pay off your credit cards, you might end up in debt without realizing why.
Even if this doesn’t happen to you, you can still get into debt if your gift card liquidation source runs dry and you have no back-up plan. What happens when you have $10,000 worth of Simon Mall gift cards and Walmart decides to shut you down?
Last week, a few people reached out to me when our mutual Walmart briefly implemented a $2,000 limit on money orders. They were scrambling for an alternate place to buy money orders or prepaid cards to help them unload excess gift cards.
It’s always good to have a liquidation back-up plan before something like that happens. Otherwise, you might find yourself in serious debt when all you were trying to do was earn some discounted travel or generate a little extra cash back.
Takeaways
Manufactured spending is rewarding but could pose serious risks to your credit and finances. Be careful, meticulous in your tracking and have a back-up plan in case anything goes wrong.
Are there any risk you all want to add to the list?
What led to the Chase shutdown for the reader who maxed the ink over a 12 month period?
No explanation. But he suspects it was due to MS.
Does paying down the amount due prior to the statement being issued a bad thing? Trying to put some spend on my Hyatt credit card with Simon gift cards.
Thank you,
Beechy
No, it’s actually a good thing to pay it down before the statement closing date. Keeps your utilization rate low.
I think the key for me is never doing too much manufactured spend to have a lot at risk in gift cards outstanding. I didn’t have the credit line for one but second, I didn’t like having to rely on a WMT or grocery store not being able to move money orders. In fact, of the five WMTs very close to me, only one really does the MO. Luckily I found two good grocery stores as back ups. But I think even though the promotion goes another 10 days or so, I am calling it for the MS. I have met the minimum on a card and pocketed enough “cash back” to be happy this month. Also its too much work!
It’s always good to know when to stop. I’m making one last trip with a cash back card, since it’s my last 1.5 weeks at my job. After this I can’t really MS in large quantities anyway, since it will require a long drive that isn’t worth it.
The end of an era?
I’m new, I just want to know can I buy visa gift cards at Simon mall on my Hilton Amex for it to apply toward the minimum spend bonus,
American Express doesn’t issue points at Simon Mall anymore. So, I think you need to find another plan. Prepay utilities, insurance(car & house), tuition, etc. Good luck !!
No, I would steer clear of that.
I used to MS but gave it up when Walmart stopped being a reliable partner. I kept fastidious records of all my GC purchases and thought I kept track of every GC. However I recently received an email from AMEX informing me that I still had an unused $500 GC floating around. They wanted to give me the chance at a refund before sending the mail only to the state’s unclaimed funds office.
I was floored. Not only was I unaware that I had lost this GC, but thankfully I must have registered it with AMEX (how else could they link it to me?). It feels like a windfall.
Sounds like your records weren’t so fastidious if you “lost” an entire $500 GC.
While it’s great that you found it, doesn’t sound like you were as organized as you thought or you’d have realized that. Losing an entire $500 GC likely wiped out most of your “profits” from MS.
That’s such a relief! And an important lesson on the risks associated with MS.
Last Saturday (8/17/19), i tried to load GO BANK account at Walmart Register, it didn’t passed through the system, the cashier did everything correctly, it seems the system is hard-cored, anyone have some problem?
GoBank has limits on how much you can load. They won’t let your account balance exceed $3000. I think they have a daily max load limit too.
I only try to load $400, but I have a balance above $3000 in that account, let me withdraw some money and try to load next time, thank you for this info!! Give me some hope!