Gaming the system

July 19, 2011 · 17 comments

I wrote a mildly popular blog post a few weeks back about my disdain for extreme couponers, you know people that spend 30+ hours/week searching for, and ultimately buying, a bunch of crap they don’t need. Well, I got an email from a reader, Emily, asking for my thoughts on a popular, new way to game the system. Check it….

┬áI came across this article the other day. It’s essentially about gaming the mint to rack up frequent flier miles at no cost. Being in a position where I could do something like this, I get that creepy gut feeling that it’s wrong. After all, free shipping doesn’t exist, the taxpayers are footing that bill. Where would you stand?

Before I begin dishing out my opinion, I think Emily answered her own question. If you have a creepy gut feeling with anything it can only mean two things…1) Your moral compass says you are doing something naughty or 2) You have very bad diarrhea. Since science says women lack the ability to poop (at least that’s what I like to believe), it’s probably safe to assume Emily would be violating her personal “code of conduct” by taking advantage of this program.

Alright, enough about Emily, what would Ninja do?

I wouldn’t do it. Not because I think people that do are necessarily evil (although some probably are), but simply because I’m lazy. That sounds like a heck of a lot of work for a relatively minor reward. Even if I charged $5,000 worth of US Mint Coins to my Alaska Airlines Credit Card and deposited said coins in to my bank account a few days later, I would have only earned 5,000 miles. Which is only one fifth of the miles I need to earn a free flight. Thanks, but no thanks.

Have you heard of credit card arbitrage? You haven’t? It’s just another way to game the system. A few years back, when interest rates on high-yield savings accounts were between 3 and 4 percent, some people would sign up for 0% interest credit cards that allowed them to take cash advances with minimal (or no fee). They would borrow like $50,000 on this CC and put the cash directly in to their high yield savings account. They would collect interest on that $50K each month, and use some of the principal to pay down the loan over the course of the 0% offer. They could literally end up making about $120/month in interest just by borrowing money against their credit card. Obviously, credit card arbitrage is pretty pointless┬ánowadays seeing that “high interest” accounts are only paying out like 1% interest.

So are there always going to be loopholes and ways to game the system? Absolutely, but that doesn’t mean I plan on taking part in them. Instead, I’d rather focus my attention on the big picture. Things like budgeting, investing, spending, giving, saving, and singing Joan Osborne’s “What if God was one of us”. Who has time to game the system???

What other tricks or loopholes have you heard of or read about? Are extreme couponers and people taking advantage of the US Mint blurring the lines of ethical behavior? What would you do?

1 Jennifer G.

I don’t think Joan Osborne would appreciate that last paragraph :)

2 Stephanie

I was JUST coming here to say this! lol

3 Mercedes

ACK! me too!

4 Mary M

I’m a “do the right thing” girl, but I don’t see a problem morally or ethically with this. Credit card companies take advantage of their users any and every way they find possible. Until they shut down this loophole then go for it if you have the time and energy to invest.
What disturbs me is that the Mint wants this dollar coin to work so badly that they would offer free shipping and take the 3.25% hit as a retailer in credit card fees. This is akin to costing more than 1 cent to manufacture and produce a penny. It’s that kind of financial stupidity that drives me crazy and drives up our country’s debt.

5 LLF

For once, I don’t think there is anything wrong with credit card arbitrage or the loopholes you find with giant douch bag corporations, since the consumers get screw by them so often.

6 slug | sunkcostsareirrelevant.com

I did this for a while and then stopped once they made the program’s purpose more explicit on the website. Then, I read the NPR story on the wastefulness of it all and decided I was doing a better job than they were of getting the coins in circulation. I’ve got a box of $1,000 on my desk right now.

http://sunkcostsareirrelevant.com/2011/07/re-visiting-the-us-mint-direct-ship-coin-program/

7 slug | sunkcostsareirrelevant.com

Oh, and in terms of time, it’s basically 15 minutes max including time to order and dropping them off at the bank.

8 Kevin @ Thousandaire.com

I hope all commentors realize that this not only hurts the credit card companies, but also the US government. In fact, it probably only hurts the government and not the credit card company at all. In this case, the government would pay an interchange fee to the credit card company. That interchange fee will pay for whatever rewards your credit card gives you, plus some profit for the bank and MC/Visa. The only way the bank loses money is if you default on the card, but since you are depositing the coins right back in the bank, that seems unlikely.

This isn’t sticking it to the credit card companies; it’s sticking it to the government

9 LLF

I was commenting on the CC arbitrage part. As for hurting the government, yes it hurts them because they have to pay for the shipping the CC process charges, and that come out of tax payers pockets. Also CC companies rarely get hurt. Like casinos, they usually win.

10 Jessie's Money

wow – people spend sooo much time trying to play the system!

Jordan and I made a decision a while back to give up collecting every single points card that exists (it was getting a little ridiculous) and stick with airmiles. we rarely use the miles/points for actual flights but enjoy redeeming them for gift cards to movies and restaurants – which is seriously helping us stick to our budget.

We never buy more than what we need or something that we wouldn’t use because of it – but we are faithful Shell gas and Safeway grocery store shoppers!

11 Brian

This trick has been around for years (so calling it “new” is kind of a joke), and I did it for a while. Personally I think the more article they write about it the better. They just show that the whole dollar coin program is a waste. We, as Americans, do not want a dollar coin. In fact new legislation has been discussed to end the program.

http://www.npr.org/blogs/money/2011/07/14/137850604/bill-would-halt-production-of-dollar-coins

In the end the only reason the mint continues to make this program available is because the have to make the coins by law.

As far as credit arbitrage, I was a little too fresh out of college, so my options for 0% cash advances were pretty much non-existant.

12 Matt

Just had coffee with a friend who told me he was going to buy $3,000 worth of gold with his credit card and then put it in the bank and reap the rewards of 3,000 miles. Like you said I am too lazy to go through the entire process to earn some miles. I would rather go through some extreme saving months to pay for the trip with cash then rack up miles buying gold.

13 Jenny~Z

WHHAAAAT IF GOD WAAAAS ONE OF US?!! :D (loved that song back in highschool hehe)

As a Canadian I must say I love our loonie and twoonie..

I too am way too lazy to do these things.. I would end up with $1000 of coins on my desk and $1000 of debt on my card. I’m also too lazy to do cash advance deals or to chase interest rates. I figure that keeping it simple is my best route.. cut spending and increase saving… make more money!

14 Claire

American’s don’t like dollar coins? Why’s that? We here in Australia have had a $1 coin since 1984, and I think the $2 since about 1988. There is no drama, and it saves so much money in production to make something that lasts for a long time. Nobody asked us what we preferred – the mint just did it based on economic reasons. we also don’t have 1 or 2 cent coins. We just got used it, and it didn’t take much. someone commented that the reason they are doing this scheme (which haven’t read any details about, so I won’t comment about it) is because they want the coins to work. But that is easy. Issue coins to banks, and then as the notes become “mute” (too damaged to be used as legal tender) or as they recived them when people bank money return them to the mint. Eventually there will be no more notes – I think a dollar note has a life of 3 months to 2 years, and you just have coins. People use the coins because that is the money that is available.

There is nothing to make work. It is just the new money.

15 Mary M

Claire, I think that is a great point! Not sure why the US would not do the same thing. Coin dollars never caught on here as anything more than a novelty. But if they stopped making dollar bills I think they would!

16 Claire

Just another point of contention – I have had that “if god was one of us” song in my head for days.

That’s not playing fair Ninja!

17 Rafiki

Hmm. This is interesting. Some things I find wrong an unethical, some things seem like too much work but I must bring up this credit card arbitrage thing seems interesting. I will go as far as to say I would have done this as it seems fair game to me. The bank borrows money from us to make money. I see nothing wrong with borrowing money from the bank to invest.

The way I see it, if I saw an investment I was interested in I would borrow money to invest if I thought it was worth it. Same thing if I wanted to invest in my own business and I expected to make a profit. I would borrow the money from the bank.

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