How is spend throttled?

I've written recently that while the American Express "old" Blue Cash card is the single best card to manufacture spend on, with its powerful 5% cash back earning rate in lucrative spending categories, use of the card is inherently "throttled." A reader commented to ask what I meant, and I thought it could be useful to explain here.

Varieties of throttles, or, watch for chokepoints

There are at least 4 distinct kinds of throttles to be aware of:

• Issuer-based: what kinds of limits does your card issuer impose on your spending ability?
• Inventory availability: do your nearby bonused merchants restock promising cards frequently? Do they impose daily, weekly, or other limitations on volume?
• Liquidation availability: how cooperative are merchants that facilitate money order purchases, bill payments, or prepaid card loads? How cooperative are your banks and credit card issuers?
• Physical constraints, namely time and geography: what are the limits on the amount of time, gas, and vehicle depreciation you're willing to commit to manufacturing spend?

Let's examine each of these throttles more closely.

Issuer throttles

These will vary primarily depending on each card's issuer and the history of your banking relationship.

For example, my American Express- and Barclaycard-issued cards will invariably approve purchases in excess of my "available credit;" American Express even has a function on their online banking website to check whether purchases will be approved before you make them.

Meanwhile, FIA Card Services, who administer the Fidelity Investment Rewards 2% cash back American Express card, will automatically deny any purchase that exceeds the amount of my available credit.

Another issuer throttle to be aware of is how quickly your credit limit becomes available after making a payment to the card. Barclaycard and American Express will typically make credit available late in the day a payment is received, while there are widespread reports that Wells Fargo can take days or weeks to restore available credit — even after a payment has been processed and appears online!

A final throttle to be aware of is each card issuer's risk tolerance for what they may view as abusive behavior. Those risk algorithms are closely-guarded proprietary secrets, but classic examples of high-risk behavior are spending multiples of your credit line each month and spending more than your reported annual income.

Inventory throttles

These throttles take many forms, but come down to this: even with the highest credit limit in the world, you can manufacture a single dollar unless you can find merchants willing to sell you the tools you need to do so.

While grocery stores are one of the most-frequently-bonused categories, they're also the category that in my experience is most vulnerable to manager and cashier intervention. Even stores that don't explicitly prohibit the use of credit cards for purchases of useful products can be shut down by accounting departments that don't like seeing such large, frequent purchases; I was recently shut down at a nearby grocery store chain for precisely this reason. This will sometimes be cast as "fraud prevention," and once the bean counters have their say there's not much you can do to reverse their decision.

Another example of an inventory throttle was the nationwide change at CVS in April restricting the use of credit cards for the purchase of some prepaid and reloadable cards.

Liquidation throttles

When I first wrote about Walmart bill payments in August, 2013, it was possible to pay American Express credit cards using PIN-enabled debit cards at any Walmart store location. In February, 2014, that stopped being possible, turning American Express bill payments into a potentially multi-day chore: buying money orders, depositing them, waiting for the deposit to clear, and finally initiating a bill payment. There's a straightforward relationship between the length of time it takes to pay down a card balance and the amount of spend you're able to put on that card each month.

Another liquidation throttle eventually encountered by many serious travel hackers is the finite willingness of banks to accept money order deposits. A bank that happily accepts $10,000 per month in deposits may call you to the carpet once you deposit $11,000. Those risk tolerances will depend on the bank and your relationship, but almost every bank will impose some kind of limitation eventually.

Adding additional banks is inconvenient and time-consuming, which leads me to a final throttle on manufactured spend.

Physical throttles

The single most important throttle on your manufactured spend is baked into the cake: how much time are you able to dedicate to this hobby. Complacent merchants, banks, and cashiers mean nothing if you don't have the time to manufacture as much spend as they're willing to help with.

Time in many cases also translates into a geographical constraint. If your merchants aren't located along your commute or within walking or biking distance of your home or workplace, you may only be able to visit them occasionally. Despite all the stars being aligned in your favor, your manufactured spend can still be physically throttled by the other components of your lifestyle.

Conclusion

The main point I hope to make with this post is that when you hear someone claim to be able to manufacture "unlimited" spend per month, that person shouldn't be understood to be bragging about their comprehensive knowledge of the game or their prowess as a travel hacker.

They're really bragging about factors that are almost entirely out of their control: their relationship with their banks and card issuers, their well-stocked stores, and their compliant cashiers. With all of those variables fixed in place, the only thing they're really saying is that they choose to dedicate more time to this hobby than others.

And good for them. But that's a lifestyle choice, not an achievement.