The Fine Print: Thou Shalt Not Manufacture Spend

The following is not legal advice. Please contact an attorney or Alexander at if you have questions on the subject. 

Points enthusiasts are always looking for ways to earn more points. The extremes they go through include mileage runs across the globe, stacking promotions, and the infamous ‘manufactured spending’. Manufactured spending, the practice of spending money without spending money, has evolved over the years. In its infancy, it was done by purchasing coins through the Federal Reserve and depositing said coins into one’s bank account. In its glory days, it was done using a shiny red card. Today, the options available are more cumbersome as banks are looking to put an end to this practice.

To be clear, there is nothing illegal about manufactured spending. It is not a crime.  It is, however, the reason provided by banks for shutting down a consumer’s card and wiping away the consumer’s points balance. In fact, some banks now include explicit terms prohibiting manufactured spending. For example, American Express has language in its terms and conditions which states that purchases or reloading of prepaid cards does not count towards meeting the threshold amount required to trigger the sign-up bonus.

For those banks that do not overtly ban the practice, the issue that all points loyalists want to know is when is too much, too much? When will the banks shut down an account? While there is not a specific amount that triggers a shutdown, the fact pattern for shutdowns has some commonalities. It begins with an uncapped category bonus which is subsequently renewed. The consumer continues to take advantage of the offer and accrues tens of thousands of points. The consumer makes some redemptions and may even open more accounts with the institution. Months later, a purchase attempt is declined. The consumer receives a letter from the bank that all accounts have been closed and all points earned have been forfeited. The bank cites a clause in the user agreement whereby it can close account at any time for any reason.

The investigation that leads to the shutdown is intricate. Looking to curtail fraudulent behavior, banks constantly scan consumer accounts for suspicious behavior and irregularities. This mechanism may flag accounts that have peculiar spending patterns. From there a manual audit may be conducted. That is when the decision is made as to whether the consumer’s account should be closed.

The next question is whether banks can do this. After all, the banks did earn a percentage on the transactions and the consumer spent time and money racking up points. It can be argued that the banks induced and ratified the consumer’s behavior by extending the category spend promotion. Unfortunately for the consumer, there is not a bright line rule to solve this mystery. The only recourse for those who believe that they have been shut down improperly is to seek relief through small claims or consumer arbitration. By filing an arbitration claim, consumers can seek significant money damages that commensurate with the value of the points lost.

Consumers who elect either option should be aware that their accounts will be scrutinized and the Internet scoured for any evidence that the consumer crossed the line of earning legitimate bonuses to engaging in fraudulent behavior. If the latter is found, the bank may file a counter-claim against the consumer.

There is a fine line, albeit an invisible one, for what constitutes acceptable behavior in the world of manufactured spending. One thing is clear: If the user agreement specifically outlaws manufactured spending then consumers should not engage in the practice and should not be foolish enough to try and disguise their behavior.  Not heeding this advice can lead to a lifetime ban, something far more serious than the clawing back of points.

If you feel that your account has been unfairly shutdown or have questions about consumer arbitration, contact Alexander at

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About Alex Bachuwa

Alexander Bachuwa is a New York attorney who focuses on consumer protection. He is also a BoardingArea blogger. Contact Alex at through his website at and visit

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    • Banks change their terms all the time making it difficult to write a precise definition. Luckily, bloggers cover these changes as they happen. I still advise consumers to review the terms on their own.

  1. I had no idea AMEX prohibited this! I tend toward Ultimate Rewards points, but would also be interested in knowing if other cards include this language. Thanks!

    • It is prohibited but only to meet the opening bonus spend. Yet this is the only meaningful MS. Everything else is a waste of time unless there is a meaningful bonus during cardmembership. Best is to read Terms and Conditions:

      …. The following charges do NOT count towards the spending requirement: fees or interest charges; balance transfers; cash advances; purchases of travelers checks; purchases or reloading of prepaid cards; or purchases of other cash equivalents …

      • I just chatted with a representative online and he said loading a Serve card (by Amex) with a linked Amex card would count as a “purchase”. Have you found or heard otherwise?

  2. “Consumers who elect either option should be aware that their accounts will be scrutinized and the Internet scoured for any evidence that the consumer crossed the line of earning legitimate bonuses to engaging in fraudulent behavior. If the latter is found, the bank may file a counter-claim against the consumer.”

    Is there a source (preferably a specific case) for this statement or is it pure speculation?

  3. Come on, how disingenuous can you possibly be? This blog is all about this activity and everyone has always known that. That’s how you (the blog owner) makes his comfortable living – by massively driving this activity. To pretend otherwise is incredibly dishonest.
    Hypocrisy knows no bounds here. What a shock.

  4. I think some of the above critical comments miss the author’s point. He is not accusing MS people of any wrongdoing, nor is he trying to dissuade them from doing MS. Instead, he is cautioning people not to overdo and to watch out for the warning signs. I, for one, appreciate the gentle warning.

    • Yes! The voice of reason has chimed in. That’s exactly the point of the article. I could be more blunt by saying to both the consumer and the banks, don’t be greedy!

  5. Chase has somewhat similar language when you go to combine points (transfer from one account to another). Here is a direct copy/paste: (-repeatedly opening or otherwise maintaining credit card accounts for the sole purpose of generating rewards- is a key phrase below)
    “Combine points with other Chase cards with Ultimate Rewards
    You can move your points, but only to another Chase card with Ultimate Rewards belonging to you, or one member of your household. If we suspect that you’ve engaged in fraudulent activity related to your credit card account or Ultimate Rewards, or that you’ve misused Ultimate Rewards in any way (for example by buying or selling points, moving or transferring points with or to an ineligible third party or account, or repeatedly opening or otherwise maintaining credit card accounts for the sole purpose of generating rewards) we may temporarily prohibit you from earning points or using points you’ve already earned. If we believe you’ve engaged in any of these acts, we’ll close your credit card account and you’ll lose all your points.”

    • I don’t understand this “otherwise maintaining credit card account for the sole purpose of generating rewards”… Why else would I use a credit card? It’s for the rewards! Otherwise I would just use cash.

      The repeatedly opening accounts for rewards part I get but not the “maintaining an account… to generate rewards”.

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