Credit Union Concerns from Manufactured Spend
21 Mar. 2019
Credit Union Concerns from Manufactured Spend

No News is Good News

For people who collect travel and cash back loyalty reward points, manufactured spend (MS) isn’t anything new.  However for some banks and credit unions, it’s still very new, strange, and probably pretty scary.  In the past few months I’ve opened up 2 new credit union accounts to help accommodate my current manufactured spending volume.  In the past couple of days though, I’ve either received calls from, or been approached by, a manager at each credit union about deposits and account issues linked with manufactured spend.

The Path

Manufactured spend has been around for a long time.  There are many different and extreme examples the lengths that people go to in order to accumulate travel reward points and miles (such as the Mint, Pudding Guy, and Simon Mall 5Backs, mileage running, and more).  It’s also extremely important to point out that manufactured spend isn’t illegal.  It might seem strange, and can be accompanied with substantial credit card spending, and bank deposit volume that raise eyebrows that create intrigue or even fear with linked entities – but it’s not illegal.

Manufactured spend (MS) is the process of using cash like instruments in conjunction with various techniques, promotions, or other resources that allow the substantial rewards accrual via cash, points, miles, or other benefits, while spending little or no actual money.

People who manufactured almost always pay for points, at least initially, the only questions are how much cost is incurred and what method is being used to accrue points.  To be clear, paying for points doesn’t mean that you end up with an actual cost, but the vast majority of MS does require an up front investment in some form or another.  After paying that cost, transactions and strategies can take multiple directions and have many different results.

Credit Union Good, Banks Bad

I generally despise big banks.  I basically see them as profit vultures that devour just about anything in their path.  They are ethical only in the sense that it’s in their best financial and legal interest to be.  That negligible sense of ethics doesn’t prevent laws from being broken for greater profit at the expense of regular citizens or even their own banking customers – as long as the profit is deemed greater than the penalty and blowback for said path to profit.  It’s not to say that profit is evil.  I believe the opposite actually.  But to me, big banks are soulless profit bulldozers, and I much prefer banking with credit unions.  Some credit unions are much more profit oriented than others, but in general, it’s a much more personalized and ethical financial path for me.

Don’t get me wrong, I’ll happily take all of the rewards, frequent flyer miles, hotel points, checking account bonuses and whatever else I can gleam from big banks.  I’m a free market fan, and it’s a bank’s option to doll out billions of reward points and related offers to customers.  To go along with that, as a customer it’s my choice to accept or decline those offers, and even exploit them if possible.  I do exploit those programs, as much as I possibly can.  Even though big banks have rewarded me with millions of travel rewards, I’m thankful for the opportunity to do so, but that doesn’t change my distrust or generally negative opinion of them.

In terms of manufactured spend, credit unions are also generally more money order (MO) deposit friendly.  You’d think the opposite would be true, that big banks would be happy to take as many money orders as can be printed.  However, in my experience that’s not the case.  Some big banks are more lenient than others with money order deposits, but the same can be said for credit unions.  And within those intracies are personal and business banking differences too.  As a general rule or statement though, credit unions are more pro-MO than big banks.

In the Know

I’m pretty sure the big, national banks are aware of manufactured spending.  Regional banks probably have a decent grasp on it too.  Obviously not all employees at those financial institutions are knowledgable about it, but in general, enough money orders have circulated around the country to where people make many of the larger decisions around it should be familiar with it.

I’ve only been back from my around the world trip for 3 weeks now and have deposited over $400k into various checking accounts with an assortment of banks and credit unions.  That sort of volume is bound to create some issues and raise some suspicion.  In all honesty, it should create some skepticism about my account(s), because my deposits are outside of “normal” banking.  I deposit large amounts of money orders, use the accounts frequently (such as paying bills), and have more transaction volume than “regular” customers.

Credit Union #1:
Account Open:  56 days
Deposit amount:  $77,000 (or a little over $1.3k per day)

Credit Union #2
Account Open: 8 days
Deposit amount:  $29k in deposits (or a little over $3.6k per day)

The main issues that have been cited as issues with my accounts are that:

  • the check amounts are the same (all $999.12)
  • deposit amounts similar ($3996.48, $4995.60, etc.)
  • and that the night deposit boxes are being utilized

Some of these figures are compounded a bit in the fact that I was gone for a month during my recent around the world trip, which meant no manufactured spend or deposit activity for that time.  However, the time before/after that trip was more active.  I think a more complete list of issues around my account would be:

  • I’m always depositing MoneyGram money orders.  (Post office MO’s are pretty but expensive and not scalable)
  • Almost all of my deposit checks are for the same amounts ($999.12)
  • Deposits occur nearly every day
  • Deposits often utilize the night deposit drop
  • The deposit amounts are large (multiple thousand dollar deposits)
  • Large external payments (I generally pull money from external bank accounts via my credit card website)

The reality of the situation is that I manufacture spend for cash back and travel rewards.  What I do is not illegal.  It’s odd, unusual, and suspicious looking to some, but it’s also an incredibly efficient, and even some times ingenious way (mostly other’s found methods not mine), to earn rewards en masse.  Manufactured spend is a much more efficient way to earn rewards than actually spending money on paid travel, and I utilize this technique at an enlarged level.


During the opening of each of these 2 accounts, I sat down with branch managers and explained my situation to them.  I told them where I work, about my side business of collecting points and miles, and that I deposit lots of money orders.  Every word of it was factual and true.  After my explanation what to expect from my accounts, each manager said “fine, no problem”.  Even though I gave a brief overview of manufactured spend, it has become clear in talking with the credit union managers since then that they really didn’t understand or have a firm grasp of what I was saying.  Knowing that I sat down and was up front about my account plans and intentions with branch managers, having them give me an “ok’, and weeks later to have each place reach out to me and notify me of a problem for the exact information that I told them about before, is all a little frustrating.

In my initial meeting with the credit union staff, I didn’t mention manufactured spend, and also didn’t mention the amount of money orders to them, which looking back was probably a mistake because the volume and frequency together seemed to have shocked the system.

Some people using MS to generate travel rewards vary their money order transactions.  They buy odd gift card amounts or get fairly random money order amounts to purposely try and make check amounts to be random, when in actuality they are completely controlling those amounts.  I don’t, nor have I ever, nor does it appeal to me at all.  I do larger volume MS and those sorts of MS deposit pattern band aids are not only a waste of time for me, but avoiding reality.  With the volume of points that I collect, it’s really not possible to mask the creation of those rewards.  For me, being as up front about what a bank/credit union can expect from my account is the best policy at this time.  I just hope the credit unions (in this case) also see honesty and straight forwardness as the best policy too.

Going Forward

I’m not sure what’s going to happen with my accounts at these two credit unions.  There are eyes on my account, or it’s flagged for concern to put it another way, and account shutdown is a very real possibility.  That shutdown could occur soon or in a week or month, who knows.  But it’s also possible that these issues are bumps in the road.  I’m hoping for the latter, but am not expecting it.  The credit unions in question are obviously not familiar with my banking patterns.  I’m pretty sure that I’m the only member engaging in manufactured spend, but certainly at the volume level.  Their concern is understandable, but hopefully a positive outcome will follow all of this.

I understand that banks and credit unions have reporting responsibilities around deposit accounts and certain transactions, and that they may view manufactured spending as a threat to everyday business.  I’m definitely not a threat, as no money order will ever be declined, there’s plenty of cash in all of my accounts at all times, and I’m as up front as possible.  However, those facts may not be enough comfort for a financial institution that hasn’t been in this situation before.

Negative outcomes here may go beyond a simple checking account shutdowns too.  A shutdown would be a negative mark on the Chex reporting system that shows a bank closed account.  It also might affect a payment in process, which could add a penalty fee from the credit card company, and in turn put eyes on that account.  Finally, I don’t know if one credit union shutdown would affect others in a larger (partner) network.  In other words, does an account closure have an effect on other member locations in both the present and future?  If an account closed at credit union A, would credit union B (in network) also close the account?  Would you be blacklisted from other network credit unions in the future?

If I can, I’ll bring business to these credit unions in any way that makes sense for both parties (car, home, or other loan, etc.).  I enjoy the people that I’ve met at the credit unions that I bank with, and respect their desire to serve members as the primary goal, and making profit secondarily.  With that said, my accounts are on ice, I just don’t know how thick that ice is, and I’m standing in the middle of the lake(s).

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