Manufacturing Spend
For those who are new to the points and miles landscape, there are different definitions of manufactured spend circulating, but one that I think is agreeable is:
“Manufactured spend” (MS) is the process of using promotions, resources and techniques that allow a person to accrue maximum rewards (cash, points, miles, benefits) while spending as little money as possible.
In a simplified way, you could think of MS as pseudo spending if that helps. It’s not fake spending, because you are making a purchase and therefore creating a transaction, but sometimes not always incurring an actual cost (or much of a cost) for that spend. Still kind of foggy?
A simple picture I can draw you is that you purchase an item for $500 with an airline rewards credit card. You then use that $500 item in some way to pay off the credit card charge. You incur may incur a small or no actual cost for that item, but still accrue at least 500 frequent flier miles or other points for the transaction. This is just a simple example, but by far the most dramatic example is that of the US Mint.
The U.S. Mint and Manufactured Spend
I first heard about manufactured spending, a technique used in the mass accumulation of frequent flyer miles, on National Public Radio (NPR) in 2011. At the time of the story, I had a faint interest in frequent flier miles and the points community in general, but the topic peaked my curiosity. The story was about the U.S. Mint – the government agency that physically creates currency (paper money and coins) for everyday use – and the federal government’s push to get $1 coins into circulation in the U.S. economy. In short, the U.S. government issued the The Presidential $1 Coin Act of 2005 that created a simple goal and formula: The government sold dollar coins on it’s website to citizens at without any extra markups or add on costs.
In the Mint transaction, there were no extra charges, just a dollar coin for a dollar charge. The big value add or incentive in the deal was that shipping was free, and that the Mint’s website accepted credit cards as a form of payment. So people were able to order many dollar coins, pay with a credit card, get the coins shipped to their front door for free, then drive that shipment down their local bank and deposit them. They did not actually USE the coins, or put them into circulation as the government had hoped, but rather deposit them straight away and then use them to pay off the charge on their miles earning credit card soon after.
And for those with more experience with generating points and miles, some people where using cash back shopping portals, generating 2%-5% returns for purchasing AMEX gift cards, then using those gift cards to buy US Mint dollar coins. This process created a situation where people were actually making money on the deal and earning thousands, and sometimes millions, of frequent flyer miles. The promotion lasted from 2005 to 2011, and I know several people who were able to able to earn many free flights and other benefits from the promotion.
In the days of the Mint deal people could accrue points and miles, and sometimes amazingly large rewards, and incur no transaction costs, which is the essence of manufactured spending. Those that got in on the Mint’s promotion accrued MANY free miles and points (minus the minimal effort of hauling multitudes of dollar coins into your local bank). I can imagine the teller’s reaction when people literally brought in truckloads and hundreds of pounds of coins to deposit!
My introduction to points and miles; of all places…NPR
Here is the original piece from NPR if you’re curious to learn more about the Mint story, it was truly an amazing time in the points world! For further reading, here’s a couple other good articles here and here that give more detail about what that time was like.
NPR’s story peaked my curiosity. But alas, I was not fortunate enough to be one of the point bandits who cashed in on the Mint’s promotion. The day after hearing the piece on the radio, I went to the US Mint’s website tried to get in on the action. Everything initially seemed ok, but in the end the purchase wouldn’t go through, so I called the Mint helpline. The person I spoke with said that option to pay by credit card was no longer available and that other forms of payment like cashiers check were possible. And that was that; the day the the Mint deal died.
While many people were able to capitalize on the Mint’s dollar coin promotion, some took it much further than others. One of those people, and the star of the rewards show, was Brad Wilson who bought nearly $3 million worth of dollar coins with a rewards card. Yes I said that correctly; 3 million. Wilson used the American Express Starwood card for most of his purchases, and accrued award points for every $1 he spent. He could then transfer them into an airline’s frequent flyer program at a ratio of 1.25 miles per dollar spent. Or in other words, for every 800,000 points he put into his American Airlines (AA) frequent flyer account (AAdvantage), he was rewarded with 1 million miles (or a bonus of 200k miles). One million American Airlines (AA) miles was good for about 50 domestic round-trip flights. With the miles he accumulated through the Mint, combined with the miles he’d already earned, Brad Wilson wound up with more than 4 million miles, which earned lifetime Platinum status on AA for himself and his wife. Keep in mind, all of this was done at no cost and perhaps even a profit. It was truly an amazing time in the history of accruing points via manufactured spend.
Summary
Manufactured spend isn’t dead, nor will it ever be. There are still ways to earn miles for free or nearly free. I won’t list them specifically here, because this isn’t the place for megaphones and that kind of intel sharing so please don’t ask. The post is just a piece to show you what’s possible and to get your mind working to try and accrue the most reward points for the least cost possible. The Mint deal was part of the golden days of collecting miles and points that will probably never be equaled again, but there is still plenty of opportunity, you just have to know where to look.