Unleash your manufactured spend with Walmart billpay: Part 1

First of all, I want to thank all of my readers for their patience for the last few days while I've been hinting at today's post. The reason I couldn't post earlier was not just to build buzz, but to make sure that I had personally tested every part of this technique. I've now done so, and I'm pleased to report that it's real, and it's spectacular.

Second, to the best of my knowledge the technique I'm about to describe has never been blogged about openly before, which I expect to change soon. However, it is not the result of my work alone, so before I begin I want to acknowledge the people who set me on the path to discovering it: Jerry in the comments to this New Girl in the Air post; Nathan at the very end of the comments to this post; this PointsChaser post; and of course above all this slow-burning FlyerTalk thread which was the first place to report a number of the indispensable elements that make the technique work. I'm deeply indebted to all those sources for the basic elements of this technique; any errors are of course mine alone.

Having said that, let's get started. 

Walmart allows you to pay credit card bills using any PIN-based debit card

How it Works

Walmart Money Center registers and, in locations without a separate Money Center, Customer Service registers are integrated with the CheckFreePay bill pay network. At any such register, you can ask to make a credit card bill payment and use any PIN-based debit card to pay the bill and the associated fee.

You can use up to 4 PIN-based debit cards per bill pay transaction, while paying a single transaction fee.

Credit and debit cards are issued by banks: Chase credit cards are issued by Chase, American Express credit cards are issued by American Express, Bank of America credit cards are issued by Bank of America. However, each card is also linked to a payment network: Visa, MasterCard, American Express, Discover.

The single most important thing you have to know in order to take advantage of this technique is that when you pay your credit card bills at Walmart, you must make the payment out to the payment network, not the issuing bank.

So even though your Chase Sapphire Preferred Visa Signature card and your Chase Ink Plus MasterCard are both issued by Chase, to pay your credit card bills at Walmart the payee for the Sapphire Preferred will be "Visa" and the payee for the Ink Plus will be "MasterCard."

What it Costs

This section is based only on my experiments at my local Walmart store locations: your experience may differ. 

There are two price points in the CheckFreePay system at Walmart: $1 "3 business day" payments and $1.88 "next business day" payments. Unfortunately, not every credit card payment network has both payment speeds enabled. Here are the results of my experiments:

• Visa: Next business day only ($1.88)
• MasterCard: Next business day only ($1.88)
• American Express: Next business day ($1.88) or 3 business day ($1)
• Discover: Next business day ($1.88) or 3 business day ($1)

So if you want to make a credit card payment to a Visa credit card at my local Walmart, you must pay $1.88: the $1 payment option is not available. This may vary by store location or employee. 

Why it Matters

Ever since the Federal Reserve issued new regulations forcing prepaid card issuers to allow their cards to be used as "true" PIN-based debit cards, we've been in a very exciting time for travel hacking. For example, Chase allows up to $2,600 in free gift card purchases per Chase credit card, per rolling 30-day period. Likewise, many grocery stores (a common bonus category) allow you to purchase $500 Visa and MasterCard gift cards at a typical cost of $5.95-$6.95.

Besides gift cards, in many parts of the country it's still possible to buy Vanilla Reload Network reload cards at drug stores like CVS, and PayPal Cash cards at 7-11 store locations that are processed as gas stations. 

The problem in this era of virtually unlimited manufactured spend is liquidating prepaid cards once you've purchased them.

Bluebird is a free option, loadable at all Walmart registers using PIN-based debit cards up to $1,000 per day and $5,000 per month, but those loads count against the same $5,000 calendar month limit as Vanilla Reload Network cards.

Gobank is another great option I've extensively covered, but while it's free to load Gobank accounts at Walmart up to $1,100 per transaction and $2,500 per day, it's a Green Dot product that's subject to shutdown if you exceed undisclosed monthly limits or if your loading pattern is deemed "unusual."

PayPal has a $4,000 rolling 30-day load limit using PayPal Cash cards, but unloading your account can cause problems since PayPal is notoriously sensitive to abusive behavior.

All of those problems have now gone away: you no longer need an intermediate product to liquidate your prepaid cards.  Instead, you can bring up to 4 PIN-based debit cards per bill pay transaction to your local Walmart and at a cost of $1 or $1.88 send the card balances directly to your credit card.

The Risks

There are 3 primary risks to this technique that I want to be perfectly clear about up front.

First, there's the risk of having an account shutdown. There are many reports of MyVanilla Debit cards being shutdown without warning, and it's still unclear what loading and unloading pattern is safest. I don't have an inside line on MyVanilla Debit's fraud prevention algorithms, but I believe cash advances are probably the riskiest method of unloading the cards, because of the high limits and fixed $1.95 fee. Large Walmart transactions are probably a close second. So while this is a great technique for liquidating MyVanilla Debit balances, you still should be careful about spacing your loads and unloads out over the course of the month. And of course, even being careful can't guarantee that your account won't be closed.

Second, there's the risk that Walmart will consider your payments suspicious activity. There are lots of reports in this thread of Walmart employees being prompted to record customers' Social Security numbers, home addresses, and other personal identifying details. Those requests seem to be triggered by credit card payments over $2,000, although the exact level that triggers scrutiny isn't clear. Many people are made uncomfortable by disclosing this sensitive information to Walmart tellers. It appears the best way to avoid doing so is to keep your bill payments below $2,000, although this will raise your cost per dollar of manufactured spend.

Finally, when it comes to Walmart there's always the risk of employee incompetence. This can take a number of different forms. Of course, an employee may simply not know how to make these bill payments. Alternatively, there are reports that some store locations demand that you physically bring your most recent credit card statement into the store. Further, some store locations refuse to allow bill pay transactions to be funded by gift cards (cards that don't have your name embossed on the front). Finally, some employees may feel uncomfortable with multiple, high-value transactions, and simply refuse to help you. Be aware that this is not corporate policy: you've just found an incompetent employee, or a store location with an over-vigilant store manager. Visit another location or return at a different time.

These are manageable risks, but they do exist and you should be aware of them before beginning to use this technique. As always, I recommend starting slowly, using money that you can afford to be temporarily without if something goes wrong, and watching your credit card statements carefully to make sure that each payment posts correctly.

Conclusion

This is a very basic overview of this technique. It works and it can increase your volume of manufactured spend while only slightly increasing your cost per point.

Tomorrow, I will provide my analysis of the volume and cost per dollar of manufactured spend that you can achieve using this technique, and I'll compare it to some other popular techniques.

Later in the week I'll discuss some of the most lucrative opportunities this technique unlocks and share my own plans to use it going forward.

If you've already been using this technique, please share your experiences in the comments. How long do your CheckFreePay payments take to post? Do they post at the beginning or end of the business day? What problems have you had dealing with Walmart employees, and how have you resolved them?

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Update to Gobank load limits and cost per point analysis

In my ongoing quest to document as many details as possible of Gobank, the relatively new alternative checking product, in order to make it easy for my readers to take advantage of this exciting new opportunity, I want to clarify one additional limit that I have so far failed to mention in previous posts.

As you know, there is a daily limit of $2,500 when loading money to the card using cash or a PIN-enabled debit card at any Walmart register or MoneyCenter kiosk. However, the ​Gobank website also explains (you can find this under "Deposit > Deposit Cash > Learn more"):

We allow between $20 (minimum) and $1,100 (maximum) per transaction.

Cost per dollar using MyVanilla Debit

This restriction made me wonder, what's the minimum cost a Gobank user can pay per dollar of manufactured spend using the techniques I described in my post, "The Perpetual Points Machine is Real​?"

​When buying a Vanilla Reload Network reload card with its maximum value, $500, you'll pay $3.95 per $503.95 in manufactured spend. But if you load the reload card to a MyVanilla Debit card, you'll also pay a flat $0.50 per transaction fee when you move the money to your Gobank account at Walmart. To minimize the cost per manufactured dollar, you'll therefore also want to make your unloading transactions as large as possible, in this case, $1,100. (Note that I do not do this, out of an overabundance of caution; I make multiple, somewhat smaller load transactions).

To make the math simple, say you buy $5,500 in Vanilla Reload Network reload cards. You'll pay $43.45 in load fees to manufacture $5,543.45 in spend. To unload that $5,500, you'll make 3 trips to Walmart, loading $1,100 twice during the first two trips and  once on your third trip. Those 5 transactions will cost an additional $2.50 total, bringing your total cost to $45.95 for $5,543.45 in manufactured spend, or 0.82 cents per dollar.

I find it lucrative to pay this cost when I use a 2% cash back credit card (or a card offering 2.22% cash back as statement credits), or when I use one of my other cards that offers ​big rewards when I reach a high level of annual spending. Whether it's worth it for you depends on how highly you value the points or miles you're manufacturing, and whether you are using this technique to meet minimum spending requirements you can't meet with your everyday purchases.

You can manufacture points at no net cost; should you?

On Wednesday I laid out a simple, reproducible technique to manufacture points at no net cost by using a 2% cash back credit card to offset the cost of Vanilla Reload Network reload cards purchased with a points-earning credit card.

Today I want to discuss some of my thinking behind this technique and some of the potential pitfalls.

Why I Don't Manufacture Points at no Net Cost

To manufacture 100,000 miles or points using a card that earns 1 mile per dollar spent, you'd need to buy 199 $500 Vanilla Reload Network reload cards.  Your total out of pocket cost after liquidating the cards would be $786.05. You could then use the 100,000 miles, plus taxes and fees, to book a round-trip business class award trip to Europe, which might retail for a few thousand dollars. 

To recoup that $786.05, you'd then need to buy ​129 Vanilla Reload Network reload cards with a 2% cash back card, earning back $790.77.

The problem here is straightforward, and why I don't use a 2% cash back card to completely offset the cost of my points: ​if I don't value the roundtrip ticket to Europe in business class at $786.05, why am I paying $786.05 for it?  If I value the money more than the trip, I should just keep the money and not earn the points to begin with.  That way, I'll have $790 in pure profit.

Of course, as I discussed in my first article on travel hacking theory​, I do value that award trip at more than $790, in fact, I value it at about $1,300, since that's what I'd typically pay for an economy class ticket to Europe.  For $500 less, I get to fly in business class instead.

​That isn't to say that I don't use a 2% cash back card to reduce my net costs: I do, in order to achieve my travel goals while keeping within my budget.

Perpetual Points: Potential Pitfalls

​This perpetual points machine has a number of moving parts, so before getting started you should be aware of the risks involved with each one.

• MyVanilla Debit cards. This Flyertalk thread is full of reports of people having their MyVanilla Debit cards shut down with no notice after using the cards aggressively to manufacture spending. The two most common reasons seem to be using the cards for cash advances at bank tellers and ATM withdrawals, however people who do neither have been shut down as well. You can register up to 3 MyVanilla Debit cards per Social Security number, and my recommendation is to (1) spread your spending across all 3 cards and (2) don't empty your entire card balance immediately after loading. Following those two simple rules I've been able to use my 3 cards successfully for months, although that could change at any time.
• Gobank.​ Gobank currently doesn't have a reported monthly swipe reload limit, and has a high, $2,500 daily swipe reload limit.  However, that could change at any time, either by instating a monthly swipe reload limit or reducing the daily swipe reload limit to the point that it's no longer worth repeated trips to Walmart.
• Credit card companies. Frequent, high-dollar-amount purchases at drug stores could raise concerns at your credit card company. For that reason I spread out my Vanilla Reload Network reload card purchases throughout the month and over several different cards and card issuers.

Conclusion

A lot of digital ink has been spilled over the "value" of different rewards currencies (for example here, here, and here). Ultimately though, you can't use Skymiles to pay your rent or Membership Rewards points to pay your taxes. That's why no matter what your travel goals are, you should first set a monthly budget for how much you're willing to spend to achieve them. Using a 2% cash back card is a great way to keep your expenses in line with your budget while achieving your travel goals faster.

Since you can use these techniques to manufacture almost unlimited spending at a net cost of your choosing, on Monday I'll discuss some of the most potentially lucrative rewards-earning credit cards to use when doing so.

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.

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.

PIN-based Visa Prepaid Debit Cards

There are a number of products which can help when meeting high minimum spending requirements or generating spend on cards that earn valuable points.  Today I want to discuss three of them.  These cards have a number of benefits: they can be loaded either directly or indirectly using points-earning credit cards, and they can be unloaded at ATMs, by buying money orders, or used to fund the American Express Bluebird card at any Walmart and used to pay bills, including credit cards.

For the first two options, the Nationwide Visa Buxx and Wells Fargo Prepaid cards, the transaction can be classified differently by different card issuers.  For example, Citibank classifies all such transactions as cash advances, which incur high fees and interest charges, and there are some reports that Bank of America classifies the transactions as purchases, but doesn't award points.  The best bet is to first do a trial load with any card you're considering using, wait for your statement to close, and see if points are rewarded.

Nationwide Visa Buxx

The Nationwide Visa Buxx is an excellent starter card for anyone considering entering the miles and points game.  

• It can be loaded using any Visa or Mastercard.
• You can load up to $500 at a time, up to twice per month, at a cost of $2 per load.
• There's no monthly fee.

If you max out this card, you can manufacture $1000 in spending at a cost of $4 per month, which is worth doing for almost any points currency.

There are two things to be aware of when using this card.  First, ATM withdrawals (limited to $200 per week) at MoneyPass ATMs are not free, they cost $1.  No one has any explanation for this, since they are advertised as free.  There have been reports of success having the charge reversed by calling into Customer Service, although this is a long, annoying process.

Second, there is a daily purchase limit of $800.  This means you can either load $800 onto a Bluebird card, or purchase a money order at Walmart for $799.30.

My approach is to withdraw $200 from a Moneypass ATM and purchase a money order for $798.30 (since my balance is only $799 after paying $1 for the ATM withdrawal).

Wells Fargo Prepaid Visa

This card is good for a more experienced hacker who wants to make some bigger moves.

• Load using any Visa or Mastercard
• $4500 rolling monthly load limit.
• Load up to $2500 per day.
• $5 fee per load.
• $3 monthly fee.
• $600 transaction limit.

Because of the $600 transaction limit it can take a while to unload this card.  Purchasing 8 $599.30 money orders at 70 cents each brings the total cost for $4500 in spending to $18.60, or .4 cents per dollar.

MyVanilla Debit

The MyVanilla Debit card is a more marginal play, but can be useful for meeting minimum spending requirements or reaching bonused spending thresholds.

• Load using Vanilla Reload Network Prepaid Reload cards.
• Load up to $2,500 per day.
• No monthly fee.

You have to buy a MyVanilla Debit card in a store, like CVS, that sells temporary cards.  After buying a temporary card, you can register it online and you'll receive a permanent card in the mail within a few weeks.  You can register up to 3 cards per social security number. Once you have the permanent card, you can then load it by buying Vanilla Reload Network Prepaid Reload cards, which you can load with up to $500 in value for a fee of $3.95.

To unload the MyVanilla Debit, you can purchase money orders, load a Bluebird card, or ask for a cash advance from a bank teller.  All three options currently cost 50 cents, plus any other fees charged by merchants.