Churning credit for rewards?

solidpro

Hi

I don't think this is 'stoozing' but correct me if I am wrong.

Is it possible (in the UK) to use a credit card to buy something which is directly redeemable as cash (thinking a Visa Debit voucher card), redeeming back into your bank account, paying the credit balance and then collecting the rewards?

I know this isn't a new idea, but I wondered if card companies are wise to it and either lock down someone doing it or prevent certain purchases, or surcharge them?

I churn thousands of nectar points each month just by using my card for every single purchase, and then pay off the balance every month. I just wonder if I could switch and increase this to a card which rewards with air miles...

thanks

[Deleted User]

You just need to be careful that what you're buying isn't treated as cash, or you'll pay fees and probably not earn rewards.

guesswho2000

This is manufactured spending, and it is indeed possible, but as zx81 says a lot of the methods can be treated as cash, dependent on the issuer.

Buying gift cards at a supermarket won't be (as an example), but not sure how exactly you'd plan to get that into a bank account (and it's unlikely the CC will accept the gift card as payment, they'll likely be Visa Prepaid cards, not specifically Visa Debit).

I won't go into much detail on the subject (and neither will most people, because widely publicised routes quickly get killed), but I will say make sure you can afford to 'float' the money you're using to MS - could you afford to cover the repayment if your money gets tied up in AML checks or similar for a month or two? If not, the interest you'd end up paying will outweigh the reward benefit (it's all perfectly legal, but things like cash recycling are sometimes against T&Cs of providers and can appear similar to money laundering, so sometimes do trigger checks, but buying a few gift cards now and then is unlikely to do this).

So in summary, the answer to your question is yes, but with conditions.

As an aside, "churning" is something else, this generally involves applying for a card for the signup bonus, triggering it, closing the account, then repeating the cycle. Issuers are wise to this, and many have a waiting period before you become eligible for a SUB again.

The_Urbanite

solidpro said:

Hi

I don't think this is 'stoozing' but correct me if I am wrong.

Is it possible (in the UK) to use a credit card to buy something which is directly redeemable as cash (thinking a Visa Debit voucher card), redeeming back into your bank account, paying the credit balance and then collecting the rewards?

I know this isn't a new idea, but I wondered if card companies are wise to it and either lock down someone doing it or prevent certain purchases, or surcharge them?

I churn thousands of nectar points each month just by using my card for every single purchase, and then pay off the balance every month. I just wonder if I could switch and increase this to a card which rewards with air miles...

thanks

You can indeed - there are people who run over £10m+ per annum through rewards cards doing this. As mentioned, the term for this is manufactured spending.

It’s not as lucrative as it once was for a number of boring reasons. You may find yourself becoming open to expanding your rewards portfolio beyond just air miles once you get into it. Other things you may wish to amass include Nectar as you say, Tesco Clubcard points, John Lewis/M&S vouchers and good old cashback. Hotel points go hand in hand with air miles, but they are much harder to earn these days. Stick to schemes where you can earn decent enough amounts to redeem. 

If air miles are what you want, a good place to start is the American Express Gold, HSBC Premier World Elite and Virgin Atlantic credit cards. Being UK based, starter schemes for you will be Avios (British Airways’ reward currency of choice) and Virgin’s Flying Club scheme. 

Once you level up with the MS, you can look at more exotic airlines - Amex Gold and Marriott cards award points that can be converted into more airline schemes and even the HSBC card has a few well worth a look.

As for the MS itself, the credit card issuers don’t like it. If you turn over £5k a month you’ll probably be fine. But if you are maxing out your card, paying it off then repeating this process several times a month, eventually they will catch up with you.

Many methods of MS involve financial transactions. You need to know the rewards cards you hold well and preempt how they will treat each merchant. You may find with credit cards you are charged a cash advance fee, interest immediately until your whole balance is cleared and not get any points on any transactions the issuer recognises as cash-like. An experienced MSer knows how to dodge these charges. Similarly with debit rewards cards you may find more merchants exempt from their rewards schemes.

There have been countless schemes. For example, the Swipe debit card. You could top it up for free using Amex or any rewards card. This was categorised as a purchase and you could do £16k a week per funding card. Then the Swipe debit card paid up to 16% cashback on all spend, including making deposits into the Sainsbury’s Bank savings account and there was no monthly spend limit. Similarly the Tesco Current Account debit card paid into NS&I - a lot of people were filling their boots with the maximum permitted number of Clubcard points doing this. Or using Creation’s credit cards on money transfer sites paying the entire credit limit directly into your bank account in one fell swoop. 

Plenty plenty more ways to manufacture spend but as with any value added activity, the best way to find them is original research or exchanging useful information with people in private.