By Stephanie Miller


5 Min. To Read

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The credit card rewards game is an enticing one. By spending on certain cards, you’ll earn lucrative rewards that can go towards flights, hotel stays, or cold hard cash back. But the caveat with rewards is: you have to spend money to make money.

That’s why some people turn to manufactured spending, in order to maximize their credit cards rewards earnings. But what exactly is manufactured spending, why do some cardholders utilize this earning method, and is it really against the rules?

What Is Manufactured Spending?

In order to earn many of today’s best credit card sign-up bonuses, you will have to meet a minimum spend requirement. This means that you’ll need to charge a certain amount on your new card within the first few months of ownership, or else you won’t be eligible for the bonus offer.

This is why some cardholders choose to go the route of manufactured spending. This type of spending is essentially the practice of spending money on a credit card, without actually spending anything extra.

This might mean using a credit card to fund a bank account (not always allowed, but it depends on the bank) or using a credit card to buy things like gift cards or money orders. You can then use those funds, gift cards, and money orders to cover your everyday expenses or even pay off your credit card statement balance. In the end, no additional money even came out of your pocket.

Why Do People Turn to Manufactured Spending?

It’s easy to see why some cardholders use manufactured spending as part of their bonus/rewards accumulation plan. It’s an easy way to beef up the charged amount on a credit card account, without spending extra money that they may not afford to spend in the end.

Let’s say that you get a new credit card with an incredible sign-up bonus, but it has a high minimum spend requirement in the first three months. You may not have the room in your budget to do the usual spending tricks – like paying your annual insurance premiums in bulk, prepaying bills, or stocking up on household/office goods – and can’t think of any other way to meet the minimum. Or you need/want to accumulate a few thousand rewards points for an upcoming trip, but just don’t spend enough each month to do so.

In either case, manufactured spending could look pretty enticing.

With manufactured spending, you would opt to do something like buy money orders or fund a new bank account with your credit card, then use those “purchased” funds to turn around and pay down your credit card statement. It’s sort of like shifting money from one hand to the next and back again. But it also feels a little sneaky.

Is Manufactured Spending Against the Rules?

If manufactured spending makes you feel a little bit like you’re breaking the rules, it’s because in theory, you are. You’re exploiting a loophole in the credit card rewards system to your own benefit, racking up rewards and collecting bonuses that you didn’t really “earn.” But even still, it’s not illegal. Just frowned upon.

Some of us have used manufactured spending to boost credit card rewards without really thinking about it. For instance, I get 6% cash back at grocery stores with my Blue Cash Preferred Card from American Express, which is an enviable rate. I have, on occasion, used this to my advantage to buy gas station, department store, or even Amazon gift cards from the gift card kiosk at the register. I get the higher rate of reward since it’s part of my grocery purchase, but I still make my planned purchases at the other retailer.

This is the only type of manufactured spending I would personally ever utilize, but there are those who outsmart the system every day with much bigger plays. In fact, there are entire online forums dedicated to manufactured spending, and finding new ways for cardholders to skirt around the credit card rewards system.

If a card issuer suspects that you are engaging in manufactured spending, you could be up for some serious repercussions. For instance, they could decide to revoke all of your earned rewards… even those that were typical purchases! They could also choose to close your card account altogether.

The reason is two-fold. First, and most obvious, is the fact that you are using a loophole in the system to your advantage. No, it’s not technically breaking any rules, but it is highly frowned upon.

Second, buying things like money orders and gift cards in bulk can be a sign of laundering funds. If you’re using this method to manufacture your spending – even if you’re not money laundering – it can set off red flags. This might catch the attention of law enforcement in your area, and it’s certainly something that the credit card companies don’t want to be a part of.

This gives them a great reason to close your account, even if it’s not an activity in which you’re engaging.

Should I Utilize Manufactured Spending?

There are plenty of great ways to meet minimum spending requirements for credit card bonuses, or rack up plenty of rewards, without going on a shopping spree. Prepaying bills, paying premiums in bulk, using issuers’ online shopping malls, or even buying gift cards for your typical everyday purchases can be a great way of hitting those thresholds. But that may be as far as you want to go.

While serious manufactured spending – funding bank accounts or buying gift cards and money orders with a card, then using those funds to pay off your statement balance and collect rewards – isn’t yet illegal, it can be an easy way to get in trouble. You may raise eyebrows with your local law enforcement, or at the very least, result in your issuer cancelling your card.

Are the potential rewards worth the risk to you? Only you can answer that question. For me personally, I’ll stick to racking up my points the old-fashioned way.

The credit card rewards game is an enticing one. By spending on certain cards, you’ll earn lucrative rewards that can go towards flights, hotel stays, or cold hard cash back. But the caveat with rewards is: you have to spend money to make money.

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