What Is Manufactured Spending And Why Do People Do It?

by joeheg

Manufactured spending. What does that mean? It’s not apparent from the name, but a good guess would be that it has something to do with spending money concerning travel since I’m writing about it on a blog dealing with points, miles and travel.

I’m not an expert on the topic. I know some of the basics of what’s involved, and I’ve dabbled with some of the more straightforward methods here and there, but I’m not a regular practitioner.

For those of you who know what manufactured spending is, there’s nothing new in this article unless you want to read someone who has a basic understanding of the topic explaining it to someone who has never heard of it before. 😉

I don’t think there’s a set definition of manufactured spending (MS). My best attempt is that manufactured spending is any method used to spend money multiple times through a financial instrument to earn some form of reward.

What’s the basic principle of manufactured spending?

Good question.

I’ve said many times that the best way to earn points and miles is through credit card spending. You can sign up for cards and earn sign-up bonuses. It’s also a good idea to maximize earnings on your everyday spending, whether that’s for restaurants, groceries, gasoline or non-bonused spending.

If you have $1,000, you can spend that on the above categories and possibly earn 5,000 points or more if you maximize every dollar. But if there’s a better way to get points with that same $1,000.

I’ll use a casino analogy here; just don’t think I’m saying that manufactured spending is like gambling.

slot machines

Slot Machine Analogy

Say that you’re going to sit at a slot machine, and you know that for every $1 you put into the machine, you’ll get 90 cents back. For every $1 you spend, you’ll also get 5 points in the loyalty program. Starting with the same $1,000, after playing 10 rounds, losing 10% of your money each time, you’ll have $348.67 remaining. However, you will have put $6,511 through the machine. Since you earn 5 points per dollar, you’ll have 32,562 loyalty points.

By continuing to cycle your money through the machine, you were able to earn many more points with your $1,000 than merely by spending the money. You earned 32,562 points and spent $651.33. It ended up costing you about 2 cents for every point you received.

The basis of manufactured spending is recycling the same money through the system, earning points, miles or cash back every time you repeat the process. The example also shows one of MS’s downsides: It’s not free.

All manufactured spending techniques have costs. Making the system work is making sure the rewards you earn are worth more than the money you spend. There are two sides to that equation that you can use to increase your value when MSing. You can try to lower the cost of acquiring the points, or you can earn more points, or more valuable points, for each transaction.

Types of Manufactured Spending

There are many different techniques used by people who manufacture spending:

Buying Cash Value Gift Cards – This procedure involves buying gift cards with a cash value. While it’s possible to use the card to pay other charges, the goal with MS is to liquidate the card as quickly as possible to reuse the funds. With MS, the primary way is to use gift cards to purchase money orders, which can then be used to pay off the credit card bill. Repeat the process over and over.

Expenses: The gift cards have an activation fee and there are also costs in getting money orders. Lowering the activation cost can significantly change the value proposition of this MS method, thus all of the excitement over Simon Mall offering a $1,000 gift card with only a $3.95 activation fee or when you see an offer of a no-activation-fee gift card.

Buying Store Gift Cards – This process involves buying gift cards for a single store, such as Amazon.com, McDonald’s or Macy’s. There are online websites where you can sell gift cards to liquidate the money spent.

Expenses: These gift cards don’t have an activation fee. However, you have to take a loss on reselling them online. The re-selling websites also take a cut of the sale price.  In addition, several gift card reseller sites have gone under, causing people to lose their entire investment.

Reselling Merchandise—This is a riskier process but can be very lucrative and even turn into a business of its own. You purchase items when they are on sale or if you get an excellent bonus for a shopping portal. You then resell the items on eBay or Amazon (or any other online selling site).

Expenses: You’ll have to pay the costs of selling the item to the online portal and usually the shipping costs. In most cases, you’ll have to sell the item for less than you purchased it for so it’s possible to take a considerable loss.

Online Loan Websites – There are online sites that specialize in microloans. One such site is Kiva, which is a non-profit that loans money to people in developing countries. You can choose to fund part of a loan, which gets paid back over time. This is a long-term way of manufacturing spending, as it can take months to years to recover your investment.

Why Go Through All This Trouble

There are several reasons why people use manufactured spending techniques:

Meet Minimum Spending Requirements – If you don’t spend a great deal of money each month on expenses, it can be challenging to reach some cards’ minimum spending requirements to earn the signup bonus. With thresholds of up to $5,000 to $10,000, this is a way to meet those requirements.

Reach Spending Thresholds – Several co-brand cards offer bonuses when reaching spending thresholds. The World of Hyatt card gives an extra free night at a category 1-4 hotel if you spend $15,000 on the card in a year. The British Airways card offers a travel-together ticket if you spend $30,000 on the card. While that’s a bunch of spending to put on a single card, it’s easily reachable if you’re using manufactured spending techniques.

Earn Status Levels – Spending on co-brand cards can also help you get status. It could be a certain status level for spending a specific amount or earning a number of credits to be used for status for an incremental amount of spending.  Airlines used to allow you to waive the spending requirement for status by spending on credit cards, but more and more of those waivers are going away (or getting much harder to achieve).

Just For The Points and Miles – While many people do MS for the above reasons, some do it to earn more points and miles. If you’re able to manufacture points and save up to 75% on a hotel room or airfare price, why wouldn’t you?

Isn’t This Risky?

Yes. This process isn’t risk-free. Many things can go wrong. The best advice I’ve heard from those who do this is that you should never spend more money on MS practices than you’d be willing to have held up in limbo for a few months.

In addition, some banks, particularly American Express, are cracking down on people who practice these techniques. AMEX no longer pays category bonuses for gift card purchases and will deny sign-up bonuses if you purchase even a single gift card during the initial sign-up period. Their RAT Team has even shut down whole account portfolios of people who took the practice way too far. Most MS practitioners have left AMEX altogether due to the hassles.

Do You Still Want To Learn More?

The world of manufactured spending is vast and deep. There are day-long frequent traveler conferences that do nothing but talk about all of the different ways to manufacture spending. Going to these and talking with someone who goes to the mall and purchases $10,000 in gift cards every week only to go to Walmart to get money orders to deposit into the bank to pay off the account just to repeat the next week still makes MY mind spin.

If you’d like to learn more, I suggest reading the Manufactured Spending Complete Guide on Frequent Miler’s website. It goes more in-depth into the different areas of MS and other ways to spend money on your credit cards without buying anything.

Final Thoughts

I hope this gave you a glimpse into the world of manufactured spending. There’s a lot to cover, but knowing the whats, hows, and whys is a good start. Hopefully, you’ll be able to decide if you want to learn more about it.

FWIW, we don’t do many MS things in our household. I’ll pay attention to discounted store gift card notices because I might buy some for my personal use, not to resell them. I don’t have the time to run around buying and liquidating gift cards and we’re able to earn enough miles for our travels through other means.

But that’s our situation. Your Mileage May Vary.

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This post first appeared on Your Mileage May Vary


AlohaDaveKennedy November 10, 2019 - 8:21 am

What’s the basic principle of manufactured spending?

Steven November 10, 2019 - 9:42 am

I don’t MS either. Tried it and hated it. Lots of hidden costs including miles on the car, time spent driving around, and most importantly standing in line at Walmart. I felt like I was standing in line at the welfare office. What a shitbox.

joeheg November 12, 2019 - 12:09 am

For me, it was more the time required. I had a Bluebird way back and went to WM once or twice with Vanilla reloads when they still had the Money Center kiosk. Even though the CVS was right near my house and the Walmart was near work, this was way too much effort for a few thousand miles.

steven January 4, 2020 - 8:31 pm

For me Walmart was the deal killer as well. Even today, going to any Walmart for any reason makes me feel embarrassed to be part of the human race. (Can’t stop laughing regarding the propane tank story)

Point For Four November 12, 2019 - 6:07 pm

I stopped after my third time standing in line at WM when a dude brought in a leaking propane tank to exchange. The store had to be evacuated. Then there was a wave of shutdowns and nothing but bad news at WM, I have no regrets.

Scott December 17, 2019 - 4:44 pm

I’ve been MS’ing for 6 years. You’ve made some interesting points, but I wouldn’t totally agree with your casino analogy. The idea is correct, but it’s misleading to indicate that someone has put two-thirds of their money into the slot machine in order to get points. I would never put two thirds of my funds into anything to get points. I spend a fraction at most and many times I’ll earn a profit.

And while it can get tiring, I love the thrill of racking up tons of points at minimal cost. I love all the great trips I can take.
My wife and I have taken some amazing trips the past 6 years and most could not have been done without points(flying to Japan and Hong Kong in first class; visiting every baseball stadium; all 50 states, etc). And many times I find ways to actually earn a profit while earning points. I enjoy earning millions of points and will spend hours and hours doing so. But this hobby is only for people who enjoy that sort of thing. I don’t recommend it for most.

Earl Lee January 8, 2022 - 3:44 pm

Be VERY careful. 2 years ago I was going to Simon Malls and buying tons of gift cards. Mostly when they had promotions. I didn’t have any issues and would liquidate at Walmart buying money orders. I did it for a full year with no problems then out of the blue Chase AND Citibank closed down ALL my credit cards. Keep in mind I have FICO 830 score and had over $150,000 in checking and savings account at both Citibank and Chase and they without warning shut ALL of the cards down and I’m still banned from those banks from having any cards which sucks!

Be careful.

Fathiss January 8, 2022 - 6:12 pm

My reason for MSing is all the easy avenues of SUBs are gone. Miles/points are addictive and so is travel. I manufacture premium points at an average of around a quarter of a penny so no where near 2 cents (that’s crazy). But there are risks in turning over gcs if you use that method. Last week one of my $200 visas did not load at OD. They have a no return police on gcs and told me to go through my cc company for this. Well I don’t want to call attention to my gc activity so I decided to just eat the cost. Painful but easily made up.
I know many bloggers have their “earn and burn” mantra. I totally disagree. Earn while you can before the avenue shuts down. The next method is always more difficult and less lucrative.
I have over 8 figures in miles and points. I diverse into many currencies so I have the currency I need when travel plans change. If you travel a lot, you can’t adhere to “earn and burn”. Even if miles devalue, they’re still a bargain at my cost.
For those that don’t find it worth it, well I don’t have another way to earn over $100 per hour of travel money. I quit my job 7 years ago to travel. For me it’s worth it every time I’m sitting in the front of the plane and later relaxing in some luxury hotel. And I’m too addicted to stop!

Paul D May 28, 2022 - 10:08 am

Fairly new to MS but in the UK people dont talk about it (rightly so) as it can mean the ‘loophole’ gets shut down. So me and my MS is a few hundred pounds a month so its just a hobby at the minute but would love to do more for the points

Al June 8, 2023 - 4:32 pm

Always good to get this stuff out there to get even more competition among everyone and to make it all that much more difficult for everyone to benefit. Great post.


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