Are you loopy for loopholes?

I got an email from a reader, Emily, asking for my thoughts on a semi-popular way to game “the system”. Check it….

 I 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 nowadays 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?

12 thoughts on “Are you loopy for loopholes?

  1. Actually, I think you are missing the big picture of why the average person would do this. I do “churn” credit cards for the rewards. There is certainly nothing immoral about it. The fact that credit cards charge up to 25% interest is immoral to me! Making this purchase of coins is not something credit card reward seekers would necessarily do on a regular basis. However, it can help you make a minimum spend. This past year I got a new card that required me to spend $3000 in 3 months. That was difficult to do, so I bought gift cards and such that I could use later. Some people choose to buy coins to meet those minimum spends. Obviously, the key is to pay the balance. I got a one way ticket to Vietnam for $53 after using the points on the card (still had to pay taxes). I’ll cancel the card when I get home.

  2. I have a rewards card that gives me 4% for grocery and gas purchases and 1% on everything else so I buy gift cards at the grocery store for the liquor store, movie theatre and anything else I know that I will spend within a short period of time to maximize my cash back.

  3. Like Ashley, I also churn credit cards. I’ve opened 5 in the past few months and from that I’ve made $1,000, got 2 free nights at any Hyatt in the world (including $500/night Park Hyatts), and added 140,000 frequent flier miles (that’s about 5 roundtrip domestic flights). In all, I probably spent a days time getting those rewards and the frequent flier miles alone will last me a few years. Well worth my time.

  4. Seems kind of a loopy system to me. I’ve read a lot about travel hacking and it seems like an aweful lot of work. If you want the miles, get the credit card, use it for your everyday purchase, and one day you’ll rack up enough to get that trip you wanted. Personally, we take the cash back bonuses and can earn up to 3-400 dollars a year just by buying gas and groceries.

    • It didn’t use to be much work when you could buy Vanilla Reloads at CVS. I’d walk in, buy $5000 worth of them, load them on a Bluebird card over the course of the week, transfer that money to my bank account, and set the card up for autopay. All in all, probably 30 minutes of work for a sign-up bonus generally worth around $400-$500. Do 5-10 of those a year and it’s a nice little income bump. If 30 minutes of your time is worth more than $400, I need to do what you do for a living.

  5. The US Mint was primarily used to meet a minimum spend to get a sign up bonus (100K miles). So your $5K in spend at the mint would get your 105K miles, enough for a $8,000 Business class ticket to Europe for instance. Meanwhile you deposit the coins and pay your new credit card off. The mint needed the coins in circulation at the banks and people wanted spend on their CC. However the mint closed that option due to public outcry several years ago. The article you reference in from 2011.

  6. When you could buy Vanilla Reload cards at CVS with a credit card, it wasn’t much work at all. Just walk in to CVS, buy $5000 worth of cards, load them onto your Bluebird card over the course of the week (takes about 2 minutes to do that), transfer the Bluebird money to your checking account, and set the credit card to auto-pay. It’s about 30 minutes of total work for a $400-$500 reward. If 30 minutes of your time is worth more than $400, I need to do what you do.

    • Churning cards really doesn’t do that much to your score. You take a small hit per application, they you get more available credit and a lower utilization ratio which then raises your score. There are even some anecdotal stories that you can churn and still get the best rates for mortgages and the like, but I don’t think I would risk that personally.

  7. Yeah, I remember the days of reading various updates from bloggers about how much they got from credit card arbitrage.

    I think it’s just a matter of whether it’s worth the trouble as to if you should do it or not. If you feel it’s a good use of your time, then by all means, have at it.

  8. Like Money Beagle said, I think for me it’s just a matter of whether or not it’s worth the hassle. Work versus payoff really.

  9. I try to avoid gaming the system. In my experience, when I have tried it, I end up failing miserably, or I end up feeling really bad about it. Both times I felt like I was the one losing. Ultimately, I think trying to make the most out of the honest and straight forward way is better.

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