The Real Costs of Manufactured Spend?
13 Feb. 2018
The Real Costs of Manufactured Spend?

Show Me the Money

At times, manufactured spend (MS) or non-organic spend seems like it’s at near religious proportions in some circles within the points and miles community.  For some it’s nonexsistant, for others it’s very casual, and then for a minority it’s basically a compulsory routine.  Whatever your interest level is with MS, there are aspects to consider when flipping on the participation switch.  One important factor is cost.

Ask a variety of people how much $10,000 worth of debit cards costs, and you’ll probably get a fairly uniform answer of either $79 or $86 ($79 in card fees plus $7 in liquidation costs…assuming $3.95 per in fees per $500 card).  But is that really the cost of MSing $10k worth of debit cards?  Probably not.


How much would it “cost” to manufactured spend business class tickets to these destinations?  Map via Great Circle Mapper

To the Moon Alice

There’s a younger person that came to a local points meet-up recently and before I left, we chatted about manufactured spend.  She does some MS at lower levels, mostly through occasional office supply (negative cost) deals because as she told me, she’s worried about fees.

It seems like most of the negative talk around MS surrounds shutdowns – banking and credit card.  Very few people seem to be concerned with the total costs….card fees, fuel expense, and an almost entirely excluded piece:  your time.

The word “free” is probably the most incorrectly used word within the points and miles hobby.  For most people, acquiring and using points isn’t free, and neither is manufactured spending.  I wanted to go over some very simple numbers that look at how much it would cost to MS your way into business class tickets to various parts of the world.  And by cost, I’m referring to the total cost, including your time.

Figuring out the total costs involved in MS isn’t easy.  There are different methods, stores, deals, debit and credit cards, fees, driving, time variations, and more to account for.  A friend of mine drives 100-120 miles a day and spends a good portion of his day on the MS trail.  He’s an exception, but there are data points at many levels, so I made a few assumptions to get things rolling:


– $10k of debit (gift) cards at via local mall with $3.95 fee for each $500 card (total of $79)
– Liquidation costs of at least $7.00 (or $0.70 per $1,000).
– 3-4 hours of liquidation in person at various places (for every $10k in purchased cards)
– Personal time is valued in a range from $20/hr to $50/hr.  If you value your time more or less than that, totally fine, but you’ll have to do your own calculations
– Earning points/miles at either 1x or 1.5x with rewards cards.  There are other rates available, but I didn’t want to get crazy.
– These examples don’t include credit card sign up bonuses.  This is just pure MS spend for points (for use on business class flights in the future).


Ok so let’s look at the costs, and I’ll provide some explanation on the numbers used.


There are 2 scenario examples shown here.  Each are similar except one has more liquidation time (4 hours vs. 3 hours), and with that, some slightly higher Liquidation and Fuel costs.  This first example is also under the assumption that you’re only earning 1x on all purchases for MS.

The first column is “Time $ per hour of MS” which is just how much you value your time.  An argument could be made that your time shouldn’t have a price.  If you read a book or go for a run are you losing $30 an hour?  No I don’t think that or similar examples are fair, but it’s important to remember that by participating in MS, you’re purposely taking actions to accrue points.  You are in effect, working for those points.  The costs associated with accruing points is essentially a prepayment on a flight in whatever class of service (economy, business, first) that you desire.  If you consider yourself a permanent volunteer for those efforts fine, but it’s probably not accurate (or honest).  The higher class of service, the more work and points it will require.

The next column “Hours per $10k of MS” is just the time that it takes to go through or liquidate $10k worth of debit cards.  This is really tough to approximate.  For some it’s not even possible to do because of where they live, and for others, using 3-4 hours as an estimate is too much time.  For most people though, I’m comfortable with that range.  Note that this time also includes the time to drive and buy cards too, which is probably a minimum of 20 minutes for many.  For some it’s an hour or more.

In the end, there’s a column called Total $10k MS Cost.  That’s just the sum of your time and fuel costs, along with the card expenses.  That total is just divided by 10 to get a cost per $1,000 of “traditional” debit card MS.


This next chart is very similar to the first one except it assumings an earning rate of 1.5x, thus lowering your cost per $10k (and $1k) of debit cards purchased.  Your overall costs are the same as in the previous examples, but earning at an enhanced rate of 1.5x lowers the cost of producing the same points as before.

In the end you can see that both models (1x and 1.5x) show dramatically more total expense than just the $79 or $86 often quoted as the “cost” of $10k worth of debit card MS.

Business Class MS Costs

Now that that some basic cost info is laid out, let’s take that and apply it to the cost of acquiring a business class ticket to some nice destinations.  I chose 6 destinations that departed from Chicago:  Rio de janeiro, Rome, New Delhi, Hong Kong, Sydney, and Johannesburg.  From there I tried to find an “average business class award price” from Chicago to these destinations.  I’m not looking for the lowest points or sweetspots to each city, as there are many people with many different points and miles, so not everyone has the ability to fly Singapore Airlines, or Asiana Airlines.  I looked over the business class awards using AwardHacker, and the TravelCodex Award Maximizer tools.  It’s fairly subjective what “average” award price I ultimately went with, but I think the award prices seem fair.


“Average” business class award pricing for various destinations around the world.  Map via Great Circle Mapper

Using the average award prices selected for each destination, let’s plug in the different costs per $1,000 of MS (from the maroon colored cost columns in the examples above) into this chart and calculate how much each locale would cost.  This first chart is again assuming earning only 1x on spend.


Same two scenarios are used, one with 3 hours of liquidation time and the other with 4 hours.  Basically we have the cost of MS per $1k so take that and multiply it by the number of miles needed for each destination (below the city name).  If you started from zero, you can see that earning enough miles for a business class ticket earning 1x is extremely expensive when you factor in everything that’s involved.


Similar chart to previous except this one assumes an earning rate of 1.5x which lowers cost to reach same miles earned in the above example

Even earning at a much higher rate, 1.5x vs. 1x, the costs of MSing a business class award ticket for these destinations is still substantial.  For the longer international flights you’re still saving money on a normal fare, but for others the costs are closer to actual up front flight fares.  Taxes and fees are not included for any of the examples illustrated above either, as that cost has quite a lot of variation.  That’s an extra expense to consider too, but obviously apart from that of MS.


Some people aren’t going to like valuing their time when it comes to earning points.  But your time does have value, and sometimes it’s appropriate to allocate dollars to it.  Not every minute of every day has monetary value, but if you’re driving to get cards, then to liquidate, then to deposit…rinse & repeat many times over, well that’s a totally different scenario. You’re actively making an effort to reduce the cost of your travel, or said another way, you’re actively working to lower the cost of your travel.  The more (in-store) MS that you do, the more lines and wasted time you go through.  Your time will mean something to you in the end, especially with those who have families, as you can’t help but be somewhere else after a series of frustrations and delays.  From there it’s a matter of how you value your time.

Even if you don’t agree with every set of numbers used in this post, the “real” costs of MS are significantly higher than many people quote or even think about.  From the results you might say that you’re still getting a “deal” or an up front flight on lie flat seats, but if you’re shelling out that much cash and energy for that type of flight via MS, that’s your choice.

Most people who have MS aspirations should stick to using it for immediate travel plans/redemptions and sign up bonuses.  Even then, if you can use organic spend to achieve a bonus, I recommend that instead of MS.  If you still plan on MSing, perhaps mixing it in with planned trips to stores that you would go to anyway is best, rather than taking special trips and extra driving.

Bank shutdowns are occurring more frequently and MS is getting harder.  That’s a general statement that’s separate from the topic of this post, but it’s true.  Factor in the real costs for MS, and this points shortcut doesn’t look so glamorous.

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