Waiveable annual fees

Preface

I'm not going to write about any changes to the Target Prepaid REDcard until tomorrow. For all the wailing, lamentations, and gnashing of teeth you could possibly want, go read boardingarea.com or something. We'll all know everything there is to know, soon enough.

Waiveable annual fees

As I've written before, signup bonuses play a trivially small role in my miles and points strategy. Instead, I focus on cards that offer either valuable ongoing benefits, like the US Bank Club Carlson Business Rewards credit card (at least until the last-night-free benefit is discontinued at the end of this month), or sufficiently high returns on my manufactured spend, like the Barclaycard Arrival+ MasterCard, which earns a functional 2.22% cash back on all purchases.

Unfortunately, those cards and several others I carry come with annual fees and the requisite (after a quick call to see whether threatening to cancel will earn you a worthwhile retention bonus) annual soul-searching about whether those annual fees are worth paying.

Two cards I carry waive that annual fee for high spenders, but in two very different, very roundabout ways.

US Bank Flexperks Travel Rewards high-spend bonus

After spending $24,000 in a cardmember year on the US Bank Flexperks Travel Rewards Visa, you earn a bonus in your anniversary month of 3,500 Flexpoints.

Additionally, roughly two months before your anniversary month, the Flexperks Rewards site enables the option to redeem 3,500 Flexpoints against your annual fee of $49.

Now, that's a pretty screwy system. First of all, 3,500 Flexpoints are worth up to $70 in paid airfare, so at first glance it seems like a rotten deal to redeem them for a statement credit of just $49. But second of all, if they wanted to waive the annual fee for cardholders spending $24,000 on the card, you'd think they could just waive the damn annual fee (interestingly, that's precisely how the FlexPerks Business Edge Travel Rewards card works)!

Squaring that circle is easy once you remember my maxim that the least valuable point is always the one you don't redeem, as well as its corollary, that the most valuable point to your bank is the one you don't redeem. Seen in this light, their high-spend bonus scheme is a win-win from US Bank's perspective:

• If you hoard your Flexpoints and refuse to redeem them for a paltry $49 annual fee, you have to pay that annual fee, which goes directly to US Bank's bottom line;
• If you redeem 3,500 Flexpoints against the annual fee, you'll be further away from your next award ticket, increasing the amount of time you sit on worthless, unredeemed Flexpoints, and decreasing the chances they'll ever be redeemed.

In my opinion, the least bad option, unless you actually need the bonus Flexpoints for an upcoming, high-value flight redemption, is to redeem them against your annual fee and forget about them. That turns this up-to-4%-earning product into the most valuable, year-round, no-annual-fee credit card out there.

Barlcaycard Arrival+ World MasterCard's redeemable annual fee

Never having paid an annual fee on my Arrival card, until Frequent Miler wrote about his experience downgrading his card I hadn't realized that the card's $89 annual fee counted as a redeemable "travel" expense.

I often say that the $89 annual fee of the Arrival+ is only worth paying if you manufacture more than about $44,500 on the card each year. That's the amount where the 10% rebate on travel redemptions will generate $89 in Arrival+ miles.

But if the $89 annual fee is a redeemable travel expense, that calculation doesn't hold precisely true, since you can redeem 8,900 Arrival+ miles against the fee and earn an 890 mile rebate, worth at least $8.90 in future redemptions.

Remember, our goal is to find the amount of manufactured spend which justifies keeping the Arrival+ MasterCard, and with that $8.90 rebate against the annual fee, you need spend a maximum of just $40,050 on the card to offset the now-miraculously-lower $80.10 annual fee.

Unconvinced? Here's a quick proof: spend $40,050 and earn 80,100 Arrival+ miles. Redeem 8,900 miles against the annual fee and earn an 890-mile rebate. Redeem 72,090 miles and receive a 7,209-mile rebate. Redeem 7,209 miles and receive a 720-mile rebate. You've now received $88.19 in rebates from $40,050 in spend and just 3 redemptions (one of which – the annual fee – didn't even require an eligible travel purchase).

Obviously, the proof above also illustrates that the more redemptions you make, the closer you'll come to achieving the theoretical maximum return on manufactured Arrival+ spend of 2.22%, which is one reason to privilege small redeemable transactions over larger ones.

Conclusion

Credit card companies earn money from cardholders in 4 main ways: interchange fees on purchases, annual fees, cash advance and interest charges, and selling customers' personal information to their marketing partners.

If a bank has a target for the profitability of each cardholder, it seems only right to me that high-spending customers (earning the bank higher interchange fees) should receive a break on annual fees.

But few credit card products have explicitly adopted that philosophy yet, hoping instead to earn both swipe fees and annual fees from the same customers.

Quick update: Vanilla Visas and "Delayed Redemption"

In my post yesterday I forgot to mention an occasional problem that arises when manufacturing spend with Vanilla-branded prepaid Visa debit cards. This oversight is especially unfortunate since it actually occurred to me yesterday: the dreaded "Delayed Redemption."

The problem

Sometimes, but not always, attempts to liquidate Vanilla-branded prepaid Visa debit cards soon after purchase using a PIN (any four digits, selected the first time you use the card), whether they're marketed as "gift" cards or not, are declined.

When that happens, when you frantically call the number on the back of your card from the parking lot of whichever store you're visiting, you'll be relieved to know the funds are still there on the card. But when you go back inside, the card will still be declined.

When you get back home, or log onto vanillavisa.com from your smartphone, you'll see this message in your transaction history: "Denied : Delayed Redemption."

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When does this happen?

I won't venture a guess as to why this happens, but I can share a few datapoints from my own experience about when it happens:

• The first time this happened to me it was with a $500 OneVanilla Visa prepaid debit card purchased at Walgreens;
• This has never happened to me with any OneVanilla Visa prepaid debit card purchased at a 7-Eleven or CVS store location (although I did have a OneVanilla Visa improperly activated at CVS);
• The second time it happened was yesterday, with two $200 Vanilla Visa gift card purchased at Office Depot.

The solution: patience

If you're taking my advice from yesterday, you might be buying thousands of dollars of deeply-discounted Vanilla Visa gift cards in the next 12 days, and you might run into the problem of your PIN-based transaction being denied shortly after purchasing a card.

If that does happen to you, wait.

It's not glamorous or fun, you just need to wait. I recommend 24 hours, although you may be able to liquidate your cards sooner than that.

Conclusion

Vanilla Visa prepaid debit cards will sometimes reject PIN-based transactions shortly after cards are purchased, even if they've been properly activated. Wait 24 hours and they'll be fair game.

Liquidating deeply-discounted $200 Vanilla Visa gift cards

As most of my readers no doubt know, through May 16, 2015, you'll instantly receive $20 off every $300 in Visa gift cards purchased at both Office Max and Office Depot. The discount is instantly calculated against every $300 in Visa gift card purchases in each transaction, regardless of the denomination (so three $200 Visa gift cards receive $40 in instant savings).

The offer is supposed to be limited to two rebates per customer. What that means in practice is that the register will only award two $20 rebates per transaction. It's possible to evade this limit by:

• visiting multiple stores;
• bringing multiple "customers" with you (each with their own authorized user card, of course);
• visiting on multiple days;
• having indifferent cashiers.

The math

Since variable-value gift cards can no longer be purchased with credit cards, the two obvious options are purchasing six $100 Visa gift cards or three $200 Visa gift cards. After applying the instant discount, those transactions will ring up as $595.70 and $580.85, respectively.

Metabank versus Vanilla

The key difference between the two sister chains where this deal is available, Office Depot and Office Max, is that the former offers only Vanilla-branded Visa gift cards, while Office Max offers Visa gift cards issued by MetaBank.

Vanilla-branded Visa cards can no longer be used at Walmart for PIN-based transactions exceeding $49.99 (using any four digits on the first use of the card), while MetaBank-issued Visa cards can be liquidated for their full value using the last four digits of each card's number as its PIN.

Liquidating Vanilla Visa gift cards

For those lucky enough to have access to friendly grocery stores willing to sell money orders without a second thought, there's no particular reason to privilege MetaBank over Vanilla prepaid Visa debit cards.

For others, Vanilla Visa cards are a sheer nuisance. For my own monthly Vanilla liquidation needs, I load Serve cards at Family Dollar, which is free, although faces still-poorly-understood velocity limits (multiple identical loads at the same store are rejected as fraud, but up to 3 sequential loads of different amounts seem to be allowed).

Another obvious option for those with access to the Target Prepaid REDcard is using Vanilla Visa cards to load funds to the REDcard at any Target register. Since the cards aren't personalized, however, your success will depend entirely on the willingness of your Target cashiers to oblige you (mine insist on seeing any card I use to load funds to REDcard).

Liquidating deeply-discounted Vanilla Visa gift cards

The problem with all three of the above options is that they don't increase the amount of spend you're able to manufacture during this deal, they cannibalize the time and techniques you were already using to liquidate prepaid cards. Every $200 in Vanilla Visa gift cards I load to a Serve account is $200 in OneVanilla prepaid Visa debit cards I can't load to the same card.

For me, the essential fact about this deal is the deeply-discounted nature of the $200 Visa gift cards we're able to buy, paying just $193.61 for a card with $200 in spending power.

That deep discount means you shouldn't consider yourself throttled by the free and cheap techniques I described above; save those for your more expensive manufactured spend techniques, where every penny matters to the profitability of the technique.

This deal is about volume, and even more expensive methods of liquidation are profitable under these conditions.

Evolve Money

For many people, Evolve Money lost its luster when they started charging 3% for bill payments made with prepaid debit cards.

But guess what: if you've purchased $200 Vanilla Visa gift cards at a 3.18% discount, you can liquidate an unlimited number of them through Evolve Money and turn a profit on every single one, before even taking credit card rewards into account!

Specifically, you can make $194.17 bill payments with cards you purchased for $193.61.

So if it's been a while, or if you're new to Evolve Money, I recommend searching through their biller database for any bills you're already planning to pay.

Tuition bills

Although not found in Evolve Money, many school from kindergartens to universities are willing to accept payment with debit cards, often tacking on a similar fee to Evolve's 3%. If you're able to make multiple partial payments, this is a terrific way to liquidate deeply-discounted Vanilla Visa gift cards without cannibalizing other avenues.

Tax payments

Since these are debit cards, they should qualify for discounted debit card pricing when making payments to the IRS (and find way, way more information here).

Conclusion

When this deal comes around, as it does a few times each year, the key to maximizing it is volume. You'll be making money even at unusually high liquidation costs, so as long as you have a plan to liquidate them, you should consider buying as many $200 Visa gift cards as possible, whether they're backed by Vanilla or MetaBank.

But remember: the logic above applies only to deeply-discounted $200 Vanilla Visa gift cards; I won't personally be buying any of the much less-discounted $100 Vanilla Visa gift cards (although $100 MetaBank-backed cards will be fair game).

Manufacturing Chase Freedom's second quarter bonus categories

A reader recently wrote to me asking if there were any super-secret hush-hush methods of manufacturing the $1,500 in 5% cash back offered by this quarter's Chase Freedom bonus categories. As a reminder, those bonus categories are "Restaurants, Bed Bath & Beyond, H&M, and overstock.com."

I sent along to that reader, but also wanted to share with any other readers who may have missed Tagging Miles' post that Bed Bath and Beyond sells $200, PIN-enabled Visa gift cards with an activation fee of $6.95.

As I explained in a guest post at Doctor of Credit's website back in December, earning 5 Ultimate Rewards points per dollar on $200 PIN-enabled Visa gift cards isn't a great deal in terms of outlay ($6.95) versus income ($10.35). Rather, it's a good deal precisely because they're $200 Visa gift cards, so you can cram a lot more of them into a Bluebird or Serve card's $5,000 monthly load limit, or into a bank or credit union's without worrying about a high-volume "fraud" tripwire.

My experience at Bed Bath & Beyond roughly mirrors Tagging Miles': not all stores carry Visa gift cards, not all stores carry $200 cards, and stores that do may be extremely reluctant to sell large volumes. Yesterday I had trouble buying just $600 in gift cards, requiring a manager to slowly walk the cashier through the process, since she was sure she would be fired for letting so many cards walk out the door!

In any case, while I know many of my readers won't have any trouble spending $1,500 at restaurants this quarter, I'm as a rule extremely reluctant to use cards for both manufactured spend and "real" purchases. So if you're like me, go ahead and take 3 trips per Chase Freedom card down to your local Bed Bath & Beyond and buy no more than $600 per visit. Then you can get back to putting your actual restaurant charges on a 2% or 2.22% cash back card.

Quick hits: American Express gift card denominations and Smart & Final

I'm enjoying lovely San Diego but wanted to share two quick hits that passed my desk yesterday.

TopCashBack tracks multiple $2,000 American Express gift cards in a single order

Back in February American Express added language to their cash back portal offers excluding gift card denominations above $2,000 from earning cash back. At that point I started ordering my American Express gift cards in separate orders of $2,000 each, both out of an overabundance of caution and because it makes orders easier for me to track.

Then I got bored doing that, and last month ordered multiple $2,000 gift cards in the same order. The cash back still tracked successfully, and went to "payable" status with TopCashBack yesterday afternoon.

So if you had been ordering $2,000 gift cards separately out of an abundance of caution, don't worry, you can order them in one order without risking your cash back (although my cards were still shipped individually).

Add the Smart & Final Amex Offer to all your eligible cards

I saw a Smart & Final "Offer for You" in my American Express account a few days ago, and added it to my two cards without giving it another thought.

Then I saw Doctor of Credit write that the offer also had a Twitter signup option, "#AmexSmartFinal", and added it to all the rest of my cards as well using Frequent Miler's Tweetdeck method.

You'll earn $25 back up to 3 times when spending $50 or more on each linked American Express card.

To the best of my knowledge, you can link the primary cardholder and all authorized user cards issued by American Express, and you can link Bluebird and Serve cards as well as Bluebird and Serve subaccounts, which come with their own cards. If a card is issued by another bank, like the US Bank Flexperks Travel Rewards American Express or the Fidelity Investment Rewards American Express (issued by FIA Card Services), only the primary cardholder is eligible (If any of that information has changed recently, let me know and I'll update this post).

Smart & Final sells PIN-enabled Visa gift cards, so this is a straightforward money-making opportunity, with points added on for fun on the side.

When are more points worth more than fewer points?

Back in January I posed the rhetorical question, "Should all manufactured spend go through American Express gift cards?" and outlined a number of practical problems with using American Express gifts cards to manufacture spend (cards are shipped to your door activated, orders are sometimes inexplicably denied, American Express cards aren't accepted everywhere), as well as the significant advantages of fusing 1.5% or higher cash back onto everyday manufactured spend.

I concluded with a more speculative argument that "within reason, more points are more valuable than fewer points."

I want to dig a little deeper into that premise.

Comparing bonused spend to cash back

All manufactured spend should be divided, not into cash back versus miles and points, but into bonused and unbonused spend.

Theoretically, all unbonused manufactured spend would be better pushed through American Express gift cards purchased through a sufficiently lucrative cash back portal than if made directly with the credit card.

But that theoretical statement is not nearly as strong as it appears: many forms of unbonused manufactured spend are, for one reason or another, not accessible when using American Express gift cards.

The real issue arises when deciding between bonused spend and unbonused spend, when that unbonused spend is fused with cash back earned through American Express gift cards.

For example:

• A Hilton HHonors Surpass American Express card used at grocery stores earns 6 HHonors points per dollar. An American Express gift card bought at 1.5% cash back earns 3 HHonors points per dollar, plus 1.5% cash back.
• A US Bank Flexperks Travel Rewards card used at gas stations earns 2 Flexpoints per dollar. An American Express gift card bought at 1.5% cash back earns 1 Flexpoint per dollar, plus 1.5% cash back.
• A Chase Ink Plus card used at office supply stores earns 5 Ultimate Rewards points per dollar. An American Express gift card bought at 1.5% cash back earns 1 Ultimate Rewards point per dollar, plus 1.5% cash back.

The conceit here is obvious: 1.5% cash back ($15 per $1,000 in manufactured spend) is worth somewhat more than 3,000 HHonors points, roughly the same as 1,000 Flexpoints, and much less than 4,000 Ultimate Rewards points.

When are more points worth more than fewer points?

With all that being said, there's a reason I still manufacture HHonors points and Flexpoints at grocery stores and gas stations, and it's a function of my (extremely qualified) claim that, within reason, more miles and points are worth more than fewer miles and points.

The reason I stress the phrase "within reason" is that you should be redeeming your miles and points roughly as quickly as you earn them. When, and only when, you're doing so, there are advantages to having somewhat higher points balances rather than somewhat lower ones.

There a few reasons this is true:

• 5th night free benefits. Hilton, Marriott, and Starwood offer the 5th night free on 5-night award redemptions (Hilton for elite members, Marriott for all members, Starwood only at Category 3-7 properties). While the Marriott Rewards and Starwood Preferred Guest co-branded credit cards don't have bonused spending categories where it's easy to manufacture spend, Hilton does. If you foresee 5-night stays in your future, bonused spend on the HHonors Surpass American Express earns the equivalent of 7.5 HHonors points per dollar, which may put it over the top of 1.5% American Express gift card cash back.
• Tiered redemptions. The US Bank Flexperks Travel Rewards card has tiered redemptions, which means you can only redeem your Flexpoints starting at 10,000 Flexpoints (for up to $150 in hotel reservations) and 20,000 Flexpoints (for up to $400 in airfare) when they cover an entire travel purchase. If the perfect ticket you're looking at costs more than the maximum value your current Flexpoint balance can be redeemed for, you're (usually) out of luck.
• Transfer partners. This is a corollary of the above, but is just as important: 4 Ultimate Rewards points are worth more than 1.5% cash back not just because they can be redeemed for 4% cash back, but because they can be transferred to partner hotels and airlines where they're worth even more than a cent each.

Conclusion

This post absolutely isn't is an unqualified endorsement of manufacturing bonused spend instead of cash back — I love cash back, and my overall impression of the travel hacking community is that folks are too committed to hotel points and airline miles, acquiring unredeemably high balances at the expense of always-useful cash back.

But if, and only if, you're diligently redeeming your miles and points roughly as quickly as you earn them, then there are reasons to favor spending directly with bonused merchants rather than unbonused spending pushed through American Express gift cards, precisely because that bonused spending might get your balance within reach of a redemption you'd otherwise fall short of.

RFC: Problems with in-person Staples Visa gift card activation

While ordering PIN-enabled Visa gift cards from Staples online is no picnic, I had never had a problem buying such cards in-person until yesterday. I'd like to share my experience and see if readers have any of their own stories to share that might shed light on the best way to handle this situation if it occurs again.

Staples receipts should show the serial number of activated Visa gift cards

When you buy Visa gift cards in-store, the receipt shows the complete serial number (the second block of digits that are exposed when you peel back the small cardboard perforation). That makes it easy to check immediately whether your cards have been activated or even if (heaven forbid!) your clerk swapped them out for some dummies hidden behind the counter. Stranger things have happened.

My Staples receipt showed the product number, not the serial number

The first block of digits exposed when you remove the small cardboard perforation is identical on all $200 Visa gift cards, and that was the number printed on my receipt — the same for all the cards I purchased. In other words, it was impossible to tell which card corresponded to which item on the receipt.

Concerned at this discrepancy, I pulled a card out and called the phone number on the back to check the card's balance. Rather than a reassuring $200, the phone system told me the card had not been activated and instructed me to return to the store where I purchased the card.

Staples is able to refund unactivated Visa gift cards

In my conversation with the store's general manager, he explained that when a purchase receipt shows that Visa gift cards sold in a transaction haven't been activated, the store is capable of processing an immediate refund (my understanding is that other gift card merchants, like CVS, are also able to either process refunds or manually activate unactivated cards, though I don't have firsthand experience).

My receipt, however, indicated that the gift cards had been activated, and the general manager didn't have the option of processing a refund by simply scanning my receipt's barcode.

I lucked out with an accommodating manager

After explaining the situation to first the assistant, then the general manager at my Staples store location, the general manager researched the issue for 15-20 minutes and finally decided to process a manual refund of my purchase amount. That is to say, he generated a dummy transaction for the opposite of my purchase amount and refunded it to the credit card I used to make the original purchase.

That's highly irregular, and is clearly not the standard operating procedure when a Visa gift card fails to activate properly. Which leads me to:

Request for comment: what do you do when Staples Visa gift cards fail to activate properly?

With the hundreds of thousands of these cards folks have purchased over the last 2-3 years, people have no doubt experienced similar situations before. So I'm curious: what IS the correct procedure for having incorrectly activated Visa gift cards refunded or manually activated, either by Staples or Blackhawk Network?

How important is diversifying manufactured spend?

I often highlight a concept I like to call "imputed redemption values:" the dollar cost of a hotel night (after taxes and fees) that makes it worth redeeming that hotel's rewards currency instead of Barclaycard Arrival+ miles earned by manufacturing the same amount of spend and earning the equivalent of 2.22% cash back, when the miles earned are redeemed against travel purchases.

These imputed redemption values are an attempt to synthesize three values: the earning rate of a hotel chains's co-branded credit card; the number of hotel points required for each property in that hotel's portfolio; and the amount of cash you would earn putting the necessary manufactured spend on a 2.22% cash back card instead.

For example, here are the imputed redemption values I generated for a Hilton HHonors member manufacturing spent with an American Express Surpass card at gas stations and grocery stores:

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It's important to note these are break-even values: if a hotel room costs 40,000 HHonors points or $148 after taxes and fees, then the exact same amount of manufactured spend is required, whether it's on a Surpass American Express or Arrival+ MasterCard. As a 40,000 point room gets more expensive, HHonors points become a better value, and as it gets cheaper, Arrival+ miles become a better value.

At the exact imputed redemption value, your decision will depend on your own balances: if you have been inadvisedly stockpiling HHonors points, you should be eager to cut your loses and redeem them, while if you're saving up HHonors points for a future high-value redemption you might lean towards redeeming Arrival+ miles instead.

Should you strongly prefer cash over loyalty currencies in general?

I've been thinking about this question lately in two contexts.

In the comments to my recent post on using American Express gift cards, reader Brown wrote:

"However the most important thing is it shifts away my spending on Arrival+.

"I have a long list waiting to be redeemed on my Arrival+, like car rentals and hotels using points& cash. I believe Barclay cannot allow huge spending on their card, unlike Amex. I try to keep it below 12k each month."

Meanwhile, on February 4 Frequent Miler reflected on the opportunity cost of manufacturing elite status instead of cash back. He wrote:

"Unless you value Diamond status at more than a few hundred dollars, or you value Hilton points more than I do, I don’t see manufacturing Diamond status as a great opportunity. In this analysis, the value of the earned points and status are maybe equal to the opportunity cost. That’s not enough, in my book. As a rule of thumb, I believe that you should value the earned points and benefits much more than the opportunity cost, to make it worth doing." [emphasis mine]

These are directly opposite conclusions based on the same set of facts:

• All else being equal, cash is usually preferable to hotel points;
• But all else isn't equal — different cards are used to earn each, and there's an inherent value to spreading manufactured spend over more cards rather than fewer (within reason).

Is there a way to thoughtfully resolve this contradiction?

Why use less lucrative cards to begin with?

I think Frequent Miler is begging the question when he insists that cash is better than airline or hotel rewards currencies. He says you should prefer cash, but you already prefer cash. The only reason you'd find yourself earning hotel points or airline miles is that you've already exhausted all your most-rewarding cash-back-earning credit cards.

After all, the "new old Blue Cash" only earns 5% cash back on up to $50,000 in purchases per year — that's just over $4,000 in spend per month. Assuming you have access to more manufactured spend than that, at some point you're going to have to decide which cards you want to put the rest of your manufactured spend budget on.

In other words, you're going to run out of supercharged cards to manufacture spend on. You'll hit annual spend limits or, failing that, realize that your card issuers aren't going to let you run up multiple times your credit limit each month forever. But unless you want to stop manufacturing spend, you're going to need to dig deeper into your credit card portfolio.

That's the point where you'll need to make a conscious decision about which cards to put additional manufactured spend on, and it's at that point metrics like imputed redemption values can aid in your decision making.

For that marginal manufactured spend, whether it's $10,000 or $100,000, you should try to put spend on the cards that most closely approximate (or, ideally, exceed!) your highest-earning, unlimited cash back credit card (in my analysis the Barclaycard Arrival+ MasterCard), while not drawing additional attention from any one card issuer.

Conclusion: diversify purposefully

You shouldn't manufacture spend on a Hilton HHonors Surpass American Express just because I do, or just because it has, along with the Club Carlson Premier card, one of the most favorable imputed redemption value structures.

If you decide to manufacture spend on those cards, and others, you should do so because you find the value you receive from redeeming those rewards currencies competitive with the value you receive from your Barclaycard Arrival+ card, and you've reached your comfort level with Arrival+ spend.

Three notes on gift card purchase and liquidation

There have been a couple developments around gift cards percolating around the travel hacking community for the last week or so. Here's a quick roundup, so readers can use this post to share their own experiences and ideas in the comments.

American Express lowers maximum gift card denomination eligible for cash back

American Express gift cards are a powerful (though not, as some argue, all-powerful) tool for manufacturing spend through the alchemy of adding 1.5% cash back to unbonused spend, in exchange for only being able to liquidate the cards at merchants that will accept American Express gift cards.

As an astute reader pointed out almost immediately when I brought up the subject two weeks ago, cash back portals like TopCashBack have added language eliminating cash back on gift card denominations above $2,000. Since there's a $3.95 purchase fee for each card anyway, I now split my $2,000 cards into separate orders, which also makes transactions easier for me to track.

On the plus side, the total amount of personal and business gift card purchases eligible for cash back remain unchanged at $10,000 and $100,000 per 14 days, respectively. Additionally, I've recently found my American Express gift card orders to be approved almost 100% of the time, a huge improvement over my previous track record and a welcome development.

Staples Visa gift card activation code funny business

As other bloggers have exhaustively documented, the Gift Card Mall Visa gift cards sold by Staples online, and which are shipped out unactivated, have been accompanied much less consistently by the activation codes necessary to activate them.

Sometimes the activation codes arrive days later, sometimes they arrive by e-mail, and sometimes they don't arrive at all. Even worse, the phone numbers that come with the cards no longer direct you to a GiftCardMall representative who can manually activate the cards.

Instead, as reported by Shawn at Miles to Memories, you need to call this number: 1-877-426-2551. The customer service agents there can easily submit an activation order for your cards, and they'll be up and running within a couple hours (sometimes much sooner). For my recent orders, I haven't bothered waiting for the activation codes: I just call the number above as soon as I receive the physical Visa gift cards.

What's the best way to unload American Express for Target cards?

I get asked all the time what I think about various Rube Goldberg methods of buying and liquidating prepaid card products, and I normally have the same response: if you do that, you're cannibalizing methods of manufactured spend you could use to generate additional volume, instead.

Here's a simple example: let's say you have a credit card that bonuses spend at grocery stores, and you have access to PIN-enabled Visa prepaid debit cards at a local grocery store. Once you've purchased a $500 prepaid debit card, you could then register it, click through a cash back site, and buy an American Express gift card to earn an additional 1.5% cash back. This would naturally increase the total value earned on your initial $500 in spend.

The problem is that instead of using a prepaid debit card, you could just buy the American Express gift card with a different, rewards-earning credit card. If that card earned the equivalent of 2% cash back, you'd be earning 3.5% cash back on the transaction rather than 1.5%.

Don't get me wrong: I understand the impulse to earn rewards on both ends of a transaction; indeed, I invented one of the great triumphs of the genre. But the reason such techniques are so few and far between is that the numbers generally don't add up.

An example that came up the other day is the question of the best way to liquidate funds on American Express for Target cards: whether it's shopping through a portal to buy gift cards (see this Doctor of Credit post for vital information about online gift card orders), Simon Malls, or any of the other liquidation methods we have available.

Here's where I find those suggestions ultimately break down: American Express for Target funds are already liquid. You can make ATM withdrawals with the card, up to $400 per day and costing $3 per ATM withdrawal. In other words, American Express for Target loads are the last step in a chain. Whether or not they're also the first step is up to you: if you can load the card directly with a card that rewards bonus points for purchases at Target, that can be a great option. If instead you load them using American Express gift cards, or the many other options available to us, you can get good value that way as well.

But if the problem is that ATM withdrawals are too expensive to make American Express for Target withdrawals profitable for you, the lesson is that the costs and benefits of the technique simply don't work for you, not that you need to add more moving pieces. After all, every one of those moving pieces could simply be funded with a more lucrative, rewards-earning credit card.

A good run: AAA Visa gift card axe falls

I periodically write about AAA Visa gift cards: they're cheap (or free); they're PIN-enabled and thus easily liquidated; and they're available in many, though not all, parts of the country.

For those with access to AAA branches selling Visa gift cards, the problem has always been one of volume: those who bought and liquidated too many Visa gift cards in too short of order were inevitably and permanently blocked from buying any more. I thought I had avoided that outcome by buying slow but steady amounts at regular intervals.

Until yesterday, when I went into a local branch and was told, politely but firmly, that I needed to call Metabank to find out why I wouldn't be allowed to buy any more gift cards.

Back in January I wrote about new purchase limits in my AAA region:

"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."

That now appears to be prescient. After a single, $1,000 purchase under the new limits, my account was immediately blacklisted for future purchases.

Conclusion

During the periodic fee-free promotions, typically around graduation and the winter holiday season, I still think those who haven't yet been blacklisted should consider loading up on PIN-enabled AAA Visa gift cards. If you can then liquidate the whole haul over the course of 3 or 4 hours, you can still make off with a nice profit before your account is flagged.

But as far as I'm concerned, AAA Visa gift cards are no longer a viable avenue for consistent manufactured spend.