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Paying, not purchasing, improves credit scores


Popular Vanilla Reloads are becoming harder to find, but credit card rewards seekers still have options to avoid hefty tax-payment card fees

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QuestionDear Cashing In,
To meet a minimum spending requirement on a new credit card, I’ve been using it to buy Vanilla Reload prepaid cards, loading them to a Bluebird card, then using Bluebird’s bill pay feature to pay my rent and other expenses. With taxes due later this month, is there a way to pay my tax bill with Bluebird, too? — Jamie


AnswerDear Jamie,
This has become a popular technique for increasing your reward points or meeting minimum-spend requirements on new cards.

It allows you to use credit-card spending for bills that don’t typically accept credit cards, such as rent, mortgages and other expenses. For instance, if you find a store that will sell you a $500 Vanilla Reload card on a credit card, you can then transfer that amount to a Bluebird account and pay bills that way, just as you would with a bill pay feature on a checking account. Bluebird is an American Express product.

There are limits on how much you can transfer, and there are small fees, but you can understand why this has become a popular sport: It’s a way to shift more spending onto credit cards and reap greater rewards.

The technique has become so popular, in fact, that major retailers have started putting an end to it, after concerns about fraud. CVS has confirmed reports that surfaced last week that it has stopped selling Vanilla Reloads to customers using credit cards. “As part of a regular review of our policies and procedures, we have made a business decision to require any purchase of a reloadable debit card to be made using cash only,” wrote CVS Director of Public Relations Mike DeAngelis in an email. “This applies to all reloadable debit cards, regardless of the brand.”

Office Depot made a similar move in 2012. It is becoming tougher to find stores that allow you to buy the cards with a credit card.

But to answer your question, Jamie, yes, you can use Bluebird to pay your tax bill, which can save you money compared to paying with a credit card. The Internal Revenue Service’s payment processors typically charge 2 percent to 3 percent for using credit cards, versus a flat rate of around $3 for using a debit card.

You can avoid that fee altogether if you use a Bluebird preauthorized check. You have to fill out a form online that includes information about the payee and the amount you’re paying, to ensure the money is in your account. Then you write an authorization number on the check and send it to the IRS as you would any other personal check. Be aware that if you’re writing a check to the IRS and are asked to provide an IRS address, you must write the post office box without periods (as “PO Box”) — otherwise Bluebird will not process the form. An American Express spokeswoman told me the company is aware of that glitch and is working on fixing it.

With retailers pulling the plug on purchases of Vanilla Reloads with credit cards, it looks like this technique for building rewards faces an uncertain future. If you read the travel-reward blogs out there, you’ll see that there are plenty more creative techniques to increase credit-card spending involving money orders, online payment companies and prepaid gift cards. But they might not be as easy or inexpensive as the credit card-Vanilla Reload-Bluebird method.

See related:Multiply reward points with prepaid and reload cards



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