Don’t assume that credit card issuers offer you miles and bonus points for nothing. Each card comes with a minimum spending requirement that you must achieve before you can enjoy the benefits. Most of them usually require you to spend between $3,000 and $5,000 in the span of three months. You also need to take into account the annual fees. Chase Sapphire Reserve credit card, for instance, comes with a $450 annual fee that they charge immediately or on your first month’s bill. You need to make sure that you have the funds to pay it. Otherwise, you risk acquiring interest charges on your first bill, and that’s the last thing you want.
Remember, the idea isn’t to spend extra money on scoring points but to hack the system and find ways to meet the spending requirements without incurring debt.
That’s where manufactured spending can come in handy.
Manufactured spending refers to the practice of purchasing cash equivalents, such as gift cards, money orders, and so on with rewards earning credit card. The goal is to earn miles or points for these purchases and then liquidate the funds and use them to pay the credit card. This strategy is usually used to meet minimum requirements or to achieve the flyer miles with a particular airline or hotel.
Here are some of the most efficient manufactured spending methods:
Pay Yourself with the Credit Card
By far the best way to meet the minimum spending limit is to pay yourself with your credit card and then pay the card back. Here’s how it works:
Use a platform like PayPal, Square or Venmo and email yourself an invoice to pay a bill. You can make the bill the entire amount of the minimum spending required or whatever you may need to hit the mark. Make sure to use a different email address instead of the one tied to your current account.
Use your credit card to pay for the bill. After paying it, the money will go to your bank account, minus a 3% credit card transaction fee. Use the money from the bank account to pay for your credit card at the end of the month.
By using this simple hack, you will pay just 3% of your minimum spending. In other words, a $5,000 minimum limit will only cost you $150. That’s a pretty great deal. For just $150 you can get a free roundtrip flight that would usually cost $1,000 or more.
Use Your Credit Card to Pay for Big Purchases
Don’t get the wrong idea. I’m not advising you to start spending money just so that you can meet the minimum limit. However, if it so happens to need a new computer or a new fridge around the time you’ve signed-up for a new credit card, use it to pay for this expense.
You can also use your credit card to pay for your friend’s and family’s purchases and ask them to pay you back. For example, if a friend of yours plans to buy a new sofa, ask them to let you put that purchase on your credit card. Then, instead of paying the store, they’ll send the money to your credit card. Or, if you go out to dinner with your friends, pay the bill with your credit card and ask them to reimburse you. That way, you can take care of the minimum spending for your card for the cost of a steak at a nice restaurant.