2016 was the year I thoroughly explored churning and, more specifically, manufactured spend. This is the art (or the Hobby) of purchasing near-cash items (Visa Gift Cards, aka VGCs) or resalable items (iPads, tvs, etc.) to pay off credit cards, earning rewards points at a very low per-point cost. I found this link on r/churning, and read it thoroughly as a how-to guide for manufactured spend. The standard practice is to purchase Visa Gift Cards with a rewards credit card, and then purchase money orders to deposit to your bank. This earned plenty of free travel!
Experience – Manufactured Spend 2016
I started off small, rationalizing it that if I was unable to churn 1 $500 card, I would only be out $4.95 for the card fee, and the time spent. I could load my Serve card at the nearest Rite Aid, giving me an excuse to get out of the house and get some exercise, and later I was able streamline my process as best I could. Many, many regular runs to CVS, Walgreens (for diversity), the Post Office, and my various banks helped grow the final total. It was an exhilarating experience, especially reaping the benefits and continually optimizing my MS routine to lower my costs or improve efficiency.
Additionally, being able to see tangible rewards was always the highlight. When I am able to book hotels for my parents, allowing them to enjoy and travel more, or booking luxury hotels for my lady and her parents to experience, I remind myself how fortunate I am to have found such a wonderful Hobby.
It also fuels many of the stays (particularly Starwood) that you see on my blog. And while I may not be one of the “big-time” churners, doing $100K+ a month, I think I am doing a decent amount given my purchase restrictions and limitations.
Statistics and Analytics
Overview – In 2016, I churned $133,000, which comes to just over $11,000 per month, beating my initial $100,000 stretch goal. This does not include another $8,500 that I churned on my lady’s behalf. Each month I churned a different amount. I’ll only be speaking about my churning and some interesting tidbits.
Loading – The first $7,000 (14 cards) went to Serve loading my prepaid card. The remaining $126,000 went to money orders at various post offices all around the country, varying between $500 and $2500 at a time. They were then deposited in one of my various bank accounts.
Visa Gift Cards – Of the 283 total cards, 17 of them were the lady’s, and 266 of them were mine. 128 of those cards (46%) were from GiftCardMall, where I liberally used GivingAssistant to get between 1.25 and 2% cash back on all my purchases. This played a big role in cutting my churning cost, and I expect my overall CPP to be somewhere in the 0-1% range, rather than the 1.1-1.2% range. Post offices have since changed their systems to no longer accept GiftCardMall VGCs. Sad!
Credit Cards – Of my 266 cards, 117 (44%) were on my personal Starwood Preferred Guest card, and 122 (46%) were on my business Starwood Preferred Guest card. Combined, nearly 90% of my churning was done on SPG cards, with the remaining 10% split over various cards to hit minimum spends or get some other points (CSP, United, Fairmont, JetBlue, Freedom).
Overall Cost Calcuation
Card Cost – Assuming a $5.95 cost per GiftCardMall VGC (128), and $4.95 cost per VGC purchased from CVS or Rite Aid (138), the total cost for the cards comes to $1,444.70 (266). This ignores the earlier $3.95/card paid at CVS, or the random $2 discount per card for GiftCardMall sales.
Money Orders Cost – Assuming an average money order cost of $1.10 per $500, which is somewhere between the initial $1.20-$1.25 per $100, and the average 80c per $500 that you get from purchasing a $1,000 money order, the total cost of money orders (for 252 cards) comes to $277.2. So far, the total cost is $1722, based on the previous assumptions
Offsetting Revenue – Cash back from GiftCardMall played a huge part in offsetting many of the above costs. Backing out non-GCM purchases and charitable donations (I make some of those), GivingAssistant paid me $1,526 in cash back.
Result – My net cost, for ~$133,000 in churning in 2016, was about $196. This is about 0.15 cents per point, where I redeem the points for anywhere between 2-5cpp. At an average yield of 3cpp, I would have made about $3,800 profit. Lastly, now that I’ve written it out, it seems quite low – most likely due to its redemption for standard hotels rather than pricey first class or international travel. This also does not include the insane amounts of time, energy, gas, and car wear & tear that I needed for churning.
I have already started in 2017 with gusto, with a new goal of $180,000 this year, or $15,000 per month. Many factors, listed below, constrain my churning ability, but I will see how far I can go.
- Walmarts – no KATE or VGCs purchasable with credit card
- CVS – Limit $2,000 purchase per 24 hour period
- Walgreens – Limit $500 purchase per day
- Post Office – Limit $2,999 in money orders per day, $3,000+ requires filling out a form (don’t want to do this). Over $10,000+ they report the purchase to the government. For what reasons, I don’t know.
Manufactured Spend and Churning are worthwhile hobbies, and it has been a very fun yet strenuous experience last year. However, being able to provide travel to others is one of the highlights of the Hobby, and so I will continue to do so.
Featured image from Pixabay of a goal destination for my churning: Disclaimer: This post may contain affiliate links which, should you click through and/or make a purchase, grant me a commission. Also, I only post in the best interest of my readers. Lastly, thank you for supporting my blog and my travels.
What do you think of my musings on my manufactured spend? Let me know in the comments, or reach me directly at TheHotelion@gmail.com! Like my posts? See more here, on TravelUpdate! Follow me on Facebook (The Hotelion) or on Twitter and Instagram: @TheHotelion