Well, yesterday's post sure got a reaction out of my readers, both long-time and first-time, and I can't say I'm surprised: it was an "unblogged" technique that a lot of people have been using to manufacture spend for months, or longer, and they were understandably concerned about anything that might signal an end to that. I strongly recommend taking a look at the comments to that thread, since in addition to people scolding me there are some valuable observations by readers correcting details and making observations based on their own experiences.
I want to single out commenter Brandan who pointed out that "it says on the FlyerTalk post you linked to that it's possible to have Best Buy Chase as the payee for a Chase credit card (and reduce the bill pay fee to $1)" and commenter Jewsus for pointing out that he can pay his American Express credit card using the "next business day" service for $1.50, not $1.88 as I had posted (the 3 business day service costs $1). Thanks guys. I don't have every credit card and I haven't made payments to all the credit cards I do have, so there's a lot of information about specific issuers that I'm not going to be able to report firsthand.
Cost per Dollar (CPD) of manufactured spend: my analysis
Since this technique has a very high limit (up to $8,999 or $9,999, according to various reports) but a flat cost, the cost per dollar of manufactured spend you pay is going to vary depending on the size of your payments. For the sake of simplicity, I'm going to confine this analysis to four payment amounts, where applicable: $500, $1,000, $1,500, and $2,000. Hopefully this will illustrate the potential return of this technique, and you can repeat the calculations for your own preferred payment amounts. Here are my calculations, in increasing order of CPD.
Bank Debit Cards
This is the cheapest option for earning rewards, but is also inherently limited by the amount of money in your checking account. Further, Bank of America and Suntrust, the two banks which issue rewards-earning debit cards that pay rewards on PIN-based transactions, are understandably sensitive to so-called "perk abuse," and you risk having your checking account closed by your bank for "excessive" use of this technique.
Personally, I have made $1,000 Gobank deposits using my Bank of America Alaska Airlines debit card and the miles have posted normally, so I'm not worried about Walmart bill payments around that level. Your miles may vary.
Since there's no fee for using your bank balance to fund a PIN transaction, your cost per dollar of manufactured spend is just $1.00 or $1.88 (or $1.50 – see above), divided by the size of your transaction (note that the Suntrust Delta Airlines debit card earns 1 Skymile per dollar, while the Bank of America Alaska Airlines debit card earns 1 Mileage Plan mile per 2 dollars):
This is the same CPD calculation you should use for free Chase gift cards, if they're available in your state.
The Nationwide and US Bank Visa Buxx cards have slightly different limits and fees: the Nationwide card allows 2 loads per month of up to $500 each, at a fee of $2, while the US Bank Buxx card allows 4 loads per month at a cost of $2.50 each. Both cards allow your balance at one time to be up to $1,000, but the Nationwide card has a 7-day rolling limit of $800 in purchases. For the purposes of this chart, I've pro-rated Nationwide's $4 load fee so $3.20 is "charged" to your Walmart bill payment when you make an $800 payment:
PayPal Debit MasterCard
The PayPal Debit MasterCard is loadable using PayPal Cash cards, which can still be purchased using a rewards-earning credit card at some – but far from all – vendors. In addition to its 1% cash back function when you sign for a purchase or use it online, the PayPal Debit MasterCard also functions as a PIN-based debit card. Your daily purchase limit may vary: mine is $3,000.
In this case, in addition to the bill pay transaction fee, you'll also pay $3.95 for each reload card, with up to $500 in value each:
MyVanilla Debit Cards
Loading a MyVanilla Debit card using a Vanilla Reload card costs the same as loading a PayPal Debit Mastercard. However, there's another $0.50 transaction fee charge on every purchase made with the card, slightly raising your cost per dollar of manufactured spend:
There are a lot of different PIN-based debit gift cards on the market today, and the price per card can vary between $4.95 and $6.95. For the sake of these calculations I'll use $5.95 as a "typical" cost per $500 gift card. You should adjust the calculation depending on the cards you have available in your area:
There's a reason that I use "Cost per Dollar" analysis rather than "Cost per Mile/Point" analysis: I don't know what credit cards you carry, and I don't know how you value your miles and points.
I carry a ThankYou Preferred card that earns 5 ThankYou points per dollar at drug stores, and I can use those point to pay off my student loans for pennies on the dollar. That makes the ability to unload Vanilla Reload Network cards wildly valuable to me, even if I have to pay as much as 1 cent per dollar (earning "only" an 80% discount on my student loan payments). If on the other hand you're earning 1 Ultimate Rewards point per dollar spent at drug stores, you may be much less interested in liquidating Vanilla Reload Network cards at volume.
On the other hand, you may have an American Express Hilton HHonors Surpass card, and have some upcoming award trips planned where you'll be getting over half a cent per point in value. In that case, paying as much as 1.23 cents per dollar at a supermarket – 0.205 cents per point – means over a 50% discount on your hotel stay.
This series will continue tomorrow with some reflections on how this technique – and these blog posts – have affected my views on travel hacking, and I'll conclude on Thursday with my thoughts on how I'll personally be taking advantage of this technique in the future.