The Perpetual Points Machine is Real*

*If you have access to (1) Vanilla Reload Network reload cards you can buy using a credit card, (2) any Walmart location, and (3) a good enough credit score to be approved for a 2% cash back credit card.

The Quest for a Perpetual Points Machine

One of the first blog posts I read after I started travel hacking ​was the Frequent Miler's chronicle of his quest for a "perpetual points machine." That three part series described the ideal perpetual points machine as follows:

1. The Perpetual Point Machine (PPM) may take effort and money to setup initially, but must not take much effort or money to keep it going.

2. The PPM must be able to generate hundreds of thousands of points per year.

3. The PPM must do no harm. In my earlier post “Perpetual Point Machine… Not!” I described a failed scheme to buy gift cards with gift cards and earn miles each time, indefinitely. The problem with that scheme is that, if it had worked, it would clearly harm the retailer who would have been responsible for buying all of those miles.

4. The perfect PPM would also somehow do some good for the world, not just for the recipient of the points. Kiva loans are a great example of this, but the number of points that can be accrued annually is limited by the amount of money you have available to loan. For most people, this won’t come anywhere near the goal of achieving hundreds of thousands of points per year.

​This search eventually led Frequent Miler to his ground-breaking post on the American Express Bluebird checking account alternative, which is now one of the cornerstones of most miles- and points-earning strategies.

The problem Frequent Miler inevitably ran into was uncertainty. ​His early attempts relied either on continued, reliable shopping portal payouts, or outsmarting Google.

3 Simple Goals

My goals when designing a perpetual points machine were simpler:

1. Generate as many points as possible;
2. at as low a cost per point as possible;​
3. in as mechanical a method as possible.

​The third point is the most important for my purposes. Unlike Frequent Miler, I'm still just a struggling author (have you considered buying my e-book?), and I don't have the resources to risk lots of my own capital buying and reselling merchandise, one of Frequent Miler's (successful) recent schemes.

Since starting this blog in February, I've discussed the MyVanilla Debit card, which is reloadable using Vanilla Reload Network reload cards at a cost of $3.95 per $500 load. Then in a three part series (part 1, part 2, part 3), I broke the story of the features of the new Bluebird competitor, Gobank, before asking the question, "Does Gobank have a monthly swipe reload limit?" Finally I broke down the features of and differences between two credit cards which earn 2% cash back.

My Perpetual Points Machine

Today I want to describe a simple perpetual points machine that takes advantage of the features of each of these products. The premise of the PPM relies on just two numbers:

• $3.95: the cost of a $500 Vanilla Reload Network card.
• $6.13: the amount of net cash back earned on a $503.95 purchase made with a 2% cash back credit card, after subtracting the $3.95 load fee.​

​The ratio of these numbers is conveniently approximate to 2:3. Consequently, to manufacture spending at virtually no net cost, you can buy 2 Vanilla Reload Network reload cards with a 2% cash back card (netting $12.26, after paying the $3.95 fee for each card) for every three reload cards you purchase with your preferred points- or miles-earning credit card (at a cost of $11.85).

Of course, now you have $2,500 in Vanilla Reload Network reload cards.  To turn them back into cash, you can load them directly to a Bluebird card, up to $5,000 per month, per Bluebird.  From there, you can transfer the funds to a bank account or use them to pay off your credit cards.

Fortunately, you can also now liquidate Vanilla Reload Network reload cards in excess of $5,000 per month by loading them to a MyVanilla Debit card and using the MyVanilla Debit card to load your Gobank account at any Walmart register, up to $2,500 per day.  

The drawback: every transaction made with a MyVanilla Debit card incurs a fee of $0.50, which will very slightly increase your cost per point.

Does it Measure Up?

How does my perpetual points machine measure up to the 4 goals Frequent Miler set? ​

1. ​Does it require much money or effort to keep going? This largely depends on the geography of your area. If you have convenient access to Vanilla Reload Network reload cards and Walmart store locations, this strategy has no cost, except your time and gas. If you don't have access to them, this strategy won't help you get it!
2. Can it generate hundreds of thousands of points per year? ​To generate 100,000 of your preferred loyalty currency in 12 months at no net cost, you'd need to buy $12,500 in Vanilla Reload Network reload cards per month: $8,500 on the credit card that earns your preferred points, and $4,000 on a 2% cash back card (the net cost in this example would actually be about $18.12 per month).
   You could then load $5,000 to your Bluebird account and $7,500 to your Gobank account.
3. ​Does the PPM do no harm? ​This perpetual points machine only uses the advertised features of commercial products.
4. Does the PPM do any good for the world?​ Well, you can't have everything.

Next Up: Tips and Tricks for Maximizing the Perpetual Points Machine

Check back on Friday, when I'll discuss some of my thinking about how to maximize the value of this strategy, as well as some potential risks to avoid.

Does GoBank have a monthly swipe reload limit?

In the comments to my first post on GoBank​ and in this FlyerTalk thread, one recurring question is whether there is a monthly limit on free Walmart swipe reloads, which work exactly like reloads to the American Express Bluebird card, and if so, whether it's based on the calendar month or a rolling 30-day limit.

As a reminder, the Bluebird card has a $1,000 daily load limit and $5,000 calendar month load limit, which is shared between Vanilla Reload ​Network reload cards and reloads done at Walmart cash registers and MoneyCenter ATMs, which accept both cash and PIN-based debit cards.

GoBank, according to the product's Terms and Conditions, has a $2,500 daily load limit, but there is no specified monthly load limit.  It's possible that there is an unpublished calendar month or rolling 30-day load limit.

However, I can now report that the limit, if it exists, is definitely higher than $5,000 per month, whether it is based on the calendar month or a rolling 30-day period, since I've exceeded that threshold either way.

The next question I hope to answer is whether GoBank, like Bluebird, can be loaded using MoneyCenter ATMs, since like most people I find interacting with undertrained and rude Walmart employees a uniquely unpleasant chore.​

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Maximizing Gobank and Bluebird

Over the weekend I reported on Gobank (part 1, part 2), the new banking product ​from Greendot.  Today I'll discuss what this means for your miles and points earning strategy.

Points-Earning Debit Loads

Just like the Bluebird, Gobank can be loaded at any Walmart register with a PIN-based debit card.  If you have a debit card that earns airline miles on PIN-based transactions, this is an easy way to generate spending on the card.  

Unfortunately, there aren't very many remaining debit products that earn rewards for PIN-based transactions.  One, the Bank of America Alaska Airlines debit card, earns 1 Alaska Airlines mile per $2 spent on the card.  However, the card is no longer being issued to new customers.  If you already have an Alaska Airlines debit card, this is a great way to earn valuable Alaska miles while paying your bills each month.

A second debit card product, the Suntrust Delta Skymiles debit card, earns 1 Delta Skymile per dollar spent on the card, including on PIN-based transactions.  While Suntrust representatives claim that Bluebird (and, similarly, Gobank) loads at Walmart won't earn Skymiles, there are lots of reports of success receiving miles for these transactions.

Since online Gobank debit loads are ​treated as signature purchases by the issuing bank, you can earn your usual rewards on signature purchases, for example 1% cash back using the PayPal debit MasterCard, a great way to unload PayPal My Cash cards, similar to the technique I described in this post.

Prepaid Debit Card Loads

A slightly more involved technique is to use reloadable PIN-based debit cards to load your Gobank account.  For example, as I reported on Saturday, I was able to load my Gobank account using a MyVanilla Debit card which I had loaded using Vanilla Reload Network cards I purchased at CVS using a rewards-earning credit card.  Similarly, you can load your Gobank account with a Nationwide Visa Buxx card you've loaded using a rewards-earning credit card.

If you dont have access to Vanilla Reload Network cards, or your local merchants won't allow you to use a credit card to purchase them, beginning this month another opportunity has become available: ​many, although still not all, prepaid gift cards sold at grocery stores, drug stores, and gas stations have begun to work as true PIN-based debit cards.  Since this is a rapidly developing situation, I strongly recommend you first buy a small-denomination gift card in order to see whether it can be used as a PIN-based debit card.  The fees can be somewhat higher than Vanilla Reload Network fees, but those fees can be offset if you're able to use a credit card that gives bonus points for that type of merchant.

Comparative Advantages of Gobank and Bluebird

If you're like me and have both a points-earning debit card and access to Vanilla Reload Network reload cards, then each month Bluebird posed a dilemma: every dollar of Vanilla Reloads I used to fund Bluebird was a dollar of points-earning debit load I couldn't do.  With the introduction of Gobank, that dilemma disappears: Bluebird can be funded directly with Vanilla Reloads, and Gobank can be funded with my points-earning debit card.

Meanwhile, instead of expensive money orders and cash advances, I can easily and cheaply ($0.50 per load) unload up to $2,500 per day from my MyVanilla Debit cards, which I've likewise loaded with ​Vanilla Reloads.

Gobank vs. Bluebird

[Updated 4/15/13: ​Since writing this post I have tested and confirmed that Gobank, unlike Bluebird, allows ACH pulls.  In other words, you don't need to initiate bill payments from Gobank, you can initiate the payment from your account with your bill payee.  However, Gobank account numbers are several digits longer than traditional checking account numbers, and some of my credit card companies were not able to accept the entire account number.  Nonetheless, this somewhat mitigates the shortcomings of Gobank's bill pay feature which I identified below.]

Yesterday I reported on the capabilities, fees, and limits of the new Gobank product from Greendot.  I compared it to the similar, groundbreaking Bluebird card from American Express.  Today I'll make that comparison in more detail, and in tomorrow's post I'll take a look at some of the opportunities created by this new product.

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• Direct Deposit: Both Gobank and Bluebird allow direct deposit of paychecks, and accept incoming ACH transfers from other banks and payment services like Paypal.
• Prepaid Reloads: Gobank is reloadable using Greendot Moneypaks, which can be purchased using cash at many drug and grocery stores.  Bluebird is reloadable using Vanilla Reload Networks prepaid reload cards, which can be purchased using rewards-earning credit cards at many, but far from all, drug stores, gas stations, and grocery stores.
• Walmart Register Reloads: Both Gobank and Bluebird can be reloaded at any Walmart register using cash or PIN-based debit cards.​  Gobank has a $2,500 daily reload limit, and it's unclear whether there is a monthly limit on these reloads.  Bluebird has a $1,000 daily limit and $5,000 monthly limit, which is shared with reloads done with Vanilla Reload Network cards.
• Online Debit Card Loads: both products allow $1,000 in monthly debit card loads online.  However, Bluebird charges $2 for online debit loads, with a daily $100 limit, while these loads are free using Gobank, with a daily load limit of $200.

Winner​: the two products are very evenly matched on the load side, with Bluebird having the advantage of accepting more flexible Vanilla Reload Network cards, while Gobank has higher daily Walmart load limits and free online deposits, which can save you trips to Walmart.  I call this a tie.

ATM Withdrawals

When it comes to ATM withdrawals, the two cards are very evenly matched since they both use the same third-party network of free MoneyPass ATMs.  However, Bluebird technically requires you to have a monthly direct deposit in order to use these ATMs for free, while Gobank doesn't have that requirement.​

Likewise, both products have a daily ATM withdrawal limit of $500, but Bluebird also imposes a monthly ATM withdrawal limit of $2,000, while Gobank doesn't have a published ATM withdrawal limit.

Winner: Gobank​ by a hair.

Bill Pay

One of the most obvious advantages of Bluebird over Gobank is that Bluebird's bill pay interface is so effective, while Gobank has a handsome but comparatively clunky bill pay tool.  Additionally, Bluebird allows multiple pay-to accounts per payee, while Gobank doesn't, a major limitation if you have multiple accounts with a single company: it essentially forces you to have a backup banking product with which you can pay your other accounts.​

Winner: Bluebird​

Fees

​Most users will never pay a fee for using either of these cards.  The exception is when using the cards abroad: Bluebird has no foreign transaction fee, while Gobank charges a 3% fee for foreign transactions (no matter what currency they're conducted in).  Since I use my Bluebird card as a safe alternative to carrying my credit and debit cards while traveling abroad, this is a major shortcoming of Gobank.

Winner: Bluebird​

Conclusion

As you can see, ​these products are very evenly matched.  Since Gobank is still in its beta testing stage, it's certainly possible that some of its problems, like foreign transaction fees and a clunky bill pay interface, will be fixed by the time the product is ready for open enrollment.  In the meantime, there's no reason not to have both, since the slightly different configuration of features allows them to be used in different ways to maximize your points and miles haul.  Come back tomorrow, when I'll discuss precisely that.​

Gobank's Launch Challenges Bluebird

For the last week I've been experimenting with ​the beta version of Gobank, the new simplified, smartphone-centered bank product from Green Dot, the same people who sell cash-only Moneypaks at retailers all over the country, which can be loaded to many prepaid products, as well as PayPal accounts.

​I'm happy to report that Gobank is a true competitor for American Express's Bluebird banking product.  Unsurprisingly, as a product in beta release, Gobank is still very poorly documented.  That's why I'm here to walk you through all the features I've explored so far.  There's a lot of information here, so read this post carefully, and if you want to know more about Gobank, post your questions in the comments section of this post and I'll do my best to answer.

Getting an Account

Since Gobank is still in beta, you first need to sign up to receive an invitation​.  After a few weeks of waiting I reached out to their extremely active social media team on Twitter @Gobank and asked if they could help.  A day later I was able to create an account (although strangely, I didn't receive my invitation until a day or so after that).  This seems to be the main function of their Twitter team, so don't hesitate to tweet them and ask for an invite once you've signed up to receive one.

The best way to get a Gobank account, however, is to have someone who already has an account send a nominal amount of money to your e-mail address.  The notification gives you the option of receiving the money in a newly ​set-up Gobank account.

Online Debit Card Loads

The first, most obvious feature of Gobank is the ability to load your account online using a debit card.​  In principle this is limited to $200 per day and $1,000 per month.  Based on my limited experience (5 successful loads) of unsuccessful and successful debit load attempts, I believe that either the Gobank servers are located on another continent in a different time zone, or the $200 limit is a rolling 24-hour limit.  My unsuccessful load attempts returned an error that only one load "per day" is possible, even if the first load was the previous calendar day.  Later in the evening I was then able to make the load successfully.  This needs to be explored further in order to use this service consistently.  My tentative recommendation is to either leave 2 or more days between loads, or wait 24 hours between loads.

According to some reports on Flyertalk​ the account can also be funded using credit cards, by ignoring the "debit" prompts throughout the process.  I personally won't be using this option, since I think the risk of having the charge classified as a cash advance outweighs any marginal benefit.  Having said that, this does appear to be a viable option for now.

ATM Withdrawals

One of the most exciting aspects of Gobank is their promise of free ATM usage at over 40,000 ATMs nationwide.  According to the Terms & Conditions,

You may only withdraw up to $500 from an ATM in a single day.

​Yesterday I visited one of the ATMs the Gobank iPhone app directed me to, and was able to withdraw $400 without any ATM fee or fee from Gobank.  I only withdrew $400 since that was the ATM's transaction limit, though I do suspect that Gobank would allow a withdrawal of up to $500.

This is in contrast to the Nationwide Visa Buxx card, which is a great product, but which charges $1 per ATM withdrawal (even at their "free" ATMs!), and limits ATM withdrawals to $200 per week (7-day rolling period).​

Walmart Rapid Reload Network Loads

Today I visited my local Walmart and loaded my Gobank account with about $800 from a MyVanilla Debit Visa card, one of the true pin-based debit cards I discussed in one of my very first posts.  I was not charged any fee by Gobank or Walmart (although I was charged a $0.50 transaction fee by MyVanilla, one of the reasons it's among the worst prepaid debit card products on the market).  Just like with Bluebird, you can load the card at any Walmart register, even at stores that don't have a dedicated MoneyCenter.

The ability to load cash from a PIN-based ​debit card is game-changing, since it allows you to avoid the high fees imposed on cash advances, money orders, or ATM withdrawals, and use the money to pay anyone in Gobank's bill pay database.  Be aware that some users have reported having their MyVanilla Debit cards closed by Incomm, the company that issues them, for using their accounts too aggressively.

Bill Pay

Bill pay is one area where Gobank falls short, so far, of American Express's Bluebird banking product.  Bluebird allows you to create multiple "pay to" accounts for a single payee: for example, if you have multiple Chase credit cards, or multiple bills through a single utility company (gas and electric), you can clearly separate each account number as a separate "bill pay" account, and even give each account a different nickname.  

As of now Gobank's bill pay feature doesn't allow multiple account numbers for a single payee.  While this may not seem like a big deal, for those of us with multiple credit accounts at one bank this radically decreases the usefulness of the bill pay feature, since only one account per payee can be paid from the Gobank account, and the others need to be paid through other banking products like Bluebird.

Person to Person Transfers

​Like Bluebird, Venmo, and Paypal, and as mentioned about Gobank allows you to send money to a person's e-mail address, cell phone number, or Facebook account, and fund the transaction with your available Gobank balance.  If the recipient doesn't have a Gobank account, they can deposit the money instantly into their Paypal account

Limits

• ATM withdrawals: $500 per day.  Self-explanatory.
• Deposits: "The most you can deposit to your account in any day in cash is $2,500."  I interpret this to refer to the sum of online debit card loads ($200 per day) and in-person Walmart Rapid Reload Networks loads ($2,500 per day).  So, if you load $200 online, you should only be able to load $2,300 at Walmart.
• Person to person transfers: ​$500 per day ($2,000 starting April 17, 2013), $5,000 per month.

Fees

• Monthly fee: $0.  Like the Bluebird, Gobank doesn't charge a monthly fee, although they do allow you to pay up to $9 per month voluntarily.
• Foreign transaction fee: 3%.  Unlike the Bluebird, which charges no foreign transaction fee, Gobank charges 3% on foreign transactions.  This is not a foreign currency fee, so it will still be charged even if the transaction is conducted in US currency.  Additionally, it applies to all transactions, not just purchases, so foreign ATM withdrawals are also assessed this fee.
• Out-of-network ATM withdrawals: $2.50.  Fortunately Gobank has a very large network of ATMs, and you can get cash back at most grocery stores, so you should be able to ​avoid this fee.

Summary

Gobank is an exciting new development in the rapidly changing market of alternatives to traditional brick-and-mortar banks, which has so far been dominated by American Express's well-designed and well-implemented Bluebird product.  Gobank has a lot of promise, and a lot depends on the continuing implementation of their product.  Over the next few days I'll be giving some more analysis and suggestions of ways to maximize the value proposition offered by Gobank, as well as a bit of a refresher on the granddaddy of these products, Bluebird.