Bloomberg released an interesting article today about churning credit cards for miles and points that many LoyaltyLobby readers must be taking advantage of.
This is not a topic that I usually cover here on LoyaltyLobby, although readers often send credit card related questions and topics.
You can access the Bloomberg article here of which below is an excerpt:
One danger of churning is the temptation to spend more. A recent study from the Federal Reserve Bank of Boston showed that when borrowing limits go up, consumers generally can’t help themselves from using every last cent of their extra credit. As churners try to put everything they possibly can on their credit cards, down to rent and utilities if possible, they can also be tempted to buy things they don’t need.
Churners are reluctant to talk about it, but there are also ways to manufacture spending to get more rewards, using gift cards, money orders, and other methods. One way is to use rewards cards to buy prepaid cards, then use the prepaid balances to pay off other cards. It’s a sort of legal money laundering or a one-person pyramid scheme, designed to put spending on cards in a way that you can—eventually, you hope—get that cash back.
Nothing wrong with signing up for credit cards and taking advantage of sign up bonuses.
When it comes to “manufactured spending”, however, I believe that people would be far better off by exploring opportunities to get either a better paying job or enhance their education.