I’ve received a number of reader emails recently that go something like this:

I am about to spend a lot of money at [merchant name goes here], can you tell me the best way to save money / double dip / earn miles?

I’m always happy to do my best to answer these questions as best I can, but let me now give a general answer that should work in most circumstances:  Buy gift cards at a discount, and (if possible) spend the gift cards through the best online shopping portal available.  Here are the details:

Buying Discount Gift Cards

There are many companies that buy and sell discounted gift cards.  I’ve found that the easiest way to find the best deals is through a site called Gift Card Granny which aggregates prices from a number of gift card exchanges.  Using their site, simply search for whichever merchant you are interested in and then sort the results by Discount % in order to find the best deals.  Usually you can save at least 10% off the value of the gift card. If the merchant you are looking for isn’t available, you can sign up for alerts so that you’ll be emailed once they appear.

In some cases, you can even do a little bit better by going through a cash back portal.  For example, if you find that GiftCards.com has a good price for gift cards, go through EBates.com to get an additional 1% back.  Otherwise, please go through Gift Card Granny’s link so that they’ll earn a commission and can continue to provide this valuable service.  Note: I do not have any financial relationship with Gift Card Granny, but they have supplied data to me that will be used in future posts so I am a bit biased here .

Using Gift Cards

Whether you plan to use your gift cards online or in-store, make sure to sign up for any loyalty program the store offers.  For example, Sears / Land’s End / Kmart offers a “Shop Your Way Rewards” program in which you get the equivalent of 1% back on all purchases (savings can be applied to future purchases).

If using gift cards online, make sure to go through the best online portal available for points, miles, or cash back.  I check two sites: evreward.com and nerdwallet.com/discounts/ to find the best deals.  Unfortunately, the data on these sites is sometimes a bit out of date, so it is worth also logging into your favorite portal (Ultimate Rewards Mall, of course) to double check.  Once you have found the best option, make sure your online shopping cart is empty before you go through the portal to the online store.  Then go through the portal to the store, fill up your shopping cart, and checkout using your gift cards.

Notes:

• Not all stores allow points to be earned when using gift cards.  For example, Barnes & Noble will not award points for the portion of a purchase that uses a gift card.
• Some stores do not allow their gift cards to be used online at all.  Staples is the one primary example of this that I know of.
• It is always a good idea to google for coupon/promo codes before checking out in order to save even more.  In some cases, though, you won’t get points / miles / cash back from the shopping portal when you apply a code.  Check the merchant’s terms and conditions before you proceed.

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If you’ve already mastered the art of credit card churning, consider adding gift card churning to your repertoire.

For most people new to travel hacking, learning about credit card churning is the first stop in the adventure. By applying for credit cards with large sign-up bonuses every 90 days or so, people can easily rack up many hundreds of thousands of points and miles every year. If you’re interested in learning more about that, then you’ve come to the wrong place! Many other bloggers have that sort of information covered in full so I don’t see any point in repeating it. Most of what I learned about credit card churning was from the FrugalTravelGuy. You can learn about his strategies online or buy his Kindle book for about $5 or so. All of the proceeds go to charity.

So, if credit card churning is so great, why bother with gift card churning? There are a few reasons that you might be interested. For one, you might be uncomfortable with signing up for many credit cards. Another reason may be simply to earn even more miles and points than you can with credit card churning alone. If you really enjoy this game of accumulating points and miles, as I do, it’s not much fun waiting around for 90 days between credit card churns! Gift card churning provides a way to fill the gap. Another reason to do gift card churning might be if you do not have good enough credit to effectively do credit card churns. If that is your reasoning, please note that gift card churning involves financial risks, and I’d argue that you’d be better off spending your time working towards improving your credit scores than worrying about points and miles.

A different reason for gift card churning, and the one that motivates me the most, is that it is a way to get airline and hotel elite status without paying for flights or hotel rooms. A number of credit cards will give you elite status when you reach high spending thresholds on the cards. Gift Card Churning is a way to achieve that high spend without costing you a fortune. For a list of credit cards that offer elite status perks, see ThePointsGuy. In future posts, I’ll give more details about this topic.

Gift card churning involves three basic steps: Buy, Upgrade, and Liquidate. Each step is described below in more detail. Ultimately, the goal is to end up with as many points and miles as you can, and as much elite status, for as little out of pocket expense as possible:

Buy

There are several ways to get points and miles for buying gift cards. The simplest is to use a rewards credit card to buy gift cards. Usually, though, you will only get 1 point per dollar spent. A better option is to use a credit card with category spend bonuses. For example, the Chase Ink Bold offers 5 points per dollar spent on office supplies. So, buying gift cards from Staples, for example, is a quick way to get lots of points. The best way, though, to earn points and miles for buying gift cards is to combine the points awarded from your credit card with extra points awarded for shopping through an online shopping portal. To take the Staples example again, if you go through a shopping portal that awards points for purchases at Staples and you use a card like the Ink Bold, you can earn a huge number of points for buying gift cards.

There are several reasons to buy gift cards instead of merchandise: gift card purchases are not charged sales tax; gift card purchases usually don’t incur shipping and handling fees (although this varies by vendor); and gift cards are easier than most other merchandise to upgrade and liquidate.

In order to find online shopping portals that can be used for buying gift cards, start with evreward.com. This site lets you search for a merchant and it will list the shopping portals that will give you points, miles, or even cash back for shopping at that merchant. It is very important, though, to read the terms and conditions within whichever shopping portal you choose. Many merchants within shopping portals explicitly state that gift card purchases are ineligible. Make sure of eligibility before risking the purchase!

Upgrade

It is rare, but some stores will let you buy other vendor gift cards with their gift cards! The advantage of doing this is that you can start with buying a gift card that gives you the most points for the purchase, but then upgrade to a gift card that you can more easily use or sell. Often it is possible to buy gift cards using gift cards in store, but not online. For example, I’ve had luck doing just that at both Sears and Kmart even though store policy (if you ask) seems to prohibit it. You can read about upgrading at Sears here, and at Kmart here. I’ve also heard that it is possible to do this at Walgreens, although the one time I tried I was told no. If you find other examples that work, please let us know!

Liquidate

Use: The best way to liquidate gift cards is to use them for purchases that you would have made anyway. That way, you’ll get 100% of the value of the gift card without further ado. If you use the gift cards online, many times you can go through an online shopping portal again and get points for your purchases. We call this the “double dip”. Whether or not this works will vary by shopping portal and merchant, but when it does work it can be incredibly lucrative. See, for example, Kohl’s Double Dip and How to meet minimum credit card spend and get 50000 to 100000 extra miles. If you’re really motivated, you could use this double dip technique to buy merchandise and then re-sell it. Even if you take a hit on the resale, you could end up ahead thanks to the value of the points received from the double dip. If you’re interested in this approach, though, don’t forget that you will be charged sales tax on your purchases and you will have to pay for shipping to your customers (or pass along that cost to them). Ultimately, the easiest way to use gift cards is if you manage to profitably buy or upgrade to a Visa, Mastercard, or American Express gift card. That way, you can use these cards for just about any purchases you make day to day. You could even use them to start a new gift card churn! Unfortunately, points back options buying these cards are very limited; and options for upgrading to these cards are even more so. For example, while I’ve been able to upgrade Sears gift cards to gas cards at Kmart, I wasn’t allowed to upgrade to an American Express gift card.

Sell: If you find you can’t effectively use your gift cards, then the next step is to find the best way to sell them. The easiest way is through online gift card exchanges like PlasticJungle. GiftCardGranny is a great starting point because it lists the exchanges that are available and shows how much each will pay. You will see that it is possible to sell gift cards for as much as 92% of their face value (and sometimes more). I only have experience with PlasticJungle so I’ll describe how that works: Go to PlasticJungle and select “Sell us your gift card”. From there you can enter the type of card and the amount on the card. PlasticJungle will email to you a free mailing label so that mailing the card will cost you nothing. PlasticJungle will then pay you either through your PayPal account or by sending a check. I’ve only done this once and it worked flawlessly, but some readers have warned that PlasticJungle and others like them have ripped them off. So, proceed with caution.

Another way to sell gift cards is through EBay. The problem is that EBay charges up to 11.7% in fees. In that case, if you sell a card at face value you will get only 88.3 cents per dollar, and that is before paying for shipping. Some gift cards on EBay, though, often sell for more than their face value. So, you actually do have a chance to profit more by selling through EBay than by selling to an online gift card exchange. As with gift card exchanges, though, readers have warned about getting ripped off on EBay by both buyers and sellers. So, again, proceed at your own risk.

Donate: A final option may be to donate your gift cards to charity. Theoretically you would then be able to write off that gift at tax time. Since you have received a benefit (in the form of points) for buying the gift cards, I think you would have to subtract the value of the points from the amount you write off. I’m not an accountant, though, so don’t take my advice about this! If you’re an accountant and know how this works, please comment below!

Common Churns

So now that I’ve described the basic components of gift card churning (buy, upgrade, and liquidate), I’ll now name and describe some common churns that combine the components in different ways:

Double Dip:
I actually mentioned this one above, but it’s worth pointing out again. The “double dip” is where you get points by buying gift cards through an online shopping portal, and then you double your points by buying merchandise through a shopping portal using your gift cards. I’ve pointed out many times in this blog that you can do this double dip at Sears.com by going through the Ultimate Rewards Mall.

Double Back:
The “double back” churn is like the “double dip” in that you buy gift cards through an online shopping portal, but then instead of buying merchandise, you go through the shopping portal a second time to buy more gift cards using the gift cards you previously bought. Most online retailers explicitly prevent buyers from buying gift cards using gift cards online so I mention this one more for completeness than to suggest you can do this. Even if you find a situation where it is possible to do this, I wouldn’t recommend it unless the retailer charges a service fee. Retailers have to pay for those points you are getting, but if you manage to buy their gift cards with their gift cards without a service fee, then they get nothing in return. How long would it take this merchant to go out of business if many people were to do this? I prefer churns where merchants still profit, but at a lower margin than they would have otherwise.

Round Trip:
The round trip churn is like the double back, but with an upgrade thrown into the mix. One simple example is if you were to buy gift cards at Merchant XYZ, then use the gift cards to upgrade to Visa gift cards, and then use the Visa gift cards to start all over and buy the merchant gift cards again. I know of a few examples where the round trip churn appears to be possible, but I haven’t yet tried them. There are usually fees for buying Visa, MC, and Amex gift cards, so a round trip like this will likely not be free, but it may well pay off in the form of points and miles.

Harvest:
The “harvest” churn is a special case of the “round trip”. As with the round trip, you buy gift cards, upgrade them, and then use the upgraded cards to buy gift cards again. The twist is that there are special cases where the re-purchase of gift cards can be done at a discount and/or with some form of cash back. In that way, the value of your gift cards can actually grow over time without adding additional money to the pot! Please see Gift Card Harvesting for a complete step by step example of how this works.

Cautions

Before jumping into the gift card churning game, you do need to be aware of the risks involved. Here are just a few:

• The shopping portal may fail to give you the points or cash back that you expected.
• You may find it harder than expected to upgrade and/or liquidate your gift cards.
• You may get swindled by an unethical gift card buyer or seller.
• You may be suspected of fraud and have your online accounts or even credit card accounts frozen. For example, there have been reports in which American Express has frozen the accounts of people who bought American Express gift cards through the Big Crumbs shopping portal and then quickly liquidated those cards. Those individuals were then put through an arduous account review processes before getting access to their credit card accounts again.

Fortunately, Frequent Miler readers have been quick to point out such dangers whenever I’ve posted a gift card churning scheme in the past. So, please read the comments section of any such post and make up your own mind about whether the churn is worth the risk.

Building Churns

I realize that this post does not give enough specifics to effectively begin a career in gift card churning. The point is more to introduce the concepts and use this as a springboard for future posts and conversations. My hope is that, as a group, we will share with each other the best “buy”, “upgrade”, and “liquidate” opportunities that we find. These are building blocks in putting together working churns. Each of us playing this game can then use that information as input into constructing our own best churns. When I see churns that are likely to be sustainable, I’ll publish them with step by step instructions. Some churns, though, are likely to be killed as soon as they’re widely known. In those cases, I’ll publish the pieces without putting together the puzzle, and I’ll leave it to you to figure out the best way to profit from what you’ve read.

Stay Informed

I write new posts almost every day. If you want to make sure not to miss any future posts, you can sign up for emails (look for the email subscription box on the right of the page), or follow me on Twitter, or like me on Facebook. Emails are sent out once per day (but only if there are new posts) and may contain more than one article. Every new blog post automatically generates a tweet on Twitter, and a message on Facebook with links back to my blog.

In my recent post, Buy Miles for 1.2 Cents or Less, I showed a way to get airline miles by buying Sears gift cards, upgrading them, and then selling them. What I didn’t mention in that post, is that you can get all of those miles for free if you can find ways to use Sears gift cards for things you would buy anyway.  For those new to this: you can buy Sears gift cards through the Chase Ultimate Rewards Mall in order to receive 6 to 10 Ultimate Rewards points per dollar (see the previously sited post for more information).  Since Ultimate Rewards points are quite valuable, this is a significant rebate off of the cards.  However once you buy the cards, you need to do something with them!   To help you out, below are some ideas for how to spend those gift cards. One thing to note: Sears owns both Kmart and Lands End, so you can use Sears gift cards in both of those stores as well as at Sears.  Another note: you can buy either e-gift cards or physical gift cards, but in my experience the physical cards are a bit easier to redeem at KMart.

Sears

• Shoes
• Clothing
• Jewelry
• TVs and other electronics
• Washer & dryer
• Refrigerator
• Vacuum cleaner
• Tools
• Power tools
• Garage door opener
• Automotive parts
• Tires
• Windows
• Doors
• Gutters
• Roofing

Lands End

• Clothing
• Shoes
• Boots
• Winter gear

Kmart

• Prescription drugs
• Over the counter drugs
• Laundry detergent
• Cleaning supplies
• Sports equipment
• Garden stuff
• Toys
• Holiday stuff

Other Stores

Go to Kmart and find the gift card racks. Use your Sears (or Kmart) gift cards to buy gift cards that you would actually use:

• Gas cards
• Movie cards
• Restaurant cards
• Southwest Airlines
• Marriott

Just About Anything

(This is the infinite part)

• EBay
  (One of the gift cards available to buy at Kmart is the EBay gift card. You can use that card to buy anything available through EBay – including other gift cards!)

Conclusion

If you plan to buy any of the stuff listed above, consider buying Sears (or Kmart) gift cards in order to get airline miles, and then use the gift cards to make the purchases you would have made anyway. You will find details about buying the gift cards here: Buy Miles for 1.2 Cents or Less

If you are interested in getting Ultimate Rewards points for purchasing gift cards, you will need your own Chase Sapphire^SM Preferred Card. If you don’t already have one, you can sign up with this link. Even if you don’t want to buy gift cards, this is a great card. The signup bonus alone is worth $500 in cash back, or $625 in travel booked through Chase, or more than $1000 in travel if you convert the points to United Airlines miles and/or Hyatt points. That last point is really key to the value of this card: Ultimate Rewards points earned with this card are instantly transferable to a number of airline and hotel programs. So, you can shop around to find the best miles and points redemptions before transferring your points and in that way get some incredible values from these points! I will get a small commission if you use my link, but you’ll get the same best offer available anywhere. I promise I would recommend this card with or without the referral commission. In fact, I have recommended it many times prior to my signing up for a referral network and I use it every day as my main go-to credit card.

In part one of this series, I introduced the idea of the quest for the perfect perpetual point machine. A perpetual point machine (PPM) is a scheme in which, after a little push, hotel points and/or airline miles are accrued over and over again, forever, with little or no additional work. In itself, this sounds great, but I also introduced some rules that would be necessary for the machine to be perfect:

1. The PPM may take effort and money to setup initially, but must not take much effort or money to keep it going.
2. The PPM must be able to generate hundreds of thousands of points per year.
3. The PPM must do no harm.
4. The perfect PPM would also somehow do some good for the world, not just for the recipient of the points.

I’m not going to claim that I’ve found the perfect PPM, yet, but today I will introduce a scheme for an imperfect PPM that could nevertheless result in hundreds of thousands of miles for anyone who wants to put in the effort. This scheme capitalizes on an opportunity I’ve written about before to double-dip on Ultimate Rewards bonus points for shopping at Sears. Through the Ultimate Rewards Mall, you can buy Sears gift cards and earn 10 bonus points for every dollar spent. These bonus points can be redeemed directly for cash (at a penny each), so you can essentially buy Sears gift cards for 10% less than face value. The double-dip comes when you go through the Ultimate Rewards mall a second time and purchase Sears merchandise using the gift card. Even though the mall makes it look like you need to use your Chase credit card for purchases, several readers have asserted that you will receive bonus points for purchases that use gift cards. I am testing this theory and will post with the results as soon as I can. Assuming it is true, it means that it is possible to buy anything you want from Sears online and receive 20% back in the form of Ultimate Rewards points. A nice little bonus is that if you sign up for the Sears Shop Your Way program (it’s free), you will get an additional 1% back in the form of Shop Your Way points. So you’ll really get 21% back for all Sears online purchases.

NOTE: AS OF NOVEMBER 2011, SEARS PURCHASE BONUSES HAVE DROPPED TO 6 POINTS PER DOLLAR

The Sears Double Dip Machine

This Perpetual Point Machine idea is to buy items from Sears and re-sell them at lower cost, over and over. You can discount these products up to 21% off and still come out ahead. How? By using the Chase Sapphire Preferred card for its outstanding rewards. In addition to 1 Ultimate Reward point for every dollar spent, this card also offers a year-end bonus of 7% of all points earned. If you were to buy and sell $10,000 of Sears merchandise per month without profit, you would still earn 10,000 base points per month from credit card spend and even more thanks to the year-end bonus: Through the double-dip, each 10,000 of spend amounts to 200,000 UR extra points plus 10,000 base points. Your end of year bonus, then, would be 7% of 210,000, which equals 14,700 bonus points per month. So, in total, you would earn 24,700 UR points each month for a grand total of 296,400 points per year!

This probably sounds like a ridiculous amount of work in exchange for a few hundred thousand points. Consider this option, though, to make it much easier: list for sale high end, low margin products on eBay or Amazon before you have bought them. When someone orders an item from you, go through the Ultimate Rewards portal to Sears to buy enough gift cards to cover the purchase. Then, go through the mall again to purchase the item (using the gift cards) and have the item sent directly to the buyer. That way you never have to deal with having unsold stock on hand, and you don’t have to worry about packing and shipping! By concentrating on high end products, you will have fewer sales to deal with. If, for example, you can sell just five $2000 laptops or TVs per month this way, you would do well.

When pricing your items, you need to account for all of your costs: vendor fees from eBay or Amazon, sales tax, shipping fees, etc. I’ve done the math for a few sample products and have found that it is still possible to undercut the cheapest vendors (on Amazon, for example), but there isn’t much room for error. Also, it is critical to find items where Sears has a good price relative to the competition. Otherwise you’re out of luck.

Why this machine is imperfect

1. It takes more work to setup and keep going than I’d like. Personally, I wouldn’t want to deal with cranky customers who have shipping problems, product questions, and returns.
2. Sears will catch on. At some point, Sears will figure out the double-dip scheme and close the loophole.
3. This PPM does not fit the “do no harm” rule. At the very least it hurts Sears’ margins. At worst, they lose money on every one of these sales.

Still Searching

Personally, I’m not planning to do the Sears Double Dip machine. How about you? Instead, I’ve been working on another scheme that could meet all of the criteria for a perfect perpetual point machine. I’m happy to report that this scheme does not involve Sears or Ultimate Rewards in any way. On the down-side, it has been harder to get it going than I had thought. I won’t reveal the details of the new scheme just yet, but I’ll give a small hint: I put together a new website called “Best Travel Hacks“. This site is itself an attempt at a perpetual point machine. Yes, “Best Travel Hacks” is, itself, a travel hack! I think, though, that people will find it useful as well. Look for more info soon.

See also:

• The Perfect Perpetual Point Machine, Part 1
• The Perfect Perpetual Point Machine, Part 3
• All Perpetual Point Machine (PPM) Articles

As I’m sure you know, credit card companies frequently offer huge sign-up bonuses. NerdWallet, for example, lists seven current bonus offers worth at least $500 for signing up for credit cards and meeting minimum spend thresholds. Signing up for the cards is the easy part. Meeting the minimum spend thresholds can be harder. Recently I posted a way to meet minimum spend thresholds without breaking a sweat. In that post I detailed how to easily buy and liquidate American Express gift cards in order to meet your spend requirements. For some, this will still be the best way to go, but in this post I’ll offer up another option that will let you meet the spend requirements and earn huge numbers of extra bonus miles.

In previous posts I’ve talked about how the Chase Ultimate Rewards mall offers 10 extra points per dollar spent at Sears. See, for example, this post or this one. What I didn’t know at the time was that you do not need to use your Chase card when making purchases through the Ultimate Rewards mall. A reader named Scott pointed this out to me yesterday. He has reported success in going through the mall to buy Sears gift cards, and then going through the mall a second time to make Sears purchases using the gift cards. What this means is that he was able to get not just 10 extra points per dollar spent at Sears, but 20! This amounts to, at minimum, a 20% rebate on Sears’ purchases since Ultimate Rewards points can be redeemed for cash for a penny each. Better yet, use the points to purchase travel via Ultimate Rewards and the same points amount to a 25% rebate. And, best of all, if you value airline miles at 1.5 cents each, you can transfer Ultimate Rewards points directly to airline miles, which then amounts to a 30% rebate! As if that wasn’t enough, remember that if you have the Chase Sapphire card, you will get an annual bonus of 7% for all points earned during the year. So, those 20 extra points earned for Sears’ purchases will net you an extra 1.4 points per dollar spent at the end of the year! Or, if you have the Chase Ink Bold card and a Chase checking account, instead of a 7% bonus, you can get a 20% end of year points bonus!

So, the basic idea here is to use this trick to meet your minimum credit card spend and get huge numbers of extra miles! For the purpose of this example, I will assume that you signed up for the Starwood Preferred Guest (SPG) card which requires $5000 in spend to get the full 25000 points. I’m purposely picking a non-Chase card just to show that it is possible. Adjust the directions below to your situation. Wherever I say to use the SPG card, use instead whatever card you have for which you need to meet spend requirements. Also, this example assumes you need to spend $5000. For your card, you may need to spend less, which is perfectly fine. OK, so with that out of the way, here is how to do it, step by step:

NOTE: AS OF NOVEMBER 2011, SEARS PURCHASE BONUSES HAVE DROPPED TO 6 POINTS PER DOLLAR

Step 1: Make sure you have access to the Ultimate Rewards Mall

If you have the Chase Sapphire Preferred credit card or the Chase Ink Bold business charge card, then you’re good to go. If you don’t have either, I highly recommend signing up for one (or both) since they offer great sign-up bonuses, and they offer great rewards for day to day spend as well. Once you get one of these cards, make sure you can sign into your account at chase.com. From there, you should see a link to Ultimate Rewards.

Step 2: Sign up for the Starwood Preferred Guest (SPG) card (or any new credit card offering a big bonus)

If you haven’t already picked out which credit cards to sign up for, or if you’re still wondering whether it’s a good idea, you’ll find a few useful links here.

Step 3: Browse to the Ultimate Rewards Mall

Browse to www.ultimaterewards.com/mall and login with your Chase ID and password. Find and click on Sears to shop at the Sears online store:

Step 4: Buy $5000 worth of Sears gift cards using your SPG card

Sears has a limit of $500 per card, so you will need to buy at least 10 cards. I’d recommend, though, getting a mix of different value cards since smaller denomination cards can come in very handy as gifts (and, the holidays are coming up, you know!).  I also recommend ordering the physical cards rather than the e-cards (or a mix of both) because if you need to it is possible to sell the physical cards to PlasticJungle for 83 cents on the dollar. People have reported having trouble trying to do the same with e-cards.  But, only sell the cards if you need the money immediately for paying off your credit card bill.  Otherwise, there are much better uses for the card (as I’ll show later in this post).

Note that you will most likely get a call from Sears’ fraud department. That’s OK! You haven’t done anything wrong, and they are just doing their job. Be polite and answer their questions and you’ll make it easily through this step.

At this point you will have now met your minimum spend requirements AND earned 50,000 Ultimate Rewards points! Remember that you can transfer these points instantly into valuable airline miles or hotel points!

Step 5: Use the Sears gift cards wisely

The reason this trick works is that Sears gift cards are incredibly versatile, and they never expire.  So, if you can afford to, take your time and spend the cards for purchases you would have made anyway.  The cards can be used at Sears, Land’s End, or Kmart. As much as possible, you should use the gift cards online because you can go through the Ultimate Rewards mall a second time in order to make these purchases! This means that it is possible to turn the $5000 purchase of gift cards into an additional 50,000 Ultimate Reward points. In total, you will have earned 100,000 Ultimate Rewards points from this trick and that’s before counting your annual extra bonus of 7% (for Chase Sapphire card holders) or 20% (for Chase Ink Bold + Checking account holders)! Also, remember to sign up for Sears’ Shop Your Way program which will give you an extra 1% rebate on all purchases.

If you’re still scratching your head about how you can possibly make good use of $5000 in gift cards, here are some ideas:

Gifts:

As mentioned earlier, you can give the gift cards away directly as gifts. A better use, though, is to order gifts through the online store so as to earn bonus points a second time!

Shop for clothing:

Land’s End sells terrific clothes, and they accept Sears’ gift cards!

Every-day staples:

Whether you need shampoo, tissues, detergent, etc, it’s all available at Kmart.

Automotive needs, home improvements, appliances, tools, electronics:

It’s all available at Sears.

Charity:

Consider buying (online, of course) new toys and warm clothing to give to the needy for the holidays. Keep your receipts and take deductions at tax time!

Sell the cards:

If you really need cash, you can turn the gift cards into real money through PlasticJungle.  While this deal is currently available, I can’t guarantee that it will continue (especially if this hack becomes popular!).  They currently pay 83 cents for each dollar of Sears gift card value.  On the PlasticJungle website, make sure to select “Get Paid” rather than selecting either of the Instant Funding options:

Conclusion

If you can afford to have your money locked into Sears gift cards, you can earn amazing amounts of extra miles and points.  Remember that all of these points are in addition to the miles and points you will earn from credit card signup bonuses!

CAUTION: While this post offers a way to buy points and miles at bargain rates, there are serious risks involved in this approach. Before trying this, please review the “Risks” section at the bottom of this post.

Overview

A few days ago I posted step by step instructions for how to meet credit card spend thresholds without breaking a sweat. I showed how to achieve $5000 of credit card spend by buying and liquidating (cashing-in) American Express gift cards for a total cost of $68.40. That post focused on how to qualify for sign-up bonuses. This post, on the other hand, will show how to use the same trick to buy miles cheaply. When you buy and liquidate $5000 worth of gift cards, you will earn 5000 points or miles simply by using a travel rewards credit card. Why is this significant? Well, it means that, with this method, it will cost you $68.40 to get 5000 points or miles. That works out to 1.37 cents per mile. Considering that many reward program points are worth at least 1.5 cents each, that’s a pretty good deal! But you can do even better. Keep reading, and I’ll show you how to buy points and miles for .82 cents each!

The secret

The secret behind this hack is to find credit cards that offer big bonuses when you meet certain spend thresholds. By buying and liquidating gift cards, you can meet those spend thresholds and earn even more miles and points. For example, there are several credit cards that offer 10,000 bonus miles once you reach $25,000 of spending in a year, and some that offer even better bonuses. For a nearly complete list of such cards, see NerdWallet’s blog post “Which credit cards give bonuses to big spenders“.

Planning

This is not a quick and easy hack. It requires long term planning and follow-through to make it work. Credit card spend thresholds usually need to be met within a calendar year, so your best bet is to begin preparing prior to a new calendar year. You may need to sign up for new credit cards if you don’t already have one with a big bonus for high spend. You will also need to sign up for the Big Crumbs shopping portal and an account with Square. See my prior post for details.

Process

Begin early in the year, preferably January, and buy gift cards once a month. Your goal should be to spread out the purchases as much as possible over the year, and with each purchase buy as few gift cards as possible (so as to reduce the amount of fees paid to Amex). For example, if your goal is to spend $25,000 on a card, a good approach is to buy one $2000 gift card per month for 11 months and then one $3000 card the final month. If your goal is to spend $100,000 on a card, then buy $9000 worth of cards each month for 11 months and a $1000 card the final month. Some additional considerations:

• Make sure you have a high enough credit limit. The value of this hack could be wiped out by over-the-limit fees if you’re not careful!
• In order to keep a good credit rating, try not to approach your credit limit. See DansDeals for more about this. However, I’d recommend against paying off your credit card multiple times a month since there are some indications that this might prompt a financial review from your credit card company.
• You must pay off your credit card bill in full each month. Otherwise you will be plagued with high interest charges that will quickly turn this deal into a disaster.
• Do not try this with a Citibank card since Citibank treats gift card purchases as cash advances. There are, apparently, ways to get around this by calling Citibank each time, but personally I wouldn’t take the risk.
• Think twice before attempting this with an American Express card. There have been many reports of people being put through an arduous financial review process by American Express in which their accounts are frozen for a few weeks and they are required to submit multiple years of tax records to Amex. Personally I’m half-hoping that this will happen to me so that I can blog about the experience, but you might not see similar value in it!

Examples

The following examples show the value obtained from this approach with various credit cards. To keep things simple, the examples assume that gift card purchases are made $5000 at a time. Since $3000 is the largest gift card amount you can buy, these examples assume that you will buy two cards each time ($3K + $2K = $5K). In the example from my prior post, I showed that the cost of buying and liquidating $5K in cards is $68.40. If you buy fewer cards, your fees will be slightly lower. If you buy more cards, your fees will be slightly higher. Also, some credit cards have multiple spend thresholds. In those cases, I always assume you will reach the largest one.

* As reported by reader JTI, in this Deals We Like post, if you have a Chase checking account, you can earn an extra 20% from all points earned via purchases. So, $100K of spend results in an extra 20,000 points above and beyond the threshold bonuses! For more information, see this offer from Chase.

Analysis

If you already own any of the cards shown above (or others with similar bonuses), there is no question that this is a great deal. If you are close to a threshold, but won’t quite make it, then this deal gets even better because your costs will be much smaller than shown above. Whether it is worth getting a card just to do this deal, is another matter. Each card comes with some excellent perks, but if you don’t value those perks, the cost per mile of this trick goes up substantially for most of the cards. The Chase Ink Bold, though, is in a class of its own. Even with the annual fee factored in, the cost to buy points is less than a penny each. This is all the more remarkable because you can exchange your points for cash at a value of 1 cent each and actually end up ahead cash-wise (I wouldn’t recommend it, though – it would be a heck of a lot of work for very small profit!). The best use of Chase points is to transfer to airline or hotel partners (when you need them) or to book travel through Chase Ultimate Rewards which makes your points 25% more valuable! I can’t really say enough about how great the Chase points program is. Instead, check out this post from ThePointsGuy. Also note that, unlike the other cards, the bonus points given by the Chase Ink Bold card are not based on calendar year. Instead, they use the anniversary of your enrollment date to determine when a year has elapsed.

There are many ways you can save money and effectively buy points and miles for even less than shown above. For example, you could sign up for American Express’ Premium Shipping Plan which, for $99 per year, will give you unlimited free shipping of gift cards. Even better, you may be able to find cheaper ways of liquidating the American Express gift cards, such as by using (some of) them for daily spend. Let us know in the comments below if you have ideas for saving money or earning more points!

Risks

This mile/point hack is not without risks. I’ll spell out here the ones I can think of:

Credit Card Financial Review

Credit card companies use sophisticated rules engines to determine when there is potentially fraudulent activity on an account. If you do this trick a lot, it is very likely to cause your account to be flagged and reviewed. Many people who have done similar tricks with American Express cards have complained about having their accounts frozen for weeks while the review took place. If this happens to you, be polite and honest about what you’re doing and hopefully you’ll get through it unscathed.

IRS Audit

Starting in 2012, Square will report your transactions to the IRS if you exceed both $20,000 in payments and 200 payments. While there is nothing illegal about this hack, I’m sure you don’t want the headache of explaining these transactions in the case of an audit. Therefore, I’d recommend being very careful to keep the number of credit transactions you accept via Square to fewer than 200.

Cash Advance

This hack works because gift cards are counted as regular purchases by most credit card companies. However, Citibank is known to treat gift card purchases as cash advances instead. If this happens you will not earn points on these purchase, but you will likely incur unpleasant interest charges and fees. Before going full steam ahead with this hack, I’d recommend that you try out a single small gift card purchase to make sure it goes through as a regular purchase.

Conclusion

The technique described in this post offers the possibility of racking up huge amounts of points and miles for very little money. However, the process is complicated and risky. Is it worth it to you? In follow up posts I’ll show how you can leverage this hack to earn additional benefits beyond cheap points such as free flights, airport lounge access, and airline and hotel elite status. Stay tuned.

Credit card sign-up bonuses these days are amazing: 40,000 miles! 50,000 points! 75,000 miles! And so on. A person can rack up close to a million points a year by signing up for these deals and meeting sign-up requirements. If you’re like me and you apply for and are approved for a bunch of credit cards all at once, your first reaction may be something like “Whoo hoo!” But, a few minutes later, reality will set in and the reaction turns into “Uh, oh…” as you realize that you have to meet some pretty steep spend requirements in order to earn all of those bonus points. Fortunately, if you have an iPhone, iPad, iPod touch, or an Android device, there is a simple solution that will let you safely meet all of those minimum spend requirements AND get your bonus points and miles faster. Here’s how:

What you need:

• An iPhone, iPad, iPod touch, or Android device
• An account and card reader from Square. Signing up is free and they’ll send you a free card reader as well
• Download the free Square app to your device (iPhone, iPad, iPod touch, or Android)
• An account with the Big Crumbs shopping portal. Big Crumbs gives you cash rebates for online shopping via their site. If you sign up with this link, you will earn the same rate as you would anyway, but you will also do me a favor by helping me earn referral money. Note: you may be tempted to create two accounts so that you may refer yourself or your spouse (in order to get referral money), but Big Crumbs does not allow more than one account per household so I do not recommend attempting this!

What to do (step by step):

STEP 1: Big Crumbs

Go to BigCrumbs.com and sign in. Search for “American Express” and click “Shop Now” in the American Express Gift Cards – Personal store. By going through Big Crumbs, you will receive a rebate of 1.6% for your gift card purchases:

STEP 2: Buy Gift Cards

Add to your cart up to $5000 worth of gift cards. The goal is to buy enough to meet your credit card’s spend requirements with as few gift cards as possible. In this example, I am purchasing $5000 worth of cards:

Next, go to check-out, select Express 2^nd Day 8.95 shipping and enter promo code GEN374 in order to reduce your delivery charge to $3.00 even:

Now, buy the gift card(s) with the credit card for which you need to meet a minimum spend. You will be charged $3.95 per card and $3 for shipping. In this example, I paid a total of $5010.90 for $5000 worth of gift cards. But remember that I went through Big Crumbs, so I earned 1.6% back ($80)! It usually takes about a week to receive an email from Big Crumbs showing that you have earned this rebate.

Warning:

I have read from others that the techniques shown here will not work with Citibank cards because they treat gift card purchases as cash advances.

I believe that it will work with most other bank cards, but I have only tried this with American Express cards. If you are unsure about your card, try this technique with a small gift card purchase first.

Also note: some people have had their accounts frozen by American Express for “account review”. It is unclear whether this is due to purchasing very large amounts of gift cards, but it is likely that it is a contributing factor. So, if you do this technique with American Express, be sure to do just the minimum you need.  Please read the comments section at the bottom of this post to help you decide for yourself whether to try this with American Express cards.

STEP 3: Cash in your gift cards

Warning: since writing this post I have learned that using Square in the manner described here may violate the Square User Agreement. See more in this post.

By buying gift cards, you have met your minimum spend AND you’ve made a profit! Also, with many cards, you will receive your bonus points or miles faster for having met the spend requirements quickly. However, you still need to pay your credit card bill when it comes due. This is where your Square reader comes in. Once your gift cards arrive in the mail, you can cash them in through Square for a fee of 2.75% each:

1. Plug in your Square card reader to your device
2. Open the Square app and sign in
3. Type in the $ amount of your gift card and press “charge”.
4. Swipe the gift card (if you’re like me you’ll have to swipe several times before it takes)
5. Sign your name and click “no receipt needed”.

Square will deposit the full amount less 2.75% into your bank account that evening. In the example from this post, I cashed in two cards for a total of $5000 less 2.75% ($4,862.50).

Review:

In the examples shown above, I went through the Big Crumbs portal to the American Express gift card store in order to buy $5000 worth of gift cards. I then used Square to turn the gift cards into cash in my bank account. Here is an accounting of my spend:

So, even though I had to pay Square to cash in the gift cards, I ended up only having to pay $68.40 to meet my minimum spend all at once. If you consider the value of a typical credit card bonus (most of the good ones are worth at least $500), spending $68.40 is not bad! Of course, if the minimum spend you are trying to achieve is less than $5000 then your total cost will be proportionally smaller than $68.40.

THIS DEAL IS NOW DEAD: As reported by DealsWeLike (see comments), the Aadvantage shopping mall is no longer offering 10 points per dollar for Sears’ purchases. However, for those with Chase rewards cards, the Chase Ultimate Rewards shopping portal currently offers 10 extra points per dollar for Sears, Macy’s, and Kohl’s. Ultimate Rewards points cannot be transferred directly to Aadvantage miles, but if you’re shopping for Continental Airlines miles, Hyatt points, or several others, this might be a great opportunity. For more see my prior post 30,000 Continental Airlines miles for $2,000 Sears spend!

Since American Airlines announced an end to their previously very generous Million Miler program, people have been scrambling to find ways to bump up their Aadvantage miles before the rules change at the end of November.  For those not familiar with this, I’ll summarize:  Prior to the new rules taking effect, all Aadvantage miles a person earns through flying, credit card purchases, bonus awards, etc. count towards the person’s million mile status.  Once a person reaches a million miles, they are awarded Aadvantage elite status for life.  After November 30, achieving this milestone will become much harder because, at that time, only miles flown will count (with one specific credit card exception, but I digress). So, back to the rush for Aadvantage miles.  People can buy miles directly from the airline, but the airline charges a hefty 2.95 cents per mile and limits purchased miles to 40,000 per year. In this post, I’ll propose an alternative. As I’ve posted before, the Aadvantage shopping mall, until the end of September, is offering 10 points per dollar for all Sears purchases. Even better, there does not appear to be any restriction against buying Sears’ gift cards. And, there is no limit to miles earned through the shopping mall. Here is an excerpt from their FAQ:

Q: Is there a limit to the number of AAdvantage® miles that I can earn through the AAdvantage® eShopping mall? A: No. The more you shop – the more you can earn! As a reminder, you cannot earn miles for taxes, special handling charges, freight or shipping costs, and any unshipped or returned products. In addition, please refer to the retailer offer page for complete information regarding eligible purchases for each retailer.

So, how can a person take advantage of this and buy miles for less than 1.6 cents each? Follow these two steps: STEP 1: Using an Aadvantage branded credit card, go through the Aadvantage shopping mall to Sears and buy as many gift cards as you would need to reach your mile target. You will earn 11 miles for each dollar spent (1 mile from the credit card and one from the shopping mall).  So, if you want to earn 50,000 miles, simply calculate 50,000 / 11 = 4545.  Round that up to $4600 and that’s the amount you need.
STEP 2: Sell the credit cards at PlasticJungle.  PlaticJungle will pay 83 cents on the dollar for Sears cards. With the steps above, you will have effectively purchased Aadvantage miles for only 1.55 cents each! Let’s walk through an extreme example. Suppose I want to earn 1 Million Miles right away. I calculate that 1 Million miles divided by 11 miles per dollar equals $90,909. Let’s round that up to $91K. So I log into the Aadvantage Shopping Mall, click through to Sears, and put 182 $500 gift cards into my shopping cart. Of course I would have to have an insanely high credit limit and a lot of patience with Sears’ fraud department to pull this off, but hey, this is just an example. Once that is all done, I go to plasticjungle.com and sell $91K worth of Sears’ gift cards. I receive in return $91K * .83 = $75,530. That means I have spent, in total $91K – $75,530 = $15,470. In return, I am now a lifetime elite on American Airlines and I have over 1 million airline miles in my pocket. Not bad!

UPDATE: A post in Deals We Like indicated that the 10X offer may only be valid until September 23rd (so hurry!), and that the miles will post 8 to 10 weeks after October 8th.  If this is true, it means that the miles will post after the Nov 30th cut-off date.  On the other hand, they may be simply giving themselves plenty of “just in case” time to get the miles posted.  If you’re in it just for lifetime status, you might want to pass.  If you’re in it for cheap AA miles, then hurry!

When I was very young I invented a perpetual motion machine (a machine that runs on its own power, forever).  I drew a picture of a little car with a vertical gear that was driven by heavy bricks.  The idea was that the higher up bricks would be pulled down by gravity, forcing the entire wheel to turn.  Of course, this wouldn’t really work, but I didn’t know that at the time.

The gear that drove my perpetual motion machine

The other day, I thought I had discovered something even better:  a perpetual point machine.  A perpetual point machine is a scheme in which, after a little push, points and/or miles are accrued over and over again, forever, with little or no additional work.

The idea hit me when I was online buying a Sears e-gift card, following my own advice from a previous post showing how to earn 40,000 Aadvantage miles from $2000 Sears spend.  So, I was buying the e-gift card and I saw this:

Wow, it looked like I could buy a gift card with a gift card!  Why would I care about that?  Well, with the Aadvantage Shopping Mall offering 10 miles per dollar spent at Sears, I figured I could spend real money just once to buy the first gift card, then go through the portal again to buy another gift card, using the first one to pay, and then go through the portal again and buy another gift card, and so on forever.  Ergo, we would have a perpetual point machine!  Let’s say I bought a $500 gift card each time.  Then, each transaction would result in 5000 Aadvantage miles.  200 transactions later I’d have a million miles!

Of course, just like my perpetual motion machine, the point machine doesn’t work either.   After entering my gift card number (yes, I really tried to pull this off!), the website immediately informed me that “Gift Cards can not be used to purchase Gift Cards at this time.”  Rats!  The wording, “at this time,” does make me wonder, though.  Is there a time in which gift cards can be used to purchase gift cards?  If so, what time?