Credit_DareDevil

The Credit Card Daredevils Who Risk It All for the Points Game

Are they being shrewd, or are they conspirators in wire fraud?

Gary seems normal enough. He’s a young professional. He has a girlfriend. (Single people are also normal, but what I mean is at least one other person finds him suitable.) He has hobbies, as well as a general zest for life. But also, his basement is full of brand-new appliances that he hopes his girlfriend won’t find out about. Not to mention, his daily commute usually includes a pitstop at CVS to buy a couple thousand dollars’ worth of Visa gift cards. After work, he’ll go to a grocery store to buy a money order with those gift cards.

However, he’ll have to abandon that mission if one of the serious “career cashiers,” as he calls them, is manning the money-order desk. They tend to be real sticklers for the “law.” In that case, he’ll go home empty-handed.

But if it’s a younger cashier?

“They don’t give a damn,” he says. In practice, what that means is that they’ll disregard the rule of requiring an actual debit card to buy a money order, and allow him to turn his credit card purchase right back into cash.

Gary, a pseudonym, is knee-deep in “The Hobby,” shorthand for Taking Extreme Measures to Accrue Credit Card Points in Ways That Are Time-Consuming, Circuitous and Sometimes Illegal (hence the pseudonym). By buying Visa gift cards to buy money orders to deposit them into his bank account, he’s “manufacturing spend,” one of the shortcuts to generating large amounts of credit card points. In short, he’s making quickly recoupable purchases with a credit card for the sake of earning points. He estimates he’s run about $150,000 through this cycle.

Another technique in the manufactured spend world is reselling. (See: Gary’s basement full of appliances.) For the purpose of generating credit card points, it’s best to sell expensive, popular items, so you’re not “floating” your credit card debt for too long. Vacuums, blenders, electronics and espresso machines are all good bets.

Keith Schroeder, the eponymous accountant behind the Wealthy Accountant site, explains manufactured spend further to me. Done correctly, it can be a legit strategy to accumulate tax-free cash and points. Reselling, however, involves engaging in a “taxable event.” So you’re not really “hacking” credit card points; you’re simply running a barely profitable business funded by your credit card(s).

Depending upon how you’ve set up your manufactured-spending operation, you might not just have to worry about taxable events either. Gary, for example, received a number of cease-and-desist letters from a representative of one of the brands of appliances he was selling. He never faced further repercussions, but he did cease to sell that appliance.

When it comes to this part of The Hobby, the points bloggers I found are rather tight-lipped. That’s another reason why Gary wants anonymity, besides the whole “fraud” thing. “I don’t want to be labeled a snitch,” he says.

Rule #1 in a Points Chaser blog titled “How Not to Ruin Manufactured Spending for Everyone” clearly explains, “Don’t alert the media.” Another owner of a popular credit-card site says, “People in the community generally don’t like to [sic] much spotlight been shown to these aspects of the hobby.” Basically, when tips become public knowledge, they’re swiftly shut down.

That’s probably why Gary originally found The Hobby by word-of-mouth after meeting someone at a wedding who explained “mileage runs,” where under certain conditions, it’s advantageous to take promotional flights, because the value of the points earned is greater than the cost of the trip. Afterward, Gary signed up for several additional credit cards, bought some Visa cards and realized he needed to do more research. Namely, he started consulting the credit card subreddit r/churning, the Flyer Talk frequent flyer forum and, eventually, private messaging channels.

Gary notes that actual legal crackdowns on The Hobby seem to be rare. At the worst, he’s been scared of getting denied, but he’s never worried about getting arrested. Of course, he admits that his race — Gary is white — definitely has something to do with this. Grocery stores and drugstores in lower-income neighborhoods are much more vigilant with gift card/money-order purchases, but affluent neighborhoods seem to be, he says, “‘Anything goes! White privilege!’ Which felt pretty shitty.” He adds that many of the financial services he’s gaming, like money orders and Kmart’s BillPay feature (which allows you to pay bills with a Visa gift card: great for points, bad for general use) are often used by the “underbanked,” or people without a standard bank account.

As such, he confirms what’s been proven in several areas: “It’s very, very expensive to be poor.” He does try to make clear, though, that he’s not taking advantage of poor people, just the financial institutions, which are in it “to fuck everyone over.” But he realizes if he actually had to send money via money order, or pay bills via gift card, they’re more costly than his usual methods of Venmo and checks.

Either way, all of this used to be much easier. In particular, many people in The Hobby harken back to the golden age of manufactured spend, circa 2015, which many churners fondly recall as Redbird. “For a while, you could literally go to Target with your REDcard and load it up with a credit card (in order to earn points and miles) and then go home and use the REDcard’s bill pay feature to pay your credit card bill with the same funds that you just loaded up — and all of it was completely free,” explains Greg Davis-Kean, the author of points site FrequentMiler.

Gary got into The Hobby right around the time Redbird got shut down, but he and others simply became hyper-local. Pre-Redbird, The Hobby seemed more national, where the same tips could work in Minnesota or California, as long as you knew the deal(s). But after Redbird died, Gary tells me, there was a change. People became more secretive and the tips much more specific. It’s not enough to know there’s a good sign-up bonus for a new Chase card. These tips are about knowing which exact grocery store to go to — and which exact cashier to go to — in order to get money orders.

The legal definition of wire fraud, Davis-Kean says, is so broad that many people in The Hobby may have broken the law at some point without even knowing it. “The primary thing I advise against is doing things that may appear to be structuring,” he explains. “For example, if you have $10,000 in money orders you want to deposit, just do it all at once. Some people will run from one bank to another to deposit the money in smaller chunks. Even if their purpose wasn’t structuring, it sure looks like structuring to anyone who detects the pattern.” (Structuring, as defined by the IRS, is “the practice of conducting financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by the Bank Secrecy Act (BSA) and/or 26 USC 6050I (Form 8300).”)

Also related: When talking about manufactured spending, structuring and the legal implications of The Hobby, you’ve gone far beyond what most people know of this world — which, to regular points enthusiasts, means The Points Guy, one of the top search results for “credit card points.” The Points Guy started off as a regular “traveling hacking site” before being purchased by Bankrate, a giant financial services company, a fact that redditors were quick to point out in a February 2016 AMA hosted by the founder and CEO of the site.

When Gary and I first speak about his 15-plus credit cards, I joke that he’s like The Points Guy, but he immediately takes offense to the comparison. “Fuck The Points Guy,” he says. No one else went quite this far, but many Hobbyists note that Bankrate earns a hefty commission on the credit cards The Points Guy promotes. (FWIW: Former Bankrate CFO Edward J. DiMaria was recently sentenced to 10 years in prison for “orchestrating a complex accounting and securities fraud scheme.”)

Maybe the most telling sign that all of this is a bit unseemly, though, is that Gary waited more than a year before divulging The Hobby to his girlfriend. “There are very few positive connotations with it,” he explains. But a year into their relationship, they began taking trips together. Gary would cover the flights, sometimes upgrading to first class. He hoped she’d ask him how this was possible. Essentially, he wanted to get caught. He figured 365 days into the relationship, she wouldn’t leave him over this one weird thing. And she didn’t. When a friend asked the couple how they could afford all the flights and hotels, Gary spilled. She took the news well. After all, Gary says, it was affording them a lifestyle they couldn’t have had otherwise.

That said, Gary hasn’t purchased a Visa gift card in 10 months. During our conversations, I prod him, looking for the moment when he had a change of heart. He anticipates the question. “I haven’t learned my lesson,” he says, if that’s what I’m asking.

If anything, it’s the exact opposite. The thousand-dollar purchases, the search for a “legit” cashier that will make a money order from a Visa gift card, the heavy moments waiting to see if they’ll approve the purchase — it’s all a major rush. Gary compares it to shoplifting. “You kind of want to get caught,” he says, though he appears to be speaking hyperbolically. But I get what he means.

“If I could, I still would,” he explains. However, his previous points knowledge and expertise didn’t transfer to the Bay Area, where he relocated earlier this year. All that would have to start over, in what he calls “a much more hostile environment.” Also, he thinks $15,000 worth of appliances would definitely get stolen off his porch at his current apartment.

“It’s a pain in the ass, so I don’t. But morally, I absolutely would continue.”