In defense of American Express for Target

American Express for Target prepaid cards were, until earlier this month, one of two popular methods for running up credit credit spend at Target store locations. Loads of up to $1,000 cost $3 each, and it was possible to liquidate the funds on the cards using fee-free ATM's, where the first withdrawal each month (of up to $400 per day) was free, and each subsequent monthly withdrawal cost $3.

When Frequent Miler was reporting on the end of free Prepaid REDcard loads at the beginning of this month, he mentioned in passing:

"Amex for Target is now almost useless

I tried loading it with a credit card.  No luck.  I tried using it to load REDbird first as a credit card and then as a debit card (yes, I knew that wouldn’t work, but figured it couldn’t hurt to try). No luck. The only remaining use I can imagine for the Amex for Target card is if you’re stuck with a bunch of Vanilla Visa gift cards that don’t work at Walmart and you don’t have a REDbird card."

The cost structure of American Express for Target cards hasn't changed

I only had 3 or 4 good months of earning before Target stopped allowing credit cards to be used for prepaid card reloads, but it was a very good 3 or 4 months, and I developed a certain fondness for American Express for Target cards. The loading and unloading limits of AFT cards creates a very simple cost structure:

• Loading $1,000 costs $3;
• Unloading $1,000 costs an average of $6 ($4.50 for the first $1,000 each calendar month, $7.50 for the second).

In other words, American Express for Target cards are now a more-expensive-than-usual method of liquidating PIN-enabled debit cards.

The value of American Express for Target depends entirely on your earning rates

There are many reasons why Frequent Miler would reject the idea of paying $9 per $1,000 in liquidated manufactured spend. If you purchased $500 PIN-enabled prepaid Visa debit cards with a 2.22% cash back card, you might pay 1.4% in purchase fees, and an additional 0.9% in liquidation fees would consume the rest of the rebate value of your manufactured spend.

But if you were earning 3.75% cash back on your prepaid Visa debit card purchases, and are able to split payment for your loads between two PIN-enabled debit cards, you're suddenly netting at least 1.9% on each card.

Conclusion

Of course, if you're fortunate enough to be earning 5% cash back on certain prepaid card purchases with an American Express, Wells Fargo, or TD Bank credit card, then you are probably hunting for liquidation options at virtually any cost. A mere 0.9% liquidation fee is small change in the context of a lucrative-enough earning environment, which is yet another reason everyone needs to ask what role non-bonused spend should play in their manufactured spend strategy.

Three notes on gift card purchase and liquidation

There have been a couple developments around gift cards percolating around the travel hacking community for the last week or so. Here's a quick roundup, so readers can use this post to share their own experiences and ideas in the comments.

American Express lowers maximum gift card denomination eligible for cash back

American Express gift cards are a powerful (though not, as some argue, all-powerful) tool for manufacturing spend through the alchemy of adding 1.5% cash back to unbonused spend, in exchange for only being able to liquidate the cards at merchants that will accept American Express gift cards.

As an astute reader pointed out almost immediately when I brought up the subject two weeks ago, cash back portals like TopCashBack have added language eliminating cash back on gift card denominations above $2,000. Since there's a $3.95 purchase fee for each card anyway, I now split my $2,000 cards into separate orders, which also makes transactions easier for me to track.

On the plus side, the total amount of personal and business gift card purchases eligible for cash back remain unchanged at $10,000 and $100,000 per 14 days, respectively. Additionally, I've recently found my American Express gift card orders to be approved almost 100% of the time, a huge improvement over my previous track record and a welcome development.

Staples Visa gift card activation code funny business

As other bloggers have exhaustively documented, the Gift Card Mall Visa gift cards sold by Staples online, and which are shipped out unactivated, have been accompanied much less consistently by the activation codes necessary to activate them.

Sometimes the activation codes arrive days later, sometimes they arrive by e-mail, and sometimes they don't arrive at all. Even worse, the phone numbers that come with the cards no longer direct you to a GiftCardMall representative who can manually activate the cards.

Instead, as reported by Shawn at Miles to Memories, you need to call this number: 1-877-426-2551. The customer service agents there can easily submit an activation order for your cards, and they'll be up and running within a couple hours (sometimes much sooner). For my recent orders, I haven't bothered waiting for the activation codes: I just call the number above as soon as I receive the physical Visa gift cards.

What's the best way to unload American Express for Target cards?

I get asked all the time what I think about various Rube Goldberg methods of buying and liquidating prepaid card products, and I normally have the same response: if you do that, you're cannibalizing methods of manufactured spend you could use to generate additional volume, instead.

Here's a simple example: let's say you have a credit card that bonuses spend at grocery stores, and you have access to PIN-enabled Visa prepaid debit cards at a local grocery store. Once you've purchased a $500 prepaid debit card, you could then register it, click through a cash back site, and buy an American Express gift card to earn an additional 1.5% cash back. This would naturally increase the total value earned on your initial $500 in spend.

The problem is that instead of using a prepaid debit card, you could just buy the American Express gift card with a different, rewards-earning credit card. If that card earned the equivalent of 2% cash back, you'd be earning 3.5% cash back on the transaction rather than 1.5%.

Don't get me wrong: I understand the impulse to earn rewards on both ends of a transaction; indeed, I invented one of the great triumphs of the genre. But the reason such techniques are so few and far between is that the numbers generally don't add up.

An example that came up the other day is the question of the best way to liquidate funds on American Express for Target cards: whether it's shopping through a portal to buy gift cards (see this Doctor of Credit post for vital information about online gift card orders), Simon Malls, or any of the other liquidation methods we have available.

Here's where I find those suggestions ultimately break down: American Express for Target funds are already liquid. You can make ATM withdrawals with the card, up to $400 per day and costing $3 per ATM withdrawal. In other words, American Express for Target loads are the last step in a chain. Whether or not they're also the first step is up to you: if you can load the card directly with a card that rewards bonus points for purchases at Target, that can be a great option. If instead you load them using American Express gift cards, or the many other options available to us, you can get good value that way as well.

But if the problem is that ATM withdrawals are too expensive to make American Express for Target withdrawals profitable for you, the lesson is that the costs and benefits of the technique simply don't work for you, not that you need to add more moving pieces. After all, every one of those moving pieces could simply be funded with a more lucrative, rewards-earning credit card.

Developing: can new American Express for Target cards still be registered?

I haven't written much about American Express for Target cards since they've been thoroughly treated elsewhere in the blogosphere. I do, however, love them.

In general, each card allows you to manufacture up to $2,500 per month at a cost of about $24 and you can register up to 2 cards per Social Security number. Whether that's cheap or expensive depends on the cards you're using to load them, but suffice it to say that I find it cheap enough to happily take advantage each month.

My experience

I currently manage 3 American Express for Target cards: 2 in my own name and one in my partner's name. Out of a general reluctance to drag her along on my rounds, I never got around to registering a second card in her name until this evening.

A few months ago, a colleague sent me two unactivated American Express for Target "blanks," one of which I had used to register my partner's first card. When we brought the second blank to a local Target store this evening, none of the cash registers was capable of processing the registration transaction.

An American Express for Target blank has two exposed bar codes. One indicates what product it is, and is identical on all 4 blanks I used. The second bar code identifies the unique temporary card located inside the blank.

The Target cash registers, including at the Guest Services counter, were unable to process the first bar code, the one identifying the product. We didn't pass go and we didn't collect $100.

Instead, the register would briefly (for less than a second) flash the name of the product, then return to its resting state.

Three possible explanations

I haven't seen reports of this issue anywhere yet, so my own datapoint is the only one I've got. That being the case, three obvious explanations immediately suggest themselves, in order of seriousness:

• I got a bum American Express for Target "blank." This is the least likely explanation, since the registers didn't have any trouble reading the bar code — they were just incapable of processing the transaction. A possible variation on this explanation would be that existing American Express for Target blanks are periodically retired and new ones issued; the old blank I had lying around may have had its identifying bar code expire from underneath me.
• Some Target stores cannot process American Express for Target registrations. This is a possible, though still unlikely explanation. American Express for Target cards are not available nationwide. Instead, you have to use the "Where to Buy" tool on American Express's website in order to find a Target store location where you can find blanks. However, it's always been possible to register a blank at any Target register, whether or not the store itself carried them.
• The final, doomsday scenario would be that new American Express for Target cards cannot be registered. The American Express Campus Edition was recently retired for new applicants, so clearly American Express does at least periodically review their prepaid card offerings. With the launch of the Target Prepaid REDcard, American Express may intend to withdraw American Express for Target cards from the market.

Conclusion

Based on one datapoint, I'm categorically unwilling to claim any one of these explanations, or some other explanation, is the correct one for my experience today. But I admit that all else being equal, the third explanation seems to me to be the most likely one for now.

Needless to say, I'm eager to be proven wrong! So if you've registered an American Express for Target card since, say, January 1, 2015, please leave a comment or drop me a note.

We'll see if we can get to the bottom of this together!