What is manufactured spend?
Manufactured spend, in very simple terms, is any technique that allows you to increase spend on a points or miles earning credit or debit card without actually spending that money.
Using cash equivalents or something similar, you will end up sending the money back to yourself in order to pay off the card you originally used to earn the points.
For most methods, small fees are incurred along the way, but they are low enough that the points and miles earned are worth more. But why do it?
Why do people engage in manufactured spend?
People manufacture spending in order to meet minimum spend requirements to get credit card sign-up bonuses, meet annual spending thresholds for bonuses, or simply to increase the number of points and miles they earn on a regular basis.
Using Manufactured Spend to Meet Minimums for Sign-up Bonuses
The majority of points and miles cards come with a sign-up bonus that requires meeting a set minimum spend. These bonuses are often in the 30,000 to 50,000 point/mile range, but can go as high as 100,000 points or more as we see on the current Chase Sapphire Reserve.
Sign-up bonuses can often represent a significant proportion of the overall value proposition of getting a card, so it is imperative to not miss out on the bonus by failing to meet the minimum spend.
Minimum spend requirements are often in the range of $3,000-$4,000 within the first 3 months. This can be a bit of a burden for many people since many of their biggest expenses cannot typically be paid with a credit card (mortgage, rent, car payment, etc.). This is where manufactured spending comes in; meeting minimum spending requirements can be quite easy when using the techniques described below.
3 Techniques to Manufacture Spending
The first 3 techniques we will discuss are sometimes referred to as light manufactured spending. This is because, although they won’t actually increase the amount of money spent, they will increase the amount spent on a credit card. These options are good for people who don’t feel comfortable becoming involved in more extreme versions of manufactured spending, but have a need to increase their credit card spend.
1. Pay bills with Plastiq
Plastiq.com is a website that will allow you to pay bills that you couldn’t normally pay with a credit card, such as a mortgage or other loans. The way it works is Plastiq will charge your credit card and then send either an ACH or physical check to the account you specify. There are two key things to note when using Plastiq. The first is that Plastiq charges fees for their service (2% for MasterCard and 2.5% for Visa or American Express). Make sure the points you earn outweigh the fees you incur. The second is that if Plastiq sends a physical check to your payee, it will take some time for the funds to arrive. We recommend a buffer of at least two weeks to ensure the payment arrives on time and no late fees are incurred.
2. Pay rent with RadPad
RadPad is a service similar to Plastiq, but designed specifically to pay your rent. Debit card payments are free, but credit card payments cost 3.49%. We don’t recommend this method for long-term manufactured spending, but it can certainly be a good option for meeting a minimum spending requirement.
3. Pay Federal Taxes with a Credit Card
The Federal government accepts tax payments via credit card. You can pay estimated taxes in advance, and get a refund for the difference if your actual tax liability ends up being lower than the amount paid. Fees range from 1.87% to 2.25% depending on the payment processor.
4 Additional Methods
1. Fund Daily Fantasy Sports Accounts
Websites such as Fanduel.com allow you to fund your account with a credit card for free and receive payouts via PayPal. This is a quick and free way to meet minimum spend requirements. It should be noted that if you use this technique repeatedly without actually playing the games, they will probably shut down your account, so if you have no interest in actually playing daily fantasy sports, this technique may not be worth the risk.
2. Invest in Kiva Loans
Kiva is an organization that makes micro-loans to be people (many in third world countries) to help fund business ventures, etc. Kiva allows you make loans with a credit card for no fee. However, this method does come with other potential costs. Kiva loans have an average default rate of slightly less than 1%. To reduce your risk, invest in a diversified portfolio of small loans rather than a small number of large loans. Also, loans take a number of months to be paid back, so this method will require you to float funds (the payment structure varies from loan to loan, so read carefully before investing).
3. Fund a new Bank Account
Many banks will allow you to make an initial deposit for a checking or savings account using a credit card. The maximum amounts allowable are typically small, but can go a long way towards meeting a minimum spend.
4. Load Prepaid Cards
Prepaid cards such as GoBank, Bluebird, and Serve can be loaded with debit cards. You can purchase pin-enabled gift cards (which function as debit cards) from a variety of sources using your credit card and then load them to your prepaid card. Once the funds are on the prepaid card you can send the money back to a bank account or use it to pay bills directly. We recommend treading lightly with this method, as many people have had their accounts closed for excessive activity.
Manufactured Spending to Meet Annual Spending Bonuses
Similar to minimum spend requirements for sign-up bonuses, many cards also have annual spending bonuses. For example, The United MileagePlus Explorer card earns 10,000 bonus miles for spending $25,000 in a year. The same techniques can be used to meet some of these higher spending thresholds.