Rewards credit cards are a great way to earn a few percent cash back or frequent flyer miles for everyday purchases, but they’re geared against the consumer’s rate of purchase — the more you spend, the more rewards you earn.
Intrinsically this concept conflicts with the budget traveler. Sure, 2 miles for every dollar spent would be great, but few people spend enough money each month to make the miles worthwhile. If one spends 300 dollars and earns 600 miles per month, for example, it would take 41 months to save enough for a free flight on most airlines.
But a few savvy consumers have learned to game the system, all courtesy of the US mint. On their website, the mint advertises free shipping for over $500 in purchases of presidential $1 coins — at cost. This means that a user can show up at their online store, purchase $1000 worth of dollar coins on their rewards card and have them shipped to their front door for free. A quick walk to the bank puts that money back into circulation (hopefully for the payment of one’s credit card bill) and the user emerges a few miles richer. At that point, the user can repeat the cycle.
Sounds like a cash advance, right? Sort of, but mileage hounds have found that the neither the credit cards nor the IRS view it in that way, so they’re still buying dollar coins and reaping the rewards.
As to any impact on one’s credit score or the value of carrying 20lb boxes to the bank every day, the jury is still out, but for those with time and a bit of financial flexibility it seems like a great trick to earn miles.
You can read more details and extensive discussion over at Flyertalk and Milepoint.