Increasing credit card spend: What’s safe?

I write often about techniques for manufacture spend.  These are techniques designed to increase credit card spend in ways that result in getting most or all of your money back.  The purpose of these techniques is to help meet minimum spend requirements, earn big spend bonuses, or to simply increase credit card rewards.  While there’s nothing illegal about these techniques, sometimes they can be used for illegal purposes: fraud, theft, money laundering, etc.  As a result, banks and other financial institutions watch for suspicious activity and will often shut down suspicious accounts, usually without warning.  Similarly, banks that believe you to be a bad financial risk or an unprofitable customer can shut you down.

Manufacture_spend_caution

If a bank or credit card issuer shuts down one of your accounts, it will most likely shut down all of your accounts.  For example, if Chase shuts down your checking account they will most likely close all of your Chase credit card accounts as well.

Almost everyday I get questions about this.  People ask… what is safe?  Let’s try to figure that out…

A couple of years ago I broached this subject specifically with respect to Chase accounts.  I wrote: Why Chase cancels accounts (and how to protect yourself).  In that post I suggested that accounts were shut down for two primary reasons: Bad credit risk, and “Perk abuse” (a term I made up for that post).  Both are valid concerns today, but its necessary to add another shut down trigger: suspected money laundering.

Let’s look briefly at each…

Bad credit risk

When a credit card customer suddenly starts charging more to their card than they earn, it’s perfectly reasonable for the card issuer to worry that the cardholder won’t be able to pay them back. When this happens with American Express cards, you’re likely to receive a financial review.  If that happens, your Amex accounts will be frozen until the review is done. If you pass, you’re good to go.  Otherwise, you’ll need to look to other card issuers for credit cards.  View from the Wing wrote up details about Amex financial reviews here.  Other banks may not be kind enough to give you the chance for review.  They may decide to cut their potential losses and simply shut you down without opportunity for review.

Perk abuse

Credit card companies often offer bonuses as loss leaders in order to attract new customers, retain existing customers, or to keep their card “top of wallet”.  In many cases, these bonuses are “game-able”.  If you game the system too much, though, you may get shut down.

One famous example was when the Chase Freedom card used to offer checking account customers an extra 10 Ultimate Rewards points per transaction.  Since Ultimate Rewards points can be redeemed straight up for 1 cent per point, this meant that a one cent purchase turned into a 9 cent profit for the consumer.  Of course, it wasn’t long before people figured out ways to script the purchase of 1 cent gift cards.  They ran their scripts thousands of times, earned huge piles of Ultimate Rewards points, and then had their accounts shut down.

Then there are cases that many of my readers are familiar with.  One example was when Citi had a signup offer for their ThankYou Preferred card in which customers would get 5 points per dollar at gas stations, groceries, and drug stores for 12 months.  Needless to say, many customers spent a lot of money at those locations buying gift cards and reload cards.  And, for a few weeks one May, many people had their accounts forcibly shut down.

Suspected money laundering

Some manufactured spend techniques result in cash or money orders that need to be deposited to a bank in order to pay one’s bills.  In small amounts, that’s fine.  In large amounts, banks are likely to suspect you of money laundering.  How much is “a large amount”?  Due to the Bank Secrecy Act (which requires financial institutions to assist government agencies in detecting money laundering), deposits (or transfers or withdrawals) of $10,000 or more must be reported to the government.  So, it seems likely that regular deposits over $10,000 will be more closely looked at than smaller deposits.

That does not mean you should actively deposit “just under” $10,000!  If you do that, your manufactured spending will suddenly become illegal after all.  The reason?  Structuring. It is illegal to “structure” deposits in order to evade these reports.  Banks are required to report potential structuring as well.  Travelblawg has a couple of in-depth posts about manufactured spend and structuring.  These are worth a read:

So, what’s safe?

I don’t know.  I don’t work in the banking industry.  I have no inside knowledge of… anything.  That said, I do get asked this question all the time.  So, for those who don’t mind taking advice from someone who knows almost nothing about this subject, here are my best guesses as to what is safe:

Bad credit risk

To avoid looking like a bad credit risk, I recommend keeping credit card spend below the salary stated on your credit application.  For example, if your stated salary was $60K per year, that averages to $5,000 per month.  Keep your balance with that bank below $5,000 at any one time.  For most people, that means spending less than $5,000 per billing cycle.  Some like to pay off their credit card multiple times per billing cycle, though, so you may be able to spend more than $5,000 without raising concerns that you’re a bad credit risk.  Warning: paying off your credit card many times per month may raise other red flags.  I don’t know this to be true, but it seems reasonable.

Perk abuse

To avoid getting shut down due to perk abuse, many think that it’s a good idea to mix bonus spend with “regular” spend.  In older posts, I’ve been known to recommend that myself.  For example, I used to recommend that people use their Chase Ink cards not just for 5X bonus spend but for 1X or 2X spend as well.  But… I’ve long since stopped listening to my own advice here.  I have a number of credit cards with 5X categories and I use them exclusively within their bonus categories.  I’ve never had any problem with that approach.

I believe that a more important safeguard is to limit the credit card issuer’s losses.  If you cost them too much money, they’ll eventually notice you.  How much is too much?  Since we have no other information to go with (that I can think of), let’s go with the bar set by Amex recently.  Their “old” Blue Cash card lets people earn 5% cash back at grocery stores (after the first $6500 spend each year).  This benefit used to be uncapped, but Amex has recently imposed a $50K per year cap on that spend.  In other words, they’ve limited their exposure to 5% of $50,000 or $2,500 per year, per person.  Chase has the same $50K limit on 5X spend with their Ink Plus product.  This leads to a few recommendations:

  1. For cards with great spend bonuses, limit bonus spend to $50,000 per year
  2. For cards with other types of “game-able” bonuses (like the Freedom example), limit the bank’s payout to you to less than $2,500 per year.
  3. Spread out the spend as much as possible.  For example, if you plan to spend $50,000 per year, try to keep to less than $5,000 in any one month.

Suspected money laundering

The best way to avoid suspicion of money laundering is to avoid depositing cash or money orders at all.  Sometimes the same techniques that are used to buy money orders can be used, instead, to pay your credit card bills.  Or, rather than depositing your cash or money orders, try going into your bank and asking to pay your credit card bill with cash or money orders.  If cash or money order deposits are unavoidable, I’d recommend keeping such deposits to $3,000 or less per week.  My guess is that that’s low enough to avoid suspicion.  No self respecting money launderer would do such low amounts, right?

Reader input

Have you had credit card accounts or bank accounts shut down due to manufacturing spend?  From your experience, do you think that the above guidelines would have kept you safe?  Do you have other suggestions for staying safe?  Please comment below.

Last updated on February 23rd, 2016

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

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Sam
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Sam

FM- What is your suggestion on how to manage 4 REDCards in terms of loading and using different CC’s to max out $5K each month? Or would you not do that?

Thanks for your help

N
Guest
N

I’d be very interested in your thoughts on Redcard and MS as well! Thanks, another great post! Love all your original content!

Jeff
Guest
Jeff

Same here on Redcard

Jacinto
Guest
Jacinto

The best way to get better rules on what’s safe is to gather all the structured data points on a particular tactic in one place and then analyze the data. Can your Laboratory accommodate structured data points by tactic?

Jeff
Guest
Jeff

I am a small business owner and spend nearly twice my reported credit application salary on the credit card because of my business expenses. AMEX and MasterCard both issued me a second card for no additional charge to put my business expenses, which I reimburse weekly. AMEX did check with me in the first month of doing this to see if anything suspicious was going on but I’ve had no problems ever since. This probably isn’t true Manufactured Spend in some people’s eyes, but useful knowledge to others.

Anthony
Guest
Anthony

I think with a business card they view it a little different. Your expenses will almost always be much more than your income, because it takes money to make money. Personal cards it would look a lot more suspicious, at least I think so.

AML Professional
Guest
AML Professional

Great article! “Structuring” only pertaining to cash activity. And the reporting amount is $10,000.01 and over. It is commonly misunderstand that at $10,000.00 cash deposits will be reported. Small amounts are likely to fly under the radar, but as FF mentioned any cash pattern that looks like it’s trying to aviod the reporting limit will get flagged. For example, if you deposit $1000 each in cash over 10 times in a week, that will likely trigger an AML alert. Manufacturing spending is not illegal, but trying to structure illegal or legitimate funds is a big no-no. You don’t want to be associated as a potential money launderer and open your account for a full review. Manufacture spend safely and responsibly.

Kent C
Guest
Kent C

Structuring is not just related to cash activity unless you mean cash equivalents.

Ron
Guest
Ron

An old adage that’s useful to remember: Pigs get fat. Hogs get slaughtered.

GlenGarry
Guest
GlenGarry

Old adage seems grossly incorrect as pigs as well as hogs get slaughtered. If by someway you are saying that the arbitrary “too much” is in play here I ask you to define the term “too much”. And is these terms are being defined in your head and not whats possible then you are leaving much on the table.

Anthony
Guest
Anthony

Bears make money bulls make money pigs get slaughtered.

iahphx
Guest
iahphx

This is a topic near-and-dear to my heart because I was one of the many folks shut down in that infamous Citi May massacre of Thank You Preferred members. I wasn’t doing all that much spend on that card, probably about $10K/month, lots of real spend mixed with gift card purchases. The shutdowns seemed almost random and, if you survived, you were then free to keep spending as usual, with no ramifications!

When I was shutdown, I did nothing and, honestly, barely missed my Citi cards. But as the US airline industry consolidated, losing access to AA points has become periodically annoying. Like I couldn’t get that 100,000 mile bonus last year with the free lounge access. I did apply for an AA card a couple months ago and got shot down. Has anyone who was a fellow victim of the May massacre managed to get reinstated as a Citi customer?

Andrew G
Guest
Andrew G

I would think that “doing nothing” might have gotten you flagged for life, as they just assumed you were a criminal trying to avoid confrontation. If you called them up, on the other hand, to ask WHY your account got shut down, perhaps they would be more willing to have you back as a customer (or would even have reinstated your accounts back then). Sometimes the “whatever you do, don’t call the airline/bank” advice is incorrect.

Kent C
Guest
Kent C

That’s a good one. Reason with them. When has that worked after one has been shut down?

J Goldberg
Guest
J Goldberg

Chuckling at a scammer whining how much a VICTIM he feels as a direct result of his SCAMMING……

JohnnyAppleSale
Guest
JohnnyAppleSale

You say $10k is the threshold for auto reporting which I agree with, however, do note that many banks are actually decreasing that threshold to more like $5k. Granted paying CCs for such large amounts aren’t as much of a concern especially with a linked account from either CC or banks’ approach. Just don’t be dumb with MOs exceeding $5k and especially cash. Plus don’t build up massive balances be sure to spread the love with multiple accounts, if you’re really going to hit it hard. IME I’ve never had issues with bank accounts, but if I were going to try anything subjective to questionable, I’d use an off bank account that doesn’t have any auto pulls/pushes (outgoing/incoming ACH) strings. Resetting that info would imaginably suck.

Kent C
Guest
Kent C

Spreading out the love may suggest structuring. Be careful.

JohnnyAppleSale
Guest
JohnnyAppleSale

Unless someone was already in hot water w/ the feds, I guarantee this won’t be tripping any alarms from the bank’s approach. I’m not suggesting doing anything illegal as much as don’t keep all your marbles in 1 acct for a multitude of reasons. Diversity of accounts with balance mindfulness goes a long way to relieve any tension. Ultimately, know the purpose is NOT to evade the reporting purposes of tax related events. Since there is no tax related event. It was proven that miles earned on a CC were not taxable so this shouldn’t be any issue. In regards to the IRC’s definition see the link below, and remember knowledge = power 🙂

https://www.law.cornell.edu/uscode/text/31/5324

josefismael
Guest
josefismael

Everyone knows what the backing banks are looking for, why not keep that in mind when you’re taking advantage of these opportunities.Example: Redbird is a game changer for us MS folks, but from Target’s perspective it’s actually pretty clever. Of course they lose money to checkfree for the billpay, and merchant fees for the CC loads. But the value of getting people in your store on a regular basis is immeasurable.

JC
Guest
JC

Actually it’s extremely measurable. I can tell you that the average Target per trip basket is $50. That’s Sales, not profit. A $2,500 load that costs them $25-$75 isn’t being made up for in traffic to the store.

josefismael
Guest
josefismael

They pay $75 for a $2500 load? If I load with my Arrival+, is that just merchant fees being paid to Barclays/Mastercard/CC networks? I had no idea it was that steep….

JohnnyAppleSale
Guest
JohnnyAppleSale

3% rate is way too high check this… For Target, I’m guessing the rate is =>1.32% + $0.05/txn. Using my math a deposit of $2500 is $33.15. Granted assuming the $50avg/shopping trip surely isn’t generating a profit of $33.15 for a grocer unless you’re buying high marked up goods like perfume/watches.

http://www.mastercard.com/us/merchant/pdf/MasterCard_Interchange_Rates_and_Criteria.pdf

Bikeguy
Guest
Bikeguy

When talking to someone from Chase that had sent me a letter requesting no more cash deposits near the $10K mark, I asked what amount would definitely not draw attention. After hemming and hawing, the rep finally said keep it under $7500 in cash per deposit and I’d be fine.

jed
Guest

if you manipulate your deposit pattern to avoid drawing attention, then you are structuring, which is illegal. Regularly depositing $7500 because they told you that amount is “safe” could get you charged with a crime (and you would be guilty!). Just deposit above $10,000 and let them report you. You aren’t doing anything wrong.

Dave
Guest
Dave

I have 3 RB cards that I manage. The majority of the time, I load it with my Citi TY Pref card that’s bonused with 6 months of unlimited 3x. The main problem is that this card is under my father’s name (I’m AU) and only has a CL of $7500. His stated income is $50-60K. I’ve only been using this card (again) for the past month or so, and spent $8-9K that month. I plan to take that up to $10K or so. Crossing m fingers!

Carl C
Guest
Carl C

Interesting thoughts. I’m now up to managing 5 redbirds. Additionally, I just got the Discover IT Miles for unlimited 3% in the first year cashback (1.5% initial, 1.5% bonus end of one year) and have plans of pushing 300k in the first year to try and get a nice payout. Anyone ever get shut down from Discover? I haven’t had issues with depositing MO of 2-4 k several times per week to a credit union recently. We’ll see if ramping up causes problems.

wise2u
Guest
wise2u

I have a feeling discover will shut down people doing a lot less than you plan. The T&C give them the right to pull the plug on you before the big payout. I would plan on 1.5% until they kill it. Redbird quits taking direct CC loads and a lot of schemes look less worthwhile. I am using WF 5% for 2 Redbirds and have maxed out my 14K credit limit each month so far (thanks to maxing Bluebird before switching to Redbird), I could add more Redbirds and use other cards as well before the situation changes, but I feel that is greedy. $3000 cash for 6 months running RB is good enough for me. I am just trying to earn money for a nice vacation, not make a living with this game.

John
Guest
John

So, one thing I’ve always wondered in terms of CTR, SAR’S, Structuring etc is this: Do all of these rules only apply to actual cash? Or do money orders and other similar financial instruments trigger the same rules/issues?

Autolycus
Guest
Autolycus

CTR’s are only for “currency”, which means just cash or coins. SARs are for any type of transaction. Structuring is for any attempt to structure transactions to avoid one of the required reports. That’s primarily the CTR but includes the CMIR form you do with Customs if you’re carrying bulk cash into or out of the US.

Also note as a side issue to all of this that even though CTRs are filed with FinCEN for >$10k cash transactions, they have to keep a log of all cash transactions above some other threshold but below the CTR threshold. I believe the lower limit for the log is $3k, but my memory is hazy. That log is provided to FinCEN other other .gov upon request.

Will
Guest

Hi,

Thanks for sharing your experience on MS! I agree to most of the content but I don’t think paying credit card bills with cash or MO is any better than depositing them. And it’s likely to be even worse, because the cash has no “source”. I remember Chase got fined a while ago for that and they must have tightening their rules. My experience with Citi is a lot more pleasant. I have many successes on depositing large amount of cash, but I don’t know if they would allow paying credit card bills with cash.

Cheers

steve
Guest
steve

how to avoid structuring?
DEPOSIT MORE THAN 10,000!
duh

Jeff
Guest
Jeff

I’m the most concerned about getting shut down by Chase over the Ink Card. I’m not pushing the limits nearly to the extent many others on here are talking about (Probably $6,000 MS split between the two), but I would say 95% of my spending is at Office Supply stores for the 5x Bonus and racking up points pretty fast. Any opinions on whether or not this will get me flagged, or am I off the radar since I’m not in the $10k/month realm with either card?

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[…] Manufacturing spend: What’s safe? by Frequent Miler. Less is best, crawl before you walk, walk before you run, run before you sprint. No need to try and start off doing excessive amounts, find your own comfort zone and stick to it. […]

Joe Tolly
Guest
Joe Tolly

It would be great if you could specify max spend limits in terms of CC cycle year or calendar year (ink bold etc)

Mike
Guest
Mike

Do CC companies only look at their own cards when it comes to spending vs income? Or can/would they look at credit reports to see balances or spending on other cards? For example, if I make $50k/yr, spending $10k-$15k per month would be suspicious on one card, but if I’m spreading that over 3 cards, would it then not be an issue?

Paul
Guest

My “big” MS is loading my Serve account by $350 per week using my Sapphire card. I have been doing that every week for the past 3 months. Does anyone think the regularity of payments could raise an issue with Chase? Thanks.

wise2u
Guest
wise2u

Actually I have been told by a couple of CC’s that once a pattern is established it causes less attention from the computerized algorithms that look for fraud alerts….so now spending $1000+ at target is normal and goes through, while spending $40-$50 multiple times a day would draw more attention…and visa-versa…..if nothing is said and a pattern is established you should be good.

Lemma
Guest
Lemma

This is obviously highly YMMV, but I have found that the suspected money laundering issue is much more of a problem when purchasing money orders than depositing them. Many stores will refuse gift card payments outright, and my experience has been that even the friendly ones will cut you off if you buy too many too often. They are retailers, not financial institutions, they sell MO as a convenience and not to make money, and they have every incentive to cut you off the moment they think you might be a compliance risk.

On the other hand, if you deposit MOs at a smaller local bank or credit union, you can build a friendly relationship with the staff and explain to them what you are doing, and in my experience it goes a lot further than it would at a retailer that sells MO or at a big bank. At one of the big banks you will just be an entry in a database to their compliance department in another state. And they won’t really care about your deposit accounts just like the grocery store doesn’t care about losing your MO business.

I deposit all my MO at a small local credit union where I have a good relationship with the manager of my branch, with whom I have always been completely frank about my activities. I’m not sure exactly why my CU is so confident that all I’m doing is MS and wouldn’t talk about it if I did know, but I am the complete opposite of under the radar there and have been depositing large volumes of MO for almost two years now.

Mike
Guest
Mike

I too am curious about RedBird. You are limited to $1k per transaction and $5k per month per card. Also your receipt from Target says “cash reload”. Would 1 or 2k per week be considered structuring? At $5k per month, are they going to notice?

Autolycus
Guest
Autolycus

@Mike, Structuring only relates to structuring transactions to avoid the Bank Secrecy Act reporting requirements. If you do lots of $1k transactions because $1k is the limit on the transaction, you’re fine. It’s only if you say to yourself, “I really don’t want a CTR filed with my name, so I’ll do X,” that you’ve committed the crime of Structuring.

mack
Guest
mack

Will it work if one wants to buy a Kroger GC at Staples and then use it to buy a OV or VGC at Kroger?

Larry
Guest
Larry

I’m new to Redcard . I have just loaded $2000 the first partial month and $5000 last month. Do you think transfers back to my linked bank account of up to half the loaded total raise suspicion. Is it better to find bills to pay with the bill pay Redcard service. Is that service dependable enough to use to pay quarterly estimated Federal taxes if I send 3 weeks ahead of due date. I see many people are just paying off credit cards from bill pay. Doesn’t that raise suspicion even if you are careful not to pay off the same card or card company you recently used for the reloads? I’m hoping Redcard keeps allowing CC reloads. I plan to just use one Redcard and mostly to help meet minimum spends. Do you think Redcard will keep allowing direct CC reloads or will this probably just stop in a short time?

Barb
Guest
Barb

Looks like the first wave of Redcard shutdown has started as reported on FT:

http://www.flyertalk.com/forum/manufactured-spending/1660498-rip-redbird-fun-while-lasted.html

trackback

[…] this week I published “Manufacturing spend: What’s safe?”  That post focused on ways to avoid getting shut down by banks and other credit card issuers […]

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[…] Frequent Miler post: Manufacturing Spend: What's safe? […]

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[…] Manufacturing spend: What’s safe? – A look at manufactured spending best practices and possible suggestions to avoid account shutdowns and other trouble. […]

Dana
Guest
Dana

I pay off my credit card balances weekly. My FICO score continues to go up (well over 800), and I’ve heard nothing of the last couple years from Chase, AMEX, Barclays, or CapOne with regard to their not liking the weekly payments.

Josh
Guest
Josh

I spend about 100k a year on Amazon for my business. I have a Chase Ink Plus card with a 5% bonus in office supply stores up to 50k/year. I’ve been buying Amazon gift cards from Staples for the past few months, but am concerned Chase might think I’m manufacturing spending and shut me down. Am I gaming the system in their eyes? These are all legitimate purchases, just made with a gift card courtesy of Staples and Chase Ink.

D
Guest
D

Im thinking about trying this out. I have spent the last 2 weeks researching MS. But I haven’t found one article that tells you what to do with all the open credit cards. Do you cancel after the bonus that dings your credit and you get dinged for too many open cards. So can you help out a noob?

trackback

[…] most financial institutions will find no issue at some low volume level [the self-respecting money launderer standard {though the actual lower bar (if such a thing exists) may be smaller perhaps this value per […]