Thinking about price compression

Travel hacking means never paying full price, whether it's for flights, hotels, rental cars, or any of the other travel expenses we develop techniques to minimize, evade or completely avoid. One interesting consequence of this is what I would like to call "price compression." There are two ways this phenomenon manifests:

• More expensive itineraries don't cost more miles or points. The classic example here would be an economy itinerary that costs $150 and a first class itinerary that costs $350: both would cost 20,000 US Bank Flexpoints, so the passenger wouldn't incur any additional cost by taking the more expensive, higher-earning flight. Another fairly common situation is with American Airlines award availability: there will be only expensive AAnytime availability for economy seats, but SAAver availability for first class seats. The difference in miles, and the cost of manufacturing those miles, is often trivial.
• The price ratio between expensive and cheap itineraries is the same, but scaled drastically downwards. For example, someone redeeming Chase Ultimate Rewards points earned with an Ink Cash, Bold, or Plus card at gas stations might pay roughly 1 cent for 2.5 cents in airfare. A $500 flight still costs twice as many Ultimate Rewards points as a $250 flight, but the numbers are scaled down, to $200 versus $100 in total out-of-pocket expenses. An even more extreme example would be Citi ThankYou points earned (starting April 19, 2015) with a ThankYou Premier card at 3 points per dollar spent at gas stations, then redeemed for 1.6 cents each on American Airlines or US Airways flights (with a ThankYou Premier card).

Think about out-of-pocket costs earlier, not later

Once you've earned miles or points, a common impulse among travel hackers is to assign value to them corresponding to their redemption value, rather than their acquisition cost. This was the theory motivating Frequent Miler's Reasonable Redemption Values, for example: the value of a mile or point is the value of the award that currency is typically redeemed for.

Only later, after booking an award redemption, do you hear people say "I paid $87.50 for a $5,000 BusinessElite ticket to Europe" (using Delta SkyMiles as an example).

What I would like to suggest is that price compression makes it worth considering your total out-of-pocket expenses earlier, rather than later, in the redemption process. It still makes sense to base your earning decisions on the imputed redemption values of your miles and points, but when it comes time to redeem them, it makes sense to look at your out-of-pocket expenses as well.

Price compression at work: paid tickets on American and Delta

Perhaps it's unsurprising why I've been giving this topic some thought lately: the recent massacre of Alaska Airlines Mileage Plan earning on Delta-operated flights.

On the one hand, the new Mileage Plan earning rates have made me more willing to book flights on American Airlines, since even slightly more expensive flights earn two to four times more Mileage Plan miles. On the other hand, it has made me more diligent about checking first class fares on the Delta flights I would, all else being equal, prefer to take.

An upcoming trip to Boston illustrates this point nicely (my earning as an Alaska Airlines MVP Gold 75k is in parentheses):

• A Delta flight in the "V" economy fare bucket costs $386, and will earn 1,222 (2749) Mileage Plan miles;
• An American flight in economy costs $540, and will earn 2,734 (6151) Mileage Plan miles;
• The cheapest Delta first class flight costs $697, and will earn 3,055 (6873) Mileage Plan miles.

That's a fairly significant range of prices. But what about the "compressed" prices of those flights — the out-of-pocket cost of the spend manufactured in order to purchase those fares?

If you're manufacturing Ultimate Rewards points with a Chase Ink Plus at 0.49 cents each, and redeeming them at 1.25 cents each, the three flights cost:

• Delta "V" economy: $151
• American economy: $211
• Delta first: $273

Here you can see the ratio between prices is the same, but the prices are compressed so there's a much smaller difference in the passenger's actual out-of-pocket expenses for the three flights.

Likewise, the three prices fall into three different US Bank Flexperks Travel redemption bands. If you're manufacturing Flexpoints at gas stations for 0.49 cents each (or grocery stores for 0.69 cents each), the three flights will cost:

• Delta "V" economy: $98 ($138)
• American economy: $147 ($207)
• Delta first: $196 (276)

Knowing your out-of-pocket costs promotes clear thinking

I'm not arguing that it's worth paying $98 for 4,124 Mileage Plan miles. At 2.4 cents each, that's fairly expensive from the perspective of manufactured spend. But of course you're not just earning redeemable miles; you're also earning elite-qualifying miles, helping you qualify or re-qualify for elite status.

If the status in question is Alaska Airlines MVP Gold 75k, then you'll receive an additional 50,000 bonus Mileage Plan miles when you qualify. That doesn't mean booking the most expensive flights available is always a good idea, but those bonus miles do mitigate some increased out-of-pocket expenses, once those out-of-pocket costs have been transformed by the miracle of manufactured spend.

You'd also be flying in first class. Whatever you think about free booze, checked bags, early boarding, and so on, they're not worth nothing.

Are you redeeming your miles and points fast enough?

I relentlessly advocate earning miles and points with specific redemptions in mind. But I understand perfectly well that that's not always easy to do. Your upcoming travel schedule may not be knowable in advance. Award space you were counting on may not materialize, leaving you with an unexpectedly large balance. And of course you may simply have access to more manufactured spend than you can reasonably plan redemptions around.

That being the case, taking a look at your out-of-pocket expenses may help you realize you can afford to travel more and travel better than you thought. Instead of comparing each redemption against some ideal redemption you read about online, try comparing redemptions against the price you paid for those miles and points. When it's a matter of a hundred dollars to fly across the country or world in a premium cabin, your economy cabin may be a false economy after all.

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!

Here's when it really makes sense to make Evolve Money payments with credit cards

It's no secret that I'm proud of my initial research on Evolve Money soon after the service first launched. I experimented with and described a number of possible uses of Evolve Money, like making contributions to 529 College Savings plans and making mortgage and student loan payments. If you were buying prepaid debit cards with a 5% cash back credit card, or American Express gift cards, making such payments with Evolve Money might completely negate any interest on the underlying loan, or give your college savings a nice upfront bump in value (since your true basis in the savings would be lower due to your credit card rebate).

In conducting that research I even discovered (and shared in the newsletter I send out to blog subscribers), that Evolve Money accepted some Visa and MasterCard credit cards, and that such payments were processed as purchases. Pace affiliate blogger Daraius Dubash this was not a "short-lived" glitch, but rather one that worked continuously from the time I discovered and shared it on February 2, 2014, until a few days after he publicly and excitedly revealed it to his readers on May 15, 2014.

Now Evolve Money is again allowing credit cards to be used for bill payments, but with a 3% surcharge. This is a terrible idea, but you already knew that. Rather than tell you what you already know, I thought I'd brainstorm: when does it make sense to pay a 3% fee to charge bill payments to your credit card?

You need time to pay

On the one hand, paying 3% up front in order to take out a short-term loan is a terrible idea. It's loans like that which result in the insane interest rates you hear about on payday and car title loans.

On the other hand, if you don't have the cash available, I can imagine a few instances where the numbers add up. For example, if you're in a high tax bracket and your state allows you to deduct contributions to a 529 College Savings plan from your income, and you forgot to contribute until the end of the year, you might not have the cash for a contribution immediately available. Instead, you could make a payment using Evolve Money, taking a 3% hit up front but saving more than that when you file your taxes.

Likewise, if your landlord is a biller in Evolve Money, you don't have the cash available to make your rent payment, and your landlord charges more than 3% in penalties for late payments, you might come out ahead taking out a short-term loan by paying him using your credit card (keeping in mind that if your rent is less than $500, you'd be better off buying a prepaid debit card and paying with that).

You're incapacitated

If you're in an accident and wind up in the hospital, or you're stranded by an avalanche in a ski chalet with nothing but firewood, a bearskin rug, and your smartphone, you may find that you can't log into your accounts in order to make payments. As long as you have your smartphone, remember your Evolve Money login credentials, and have a linked credit card, you can make essential payments like your cell phone (or, given the first example, your health insurance). It's not ideal, but these things do happen!

You're abroad

Even if you find the last few scenarios outlandish, you might be able to relate to this one. If you're overseas and a big credit card signup bonus comes along, you might be tempted to apply, but not have access to the techniques you usually use to manufacture spend. There are a number of cheaper ways to meet minimum spend requirements (even if you're committed to using Evolve Money, you could fund a Nationwide Visa Buxx card and use that to make an Evolve Money payment for free), but as a last resort you could fund bill payments directly with your new credit card.

Likewise, if your credit card is lost or stolen shortly before the end of the period allotted to meet your minimum spending requirement, but you have the card's information recorded separately, you could use Evolve Money rather than wait for a new card to arrive in the mail.

Any others?

Hopefully these examples illustrate the outlandishness of funding Evolve Money payments with credit cards! Just go to the drug store, gas station, or grocery store, pick up a prepaid debit card, and pay with that instead.

Can my readers think of any other situations where a 3% fee would be a small price to pay?

Should all manufactured spend go through American Express gift cards?

Earlier this week the BeFrugal shopping portal temporarily raised their payout on American Express gift cards to 2.2% from 1.5%. Several shopping portals (including my favorite, TopCashBack) periodically raise their earning rates on these cards, so many folks wait to buy their American Express gift cards until payouts are increased.

I don't write very much about American Express gift cards because I don't use them very much, but they're extremely popular, and for good reason.

Why buy American Express gift cards?

The argument for buying American Express gift cards is simple: they turn every credit card into a cashback-earning American Express card. Instead of just earning United miles with a Chase United MileagePlus Explorer card, you can earn United miles and 1.5% cash back.

If that sounds to you like it's too good to be true, then you're in good company! Lots of travel hackers find it worthwhile to direct much or most of their manufactured spend through American Express gift cards.

Why not buy American Express gift cards?

There are a number of potential issues to be aware of if you're considering using American Express gift cards:

• The gift cards are (obviously) American Express cards. Some techniques for liquidation either don't allow American Express cards to be used, or specifically refuse gift cards for purchases (some Simon Mall locations are notorious for this). Plan in advance which merchants you'll spend the gift cards at;
• The cards are shipped out activated and ready to use, and in my experience usually don't require a signature for delivery. If you have a day job, you may not feel great about having thousands of dollars left out on your doorstep all day.
• If you order personalized cards, they can take anywhere from a few days to a week to ship and be delivered. You'll need to build that dead time into your strategy, and be willing to tie up the available credit on your cards for days with nothing to show for it;
• Finally and most importantly, orders are often denied for little or, most frequently, no reason at all. After moving in May, I couldn't get a single order approved for months, although my approval rate has noticeably increased lately.

There is so much more to say about American Express gift cards, and fortunately most of it has already been said by Frequent Miler! Check out that page for a tremendously helpful resource.

Should all manufactured spend go through American Express gift cards?

In recent months I've done as much as possible to tighten up my own manufactured spending strategy.

First I should say that unlike many of my readers, I don't place a high value on my time, or rather, I don't treat manufactured spend as a time "suck:" I do much of my manufactured spend on foot, which makes it feel vaguely healthy; I listen to funny and educational podcasts while I work; and I'm always gathering more news and updates for this blog, increasing the value I provide my readers. So I don't feel the need to put a dollar cost on my time spent, since I love my job!

At the same time, I do put a dollar cost on my dollars, and aim to maximize the value I get from each dollar spent manufacturing spend. For me, that means using cards exclusively at merchants where my spend is bonused, while using my cash back cards at cheap, unbonused merchants and for American Express gift cards.

The interesting thing about American Express gift cards, however, is that just as you can impute redemption values by comparing a 2.22% cashback-earning credit card to a hotel's co-branded credit card, you can also impute redemption values by comparing your bonused earning rates to American Express portal payouts.

For example, when you use an American Express Hilton HHonors Surpass at a grocery store, you earn 6 HHonors points per dollar spent. When purchasing American Express gift cards through a 1.5% cash back portal, you earn just 3 HHonors points per dollar spent — and 1.5 cents in cash back.

In other words, your "bonused" earning rate allows you to buy HHonors points at 0.5 cents each, which is at the high end of the range of real-world Hilton redemptions.

When portal payouts on American Express gift cards are raised to 2.2% cash back, spending with your card becomes an even worse deal, allowing you buy HHonors points for 0.73 cents each. Realistically, you're not going to consistently redeem your HHonors points for that much value.

Within reason, more points are more valuable than fewer points

Everything I've said so far is true, and you can take a look for yourself at the numbers — and the potential problems I outlined — to see whether American Express gift cards make sense in your own miles and points strategy.

However, there's one final issue that's worth mentioning. As regular readers know, I'm the biggest advocate of earning only as many miles and points as you can reasonably expect to redeem, since an unredeemed mile is worse than worthless: it actually cost you the cash back you could have earned instead.

At the same time, within reason, at the margin points become more valuable the more you have of them: 12,499 Delta SkyMiles can't be redeemed for travel, but 12,500 can. In that situation, the last SkyMile you earn is in a concrete way the most valuable SkyMile, since it unlocks the value of all the other ones!

How about a concrete example? I have an upcoming Hilton stay I'm currently saving up HHonors points for:

• I'll redeem 200,000 HHonors points for a 5-night stay in New Orleans that would cost $820, or roughly 0.41 cents per HHonors point;
• At 6 HHonors points per dollar spent, that's more valuable than a 2.22% cash back card;
• But if I instead earned 3 HHonors points per dollar spent on American Express gift cards, I'd fall short of the 200,000 HHonors points I need to receive the 5th night of my stay free, and have to pay 50,000 HHonors points per night instead;
• 3 nights would cost 150,000 HHonors points and I'd be saving $492 for those three nights, a redemption rate of just 0.32 cents each.

I'd be better off using a 1% cash back card!

Note that these numbers are specific to my own situation. That's exactly why I preach that miles and points shouldn't be earned speculatively, but rather with specific redemptions in mind.

Of course, the other possible conclusion you could reach is that Hilton HHonors points just aren't very valuable!

Regional: new AAA Visa gift card daily limits

I often joke that I'm the only person left buying Visa gift cards from AAA. And before anyone complains, I understand:

• Yes, you have to be a AAA member;
• Yes, they're only available in some regions;
• Yes, purchases can be pretty time-consuming if the person helping you isn't familiar with the Metabank system they have to interface with;
• Yes, frequent large purchases with immediate liquidation can result in being blacklisted from further purchases.

But the cards are PIN-enabled, they cost $3 most of the year and are free for 2-3 months per year (around the May/June graduation season and the winter holidays), and they're coded as purchases with every credit card I've used.

Changes to daily purchase limits

When I went in for my weekly purchase at the beginning of January, the clerk who always helps me told me that there was a new limit on daily purchases. Rather than the theoretically unlimited number of Visa gift cards customers were previously able to purchase, purchases were now limited to $1,000 per day.

I didn't ask whether this is a new national policy, is limited to my AAA region, or something in between.

Analysis

It's hard to say whether this is, on balance, good news or bad news.

On the one hand, $1,000 is less than I had previously been purchasing per trip, so this means I'll be manufacturing slightly less spend with these cards going forward.

On the other hand, the "unlimited" purchases AAA was previously willing to process was a honey trap for an unbelievable number of travel hackers. I've heard the same story repeatedly: "The first day I purchased $5,000. The second day I purchased $20,000. The third day I'd been blacklisted."

If the new $1,000 daily purchase limit keeps members of the community from falling into that trap, and therefore able to continue earning cheap miles and points, I'll consider it a net positive. If the new limit is instead designed to slow people down so their accounts can be blacklisted before they can reach the total purchase numbers that were previously possible, it'll be a net negative.

Conclusion

It was about AAA Visa gift cards that I first remarked on "What you miss when you miss MS." Affiliate bloggers who pretend that it's possible to earn significant travel rewards through everyday spending are lying to their readers in order to generate credit card commissions.

For example, talking about bonused restaurant earning on every affiliate blogger's "favorite" card, the Chase Sapphire Preferred, is preposterous when rather than spending $500 at restaurants in order to earn 1,000 Ultimate Rewards points, I can spend $6 at my local AAA branch.

Instead, the card you put your actual restaurants purchases on should be a card you carry anyway, either because of its annual benefits or because it's worth manufacturing spend on that card.

Easy and free ways to liquidate prepaid gift cards from Office Max

By now many of my readers will have seen information about the current Office Max promotion, running through December 27, 2014, for $20 off $300 or more in Visa or MasterCard gift cards purchased in-store.

Since $200 Visa and MasterCard gift cards come with a $6.95 activation fee, buying two will net you $6.10 in value even before accounting for any credit card rewards earned on the purchase, while buying one $200 and one $100 gift card would net you $7.10, again before accounting for credit card rewards.

While it's possible to simply integrate these cards into your existing workflow of manufactured spending, this deal is so good I think folks who, for reasons of geography, time, or inclination, don't typically manufacture spend with prepaid debit cards should still consider going for it.

For their sake, here are several ways to capture the value of Office Max gift cards without studying up on all the ins and outs of manufactured spend.

Give them as gifts

Ok, this one's a bit of a joke, but some people actually give Visa and MasterCard gift cards as gifts! If you can get $200 in credit with your loved ones for $196.60, that's still a win!

Prepay your bills

You might be accustomed to paying your cell phone bills each month with a Chase Ink card to earn 5 Ultimate Rewards points per dollar spent. Using a Visa or MasterCard gift card bought at Office Max during this promotion captures the same 5-Ultimate-Rewards-point earning opportunity, but includes a nice discount off face value. If you're the kind of guy who frets over taxes, you can probably even get away with deducting the entire amount of your cell phone payment (though as I'm fond of saying, not only am I not an accountant, I'm definitely not your accountant!).

In addition to cell phones, there are many telecommunications companies, among others, that happily accept prepayments made with debit cards online. Check yours.

Use Evolve Money

This is a more flexible version of the above. Evolve Money accepts prepaid debit cards for bill payments to many merchants that don't themselves accept debit cards directly. You can use prepaid debit cards to make payments to your mortgage, car loan, student loans, municipal utility companies and tax authorities, and thousands of other merchants. If you use a Visa or MasterCard debit card bought at Office Max during this promotion, you'll do so at a nice discount.

As I've reported extensively elsewhere, you can even use prepaid debit cards to fund your own or your children's education through one of the many 529 College Savings plans that accept contributions through Evolve Money (I use the Utah Educational Savings Plan because of its flexibility and low-cost Vanguard mutual funds). If you decide to go this route, please read my entire series on Evolve Money.

Buy gift credit at merchants where you'll use it

While a classic example is at a merchant like Amazon.com, where you can buy gift credit in almost any denomination and have it simply wait for you to redeem it against future purchases, there are other choices you might consider: if you frequently ride Uber, buy yourself some gift credit and it will be automatically used up as you take rides.

Conclusion

Offers like this Office Max deal are as close to free money as you're likely to find without a deep dive into the world of manufactured spend. You may think it's not worth lugging around gift cards for everyday purchases, but hopefully the examples above show you that's totally unnecessary: these cards are almost as easy to liquidate as they are to buy.

Developing: problems with Walmart bill pay

This is just a quick note going into the weekend for readers who haven't yet seen this on Twitter, Flyertalk, or another manufactured spending forum.

Some Walmart Money Center registers are no longer showing some credit card payment networks

As longtime readers know, I'm a huge fan of CheckFreePay bill payments at Walmart, which allow you to use PIN-enabled debit cards to pay Visa, MasterCard, Discover, and some American Express cards (depending on the card issuer). They make it easy to liquidate PIN-enabled prepaid debit cards and free up credit limits for additional spending throughout the month.

This afternoon I was unable to make bill payments to any of my credit cards, which I discovered has been emerging as a problem in various places around the country.

There have also been reports of people still being able to successfully make bill payments as late as this evening, so at this point this is a "your miles may vary" situation. But if you are planning to make Walmart or other CheckFreePay bill payments to your credit cards this weekend, don't be shocked if your cashiers are unable to find your payees in their system.

Stay tuned for updates in the coming days and weeks, as this situation is developing...

Is pure Arrival+ mile arbitrage possible?

I have a lot of bad ideas. I have a lot of good ideas, too! Basically, I have a lot of ideas. Being self-employed, I have a lot of time to sit and think (and, naturally, manufacture spend), all for the sake of my beloved readers.

Lying in bed late last night, I came up with what I believe may be my worst idea yet, although readers are of course free to chime in with their own candidates. Interested yet?

You can redeem Arrival+ miles against refunded purchases

Whenever I mention a creative way to maximize the value of Barclaycard Arrival+ miles, I always get pushback from readers who dismiss any actual travel redemption as a mug's game: after all (the logic goes), since you can redeem Arrival+ miles for as little as $25 against any travel purchase, even if that purchase is later refunded, no one should ever have a problem with "orphaned" Arrival+ miles.

I don't do this, for two reasons: first and foremost, I have plenty of authentic travel purchases (like this Monday's Orbitz deal) that Arrival+ miles are redeemable against, so I never have more than a few tens of thousands of Arrival+ miles in my account at one time anyway. But secondly, and this is where I meet a lot of resistance, since the Barclaycard Arrival+ card is one of the most lucrative cards for non-bonused spend I don't feel any compulsion to abuse that relationship by repeatedly making preposterously large purchases, redeeming miles against them, and then refunding them (it works in the opposite order, as well). That's easily tracked and easily flagged abuse, and it doesn't interest me.

Refunded purchases forfeit earned miles

When you make a purchase with your Arrival+ card, you earn 2 miles per dollar spent with the card. When you refund a purchase made with your Arrival+ card, you forfeit the same number of miles.

10% of miles redeemed for travel purchases are instantly redeposited

Whenever you redeem your Arrival+ miles against a travel purchase, 10% of the redeemed miles are instantly redeposited into your Arrival+ balance.

These miles are pure abstractions; they are not and could not be linked in any way to the "original" mile-earning purchase(s).

Consequently, while refunding a purchase causes the exact number of miles earned with that purchase to be "clawed back," any redeposited bonus miles remain in your account.

Rube Goldberg, eat your heart out

All of these facts were swirling around in my mind last night when I came up with the following. Consider the following stylized situation:

• On January 1, the cardholder makes 10 prepaid, refundable airfare or hotel reservations, each for $1,250, for September 1.
• On January 2, the cardholder makes 10 prepaid, refundable airfare or hotel reservations, each for $1,250, for September 2
• On January 3, when the January 1 reservations post and the Arrival+ miles are deposited into the cardholder's account, she redeems the 2,500 Arrival+ miles earned with each purchase against each purchase.
• The cardholder will receive $250 in statement credits and have 2,500 Arrival+ miles remaining in their account.
• Also on January 3, the cardholder makes 10 prepaid, refundable airfare or hotel reservations, each for $1,250, for September 3.
• On January 4, the cardholder makes 10 prepaid, refundable airfare or hotel reservations, each for $1,250, for September 4
• Also on January 4, when the January 2 purchases clear and Arrival+ miles are deposited into the cardholder's account, she redeems 5,000 Arrival+ miles against one January 2 reservation and 2,500 Arrival+ miles earned with each purchase against the other nine January 2 reservations.
• The cardholder will receive $275 in statement credits and have 2,750 Arrival+ miles remaining.
• The cardholder can then cancel a September 1 reservation, refunding $1,250 to her account and forfeiting 2,500 Arrival+ miles, leaving a balance of 250 miles.
• This continues forever.

It works, but only for a certain definition of "works"

As I said to begin with, this is certainly one of the worst ideas I've ever had. There are two key problems with it, which are already illustrated in the stylized example above:

• It takes roughly 10 days to earn enough miles to cancel all ten reservations made on Day 1. Each day you'll earn enough bonus miles to forfeit one reservation's worth of earned miles;
• It takes roughly 5 days to earn enough cash back to "pay" for each reservation. Remember that each day you're redeeming roughly $250 in cash back, while each reservation costs $1,250.

In other words, it's impossible to "catch up" to yourself: you'll eventually (around September 24, in the example above, by my back-of-the-envelope calculation) have outstanding reservations when the day of the reservation comes around, and have to cancel the reservation without a sufficient Arrival+ mile balance to cover the deficit.

Of course, this is all setting aside a much more profound problem: In order to avoid paying interest, you would have to pay off your Arrival+ card each month! Even though all your reservations would be eligible for redemption eventually, each statement would close with some outstanding reservations that would have to be paid off to avoid interest charges.

Conclusion

So what do you think? Where does this idea stand in the pantheon of my terrible ideas?

How my thinking has "evolved" on the costs of manufactured spend

One principle I've always tried to adhere to on this site is transparency with my readers. That's why I periodically share my income from book sales, referrals to services like Uber, PayPal subscriptions, and so on, and why the comment sections are always open on my blog posts. When I'm wrong, my readers don't hesitate to tell me — and judging by the comments I get, I'm wrong a lot!

I was pondering all this today in the shower when I realized there's a key concept about which my thinking has really evolved in the almost-2-years I've been writing online. That concept is how to think about the cost of individual techniques for manufactured spend and the total cost of a manufactured spend strategy.

To show what I mean, it helps to look at an early post I wrote, in which I described buying PayPal My Cash cards with a rewards-earning credit card and then liquidating the funds using a PayPal Debit MasterCard that earns 1% cash back. It's a perfectly accurate post — but I was totally, utterly, and completely wrong.

What I described was a way to earn as much as possible from a single dollar of manufactured spend on a rewards-earning credit card. I described it as "driv[ing] down your cost per point." With the benefit of 21 more months experience manufacturing spend, that's the key point I've changed my mind about.

Make it up in volume

Rather than focusing on the cost of individual techniques, these days I prefer to think about the costs of my manufactured spend strategy holistically. To give a trivial example: my American Express Hilton HHonors Surpass and Blue Cash cards both bonus charges at gas stations and grocery stores. A quantum view of the two cards would lead me to insist on manufacturing spend at grocery stores (paying an extortionate $5.95 per $500 Visa prepaid debit card) exclusively with the Blue Cash card, netting $19 per card, and at gas stations with the HHonors Surpass card, earning around 3000 HHonors points for $3.95, or about 0.13 cents each.

But that's nonsense. At the end of the day, the amount and cost of my grocery store and gas station manufactured spend is determined by my ability to liquidate the spend, not by the cards I use at each store.

These days, I use what might be called a "lump of MS" strategy. I generally know at the beginning of each month what my goals are in terms of both bonused and unbonused spend: I'm going to spend a certain amount of money at grocery stores, gas stations, drug stores, office supply stores, etc., and put a certain amount of bonused spend on certain cards. As long as I'm sure to hit my targets for each card, I'm totally agnostic about which cards I put "cheap" spend on and which cards I put "expensive" spend on.

Unbonused spend is even simpler, since by definition is has to be much cheaper than bonused spend to be worth engaging in. If I'm due to load a Visa Buxx card, for example, but discover that my Barclaycard Arrival+ card is already maxed out, I'll instead make the charge to a card like Ink Plus. While I'm earning less per dollar, I think of my non-bonused spend, like my bonused spend, as having a fixed monthly cost. All I need to do is make sure at the end of the month I've hit all my spend targets, and I can sleep well at night.

Conclusion

I don't expect this post to revolutionize any reader's strategy. But in the interest of the transparency I prize here, I wanted to explain to anyone who stumbled across my post from last February that I was doing it wrong, and hopefully keep others from making the same mistake!

US Bank Visa Buxx address changes

Obviously, I change addresses somewhat more frequently than your average worker bee. Back in May I moved to the Upper Midwest from New England, then in August my partner and I finally moved into our own place together. That's a lot of address changes to keep track of, but I do my best.

One thing common to all Visa Buxx cards is that the profile address on file with your Buxx card must match the billing address of any credit card used to fund the card. With the Nationwide and TD Go Buxx cards this doesn't pose much of a problem: when your credit card's billing address changes, you can easily sign into your Buxx account and update your profile address to match it.

The first time you attempt this with a US Bank Visa Buxx card, you'll find it equally easy. But if you change your billing address again shortly afterward, you'll see that the option to edit your profile address has been disabled, as indeed I discovered when I moved for the second time and became unable to fund my Buxx card.

I've been logging into my US Bank Visa Buxx account a few times a week for the past few months, and finally today discovered that the option to edit my profile address had reappeared. I checked my records and found that the last time I'd edited the address was 3 months ago, almost to the day.

Conclusion

Your Visa Buxx profile address must match the billing address of any card you use as a funding source. While Nationwide and (formerly) TD Go both allowed you free reign to edit your profile address, my experience indicates that US Bank allows additional profile address changes only after a 3-month period has elapsed.

I'm setting off this afternoon for a long Halloween weekend, so anticipate delayed response times until Monday. Hopefully a few days off will allow me to take a more nuanced view of all the changes currently taking place when I return on Monday.