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An elderly neighbor who doesn’t drive needs help getting groceries, so I occasionally pick up a few things for him. I give him the receipt and he pays me in cash, rounding up the total by a buck or two for my trouble.
Of course, I use a credit card to pay for his groceries. When my Discover card cashback bonus category was “grocery stores” for the second quarter of 2018, I got 5% cash-back. That was an extra $3 in my pocket on one $60 pickup.
Buying groceries for a neighbor might be a creative way to make more cash-back on a credit card, but it’s pretty tame compared to some of the strategies people have used.
The following are some of the crazier ways to rack up more points, airline miles, and cash-back with your credit cards. For example, did you know you can…
Buy Money With Your Credit Cards?
Brad Wilson bought $3 million in dollar coins with a credit card to earn 4 million miles, and he earned lifetime Platinum status on his American Airlines AAdvantage account.
It all started with the Presidential $1 Coin Act of 2005, which was meant to encourage the use of new dollar coins. Thanks to that law, for years the U.S. Mint Presidential $1 Coin Program sold coins directly to the public at face value and with free shipping.
They also accepted credit cards for payment.
You can see where this is going. Wilson started buying thousands of dollars of coins at a time with his credit card, depositing them in the bank and using the money to pay off the card before repeating the whole cycle again, and again.
He wasn’t the only one doing this, of course. For example, another blogger tells us his story about buying $15,000 worth of coins one day.
By the end of 2011 the Mint shut down the dollar coin program to put a stop to this game. You can still buy coins directly from the U.S. Mint, but not at face value.
For example, if you look at their Native American $1 Coin Program you’ll notice that with a markup and shipping you’ll pay about $117 for $100 face value (100 coins).
Let’s hope they bring back the face-value-free-shipping deal. Airline miles are nice, but if Wilson had used a Citi Double Cash card, the 2% cash-back it earns would have generated a profit of $60,000 on that $3 million in coin purchases.
Meanwhile, according to the Boarding Area blog, you can still occasionally profit from buying limited-edition coins from the U.S. Mint, because sometimes these rarer coins can be sold immediately for a higher price. And you’ll get those points or cash-back, of course.
And then there is the change machine that takes credit cards with no extra fee. Thats a rare discovery, and even if you milk it for $100 in quarters, the most you’ll make is a couple dollars’ worth of miles, points, or cash-back.
Help People In Poor Countries
Kiva is a microlender that helps low-income individuals around the world get financing for small business projects. You don’t earn interest, but you can fund the loans (starting as low as $25) using a credit card, and so earn cash-back or points.
Default rates are low, and blogger Rick Ingersoll says, “I’ve been doing it two and a half years, and I’ve never had a problem.”
I consider this a bit too crazy as just a way to get credit card rewards, but if you want to help people out anyhow, why not earn some points, miles, or cash-back?
Buy Debit Gift Cards
As explained in my post on manufactured spending, I sometimes make money using my credit cards to buy debit gift cards. For example, I buy them at Office Max, when they are on sale, using a credit card that earns 5% cash-back at office supply stores. Then I use the debit cards to buy money orders that I deposit into my bank account.
It’s fun, but my occasional profits of $17 or $18 are nothing compared to the guy who made over $4,000 using a cash-back credit card to buy debit gift cards.
He had a special 10% cash-back offer, and bought $50,000 worth of the gift cards, netting about $4,500 after paying $500 or so in activation fees.
Deals like that are rare, but you can still sometimes get 10% cash-back. For example, Discover offers double your cash-back for the first year you have the card.
If you max out those 5% cash-back bonus categories you’ll get 10% back total on $1,500 of spending per quarter, for a maximum gain of $600 per year ($6,000/year x 10%).
Of course, you’ll pay activation fees of at least $4.95 for each $500 debit gift card, so your profit on three of them ($500 x 3 = $1,500 — the maximum bonus spend amount per quarter) would be $135.15, or about $132 if you spend another $3 to convert them back to cash by buying money orders.
And, while it’s easy to find Visa and Mastercard debit gift cards to buy when the category is “grocery stores,” or even “pharmacies,” you might be out of luck when it’s “restaurants.”
Forget To Use Your Flexible Spending Account Debit Card
If you have a flexible spending account for medical expenses you probably pay for things using the debit card provided. But if you should happen to forget your card at home, you can still pay using a rewards credit card, earn points or cash-back, and then get manually reimbursed from your account.
Procedures for getting reimbursed vary by plan, and this strategy may not be worth the trouble if you have few health-related expenses. On the other hand, if you have $2,000 in expenses and earn 2% cash-back, you’ll get $40 for what will probably be less than an hour of paperwork.
Pay Your Taxes By Credit Card
You can pay your taxes by credit card using one of the IRS-approved vendors. You’ll pay a fee, which sounded crazy to me when I first heard of this, but it can make sense depending on the fee amount and the rewards you earn.
For example, I did once pay a $3,000 quarterly tax bill this way using a 2% cash-back card. The fee was 1.87%, so my “profit” was 0.13%, or $3.90 total. Fortunately my real goal was to meet a minimum spend requirement to earn a $200 signup bonus, which I met all at once this way.
That’s where this strategy is most useful; for meeting spending requirements for credit card signup bonuses (and it’s also pretty convenient to pay your taxes online).
Note: You can pay more than you owe if you really need to charge more to your card. The IRS never minds overpayments, and you’ll get your money back at tax time anyhow.
Buy A Car
When my wife and I bought our last car we paid the $9.000 using a credit card. We had the cash, but the price was the same regardless, so why not earn a couple free nights at Hyatt hotels using my Hyatt card?
Some dealers limit how much you can put on a card, and require the rest in cash or by check, but you might as well use a good rewards card for the maximum allowed.
Then there is Keith Rosso, who bought a $58,857 Tesla with a credit card.
He figures the “Chase Ultimate Rewards” points he earned (more than 176,000) are worth close to $5,000 once he transfers them to certain hotel and/or airline rewards programs.
More Ways To Earn Points, Miles, And Cash-Back
Here are a few of the less-ordinary-but-not-so-crazy ways you can earn credit card rewards. Many of these are best used for meeting spending requirements to earn a bonus, rather than just getting points.
Pay Bills In Advance – I used to use credit cards to overpay my water bill to earn rewards and, more importantly, to meet the spending requirements (and deadlines) to earn credit card signup bonuses. The extra amount is just credited toward future bills.
Buy Debit Cards To Pay Bills – Some bills (utilities, for example) have a fee for credit card payment, but have no extra fee if you pay with a debit card. So when my local safeway offers $10 off $500 debit gift cards (at least several times per year), I sometimes buy them and use them to pay bills. On each card I make $4.05 after the $5.95 activation fee, and another $15 cash-back using a card that pays 3% back on groceries.
Make Your Mortgage Payments – Services like Plastiq will charge your credit card and send your mortgage payment to your lender for you. Of course, with a 2.5% fee you’ll lose money even using a 2% cash-back card, so this strategy is best used only for meeting sign-up bonus spending requirements.
Pay Other People’s Bills – Whether you pay for a group meal at a restaurant and then collect your friends’ shares in cash, or put a $800 TV on your card for a friend who was going to pay cash (and then taking his cash), there are many ways to earn points and cash-back paying for other people’s purchases.
Buy Your Future Gasoline – When the Discover 5% bonus category is “gas stations” I can never buy enough gas to burn through the $1,500 quarterly bonus spending limit. But purchases inside the gas station count too, so to use more of that limit I buy a few gas gift cards that I use after the bonus period ends, thus effectively extending the 5% cash-back deal for months.
Try To Pay For Everything Using Reward Credit Cards – If you ever find yourself writing a check, pulling out currency, or even making a payment using Paypal, stop and think. Maybe there’s a way, even a crazy way, to pay using a rewards credit card.
If you know more crazy ways to get credit card points and cash back, please share your ideas below … and keep on frugaling!