Manufactured Spending by Buying Money Orders

Easily Earn Points for Free Travel, Earn More Credit Card Points with Manufactured Spending

Using gift cards to purchase money orders is one of the most common types of “manufactured spending”. The basic process is simple. The trick is finding local businesses that are willing to let you complete each of the necessary transactions, particularly in large dollar amounts.

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Step 1: Purchase Visa gift cards
Step 2: Purchase money orders
Step 3: Deposit the money orders
Alternative step 3: Use money orders to pay bills

You need to purchase Visa or Mastcard Gift Cards. Stores won’t let you purchase a money order directly with your credit card, but some stores will let you purchase them with a debit card. So, the first step is to use your credit card to buy gift cards. These gift cards work similarly to a traditional debit card and can (sometimes) be used to purchase money orders. An excellent source of information on purchasing these types of gift cards, online and in brick and mortar stores, is available on FrequentMiler.

You can buy gift cards at grocery stores, office supply stores, drugstores, convenience stores, etc.

You usually want to concentrate on $500 cards. There is a fee for “activating” Visa, Mastercard, and Amex gift cards. Because the fee is fixed, the higher the value of the card, the lower the cost of the fee relative to the spending you are generating. $500 is usually the upper-limit of the cards that you can find.
Some stores won’t let you purchase gift cards with a credit card. You may need to try a few places until you find one that does. For example, CVS and Walgreens will allow you to use a credit cards, but Rite-Aid and Bartell's will not. The policies can be different for different stores within the same chain. If a store does allow purchases, they will usually have limits of the number of cards you can purchase in the same day. If you want to purchase more, you’ll need to find additional or different locations.
If you are manufacturing spending just to earn points, it is critical to optimize your gift card transactions. The goal is to pay as little as possible for the cards, because you aren’t generating much additional reward value per dollar.

Ideally, you want to purchase the gift cards at a store where you earn high reward rates. For example, if you have a card that gives you 5% at Office Supply stores, you’ll usually want to purchase there; if you have a card that gives you 6% at grocery stores, that becomes a better option.
Sometimes you can take advantage of a promotion. Perhaps there is a promotion that gives you $20 off a $200+ transaction at Staples. Even after paying to activate the gift card, you’ll start out with a small profit, not including the rewards you are earning.

If you are buying online, you want to earn additional cash back through a shopping portal—this is usually your best option when you can't earn bonus rewards. However, you won’t always earn these rewards on gift card purchases. As with other things, you’ll want to experiment with specific options before you start loading up on purchases. Buying online is typically the best option when you don't have an option for earning bonus rewards on your purchases, such as when you are trying to meet a spending requirement on many credit cards or when you are trying to manufacture spend on a general-purpose reward card. The portal cashback can offset a big portion of the activation and shipping fees.
An alternative is to purchase gift cards at Simon Malls. While you won't receive cashback portal benefits, you don't have to pay shipping costs, you'll pay an even lower activation fee, and you don't have to worry about not receiving a portal payout. At these malls, it is often straightforward to purchase up to $25,000 in $1,000 gift cards, per day.

If your goals are to meeting spending requirements, optimization don’t matter as much. The card you need to use may have no useful bonus categories. And since the value of getting a signup bonus is so much higher than the value of additional points from spending, it is less critical that you eke out every possible cent from the deal.

Step 2: Purchase money orders

Once you have the gift cards, you can use them to purchase money orders.

Many stores will not let you purchase money orders with a gift card. Just as you may have had to search around for a store that would let you buy gift cards with a credit card, you might have to search for a specific location that will let you buy a money order with a gift card. Except finding a location that allows this is even harder. When you do find a location, they will often have a limit on the amount of money order purchases that you can make. If you want to do more, you’ll need to find additional or different locations.

The go-to locations used to be Walmart and the post office. But Walmart has been cracking down on people doing this and the post office has hard-coded its registers to block purchases with most gift cards.

When asking, always ask if they will accept a “debit card”, not a “gift card”. The cashier is more likely to answer yes. Just be aware, that some locations will only allow purchases with traditional debit cards and some will want to see your name on the card (which is typically missing from gift cards). So you might start out with a yes, and then get rejected later by the cashier or the cash register.
Try to purchase as large of a denomination as you can. Money orders have a small purchase fee. The larger the money order, the lower the fee per dollar.
Since gift cards often max out at $500 each, you will usually want to purchase each money order with multiple cards. You’ll need to ask the cashier to split the purchase across multiple cards. Once again, each store will have limits and you may wind up with a cashier who will have difficulty helping you out.

You need to account for the money order fees. For example, if the fee for purchasing a $2,000 money order is 90 cents, you want to purchase a $1999.10 money order, and pay the total (including fees) by swiping four $500 gift cards. To differentiate yourself from a typical Manufactured spender, you can purchase gift cards or money order for a different, and somewhat smaller amount.

Try to avoid buying money orders at the same store that you are buying the gift cards. Stores are not happy with this practice and it will draw unnecessary attention to what you are going.

Step 3: Deposit the money orders

The most straightforward way to liquidate the money orders is to deposit them into a bank account. However, that is a little bit trickier than it sounds.

Many banks are unenthusiastic about accepting regular money order deposits. To them, it smells like money laundering or other shady practices. These deposits are often accompanied by additional paperwork and risks associated with government financial regulations. As a result, a bank may shut-down your account, refuse to accept the money order, or ask you to limit the volume of your deposits. This is especially true, if the money winds up getting immediately transferred out of the account.

This doesn’t mean that you need to give up on this liquidation option. You may just need to try out several different banking options, until you find a bank / banker who doesn’t have a problem with your activity. It is also best to avoid this activity with any bank with which you want to be certain to maintain a good relationship. Many people try to work with a smaller savings and loan, so that there is lower impact, in the case that they are asked to take their business elsewhere.

Often the most straightforward way to deposit the money orders is through the ATM, rather than using a teller.

Alternative step 3: Use money orders to pay bills

An alternative way to use a money order is to use it, instead of a regular check, to pay a bill. Of course, not everyone accepts money order payments. But when they do, this is can be a good alternative to depositing the money order at the bank. Mailing the money order to a payee requires some additional work and a stamp. It is also a little awkward when the amount of the money order you purchased ahead-of-time doesn’t exactly match the amount of money you owe. Experts recommend avoiding using a money order to pay your credit card bill itself.