People who make a hobby out of amassing credit-card reward points are mourning the loss of a popular if devious tactic — buying $1 coins from the U.S. Mint — and are on the prowl for new ways to rack up free rewards.
Experts say there are still plenty of ways to earn big rewards from using credit cards: Sign-up bonuses have never been as lucrative. There are plenty of bonuses for spending in different categories or with certain merchants. And opportunities still exist to take advantage of schemes like the $1 coin purchases — but they’ll likely be harder to find.
On July 22, 2011, the U.S. Mint said it was ending credit and debit card sales of $1 coins because of “individuals purchasing $1 coins with credit cards, accumulating frequent flier miles, and then returning coins to local banks … While not illegal, this activity was a clear abuse and misuse of the program.”
It had been a favorite technique to easily boost frequent flier credit-card rewards. The Mint sold the coins at face value and shipped them to customers for free, intending that people would start using them in everyday life — not return them to the bank to finance repeated rounds of coin purchases.
After stories in national newspapers in 2009, the Mint capped credit card purchases at $1,000 every 10 days, so at most customers could earn roughly 36,000 free frequent flier miles a year. However, some people created multiple accounts and shipping addresses to circumvent the limits.
On Internet chat boards, participants in recent days have reminisced about the reactions of bank tellers when they showed up every two weeks with more boxes of coins for deposit. They predicted doom for the future of $1 coins (the next coin in the Mint’s series of presidential coins, featuring Rutherford B. Hayes, is due out Aug. 18, available only by money order, wire transfer or check). They angrily blamed the media and people who abused the program. And, of course, they recalled the many free flights, hotel stays and cash rebates the $1 coin program represented.
“Dear US Mint,” wrote a member on FlyerTalk, a frequent travelers’ forum. “Thank you for sending me to some very fancy hotels on my honeymoon! With fond memories.”
“We are all in shock and disappointed,” says Rick Ingersoll, who blogs about credit-card rewards at FrugalTravelGuy.com. Over the years, he figures he bought around $325,000 worth of $1 coins, nearly all of which he redeposited in his bank account.
Tricks remain, just not with coins
Ingersoll says there are still plenty of “gray areas” — ways that cardholders can game the system to gain rewards points in ways that are not illegal, but are not what card companies and merchants intend, either.
Most of those involve charging a credit card and receiving a cash equivalent, which can then be deposited into a bank account, and the process can be repeated. For instance, some people have found grocery-store clerks who allow them to purchase money orders on credit cards. Others have found holes in retailers’ return policies. Some online pay services, such as Amazon Payments, allow members to transfer money to someone else’s bank account using a credit card.
In the future, though, these techniques are less likely than before to be posted publicly on discussion boards such as FlyerTalk and FatWallet, Ingersoll says, because people will be wary about attracting publicity that can expose the secrets and end the schemes.
Dear US Mint: Thank you for sending me to some very fancy hotels on my honeymoon! With fond memories.
|— A FlyerTalk forum participant, |
bidding farewell to the coin loophole
Still, there are plenty of ways that even people who don’t frequent discussion boards or have the desire to haul boxes of coins to the bank can still accumulate big rewards.
“You may or may not want to go the extra lengths, like the dollar coin game,” says Tim Winship, editor of FrequentFlier.com. “But at a minimum, you should ensure that you get as many miles as you can through your everyday purchases.”
Some of the easiest ways are:
Sign-up bonuses. Experts say they’ve never seen rewards card sign-up bonuses this generous. A handful of airline cards are offering between 35,000 and 50,000 miles after hitting a minimal spending threshold. Other cards offer cash rebates or gift cards.
Category bonuses. Some cards award extra points for spending in certain categories. For instance, Citi‘s Forward card earns five points for every $1 spent on dining and entertainment. American Express‘ Hilton HHonors Surpass card earns six hotel points for every $1 spent at drugstores and gas stations. It could make sense to use different cards in different categories to maximize reward points for items you’re already buying.
Online malls. Before you buy anything online, find out if your card is linked to an online mall. Many airline and hotel cards are, and you can earn extra points or miles. For instance, US Airways offers an online mall that includes hundreds of well-known retailers such as Staples, Home Depot and Barnes & Noble. Enter your frequent-flier number, and you can earn miles in addition to the mile-per-dollar you earn using Bank of America‘s US Airways Visa Signature card.
“These days, you would be hard-pressed to think of any product that you might need on an everyday basis, with the possible exception of groceries, that you can’t earn miles for purchasing,” Winship says.