According to an NPR story this week, the Federal Reserve is sitting on a billion dollars worth of the $1 Sacagawean and Presidential coins, and the program to replace dollar bills with the metal coins has largely been deemed a failure. The government spends millions annually to mint new coins in order to introduce all the US presidents, resulting in millions languishing in vaults a la “Scrooge McDuck” said Planet Money’s David Kestenbaum. Despite the fact that they are legal tender and the government’s many efforts to promote their use, Americans still distrust the dollar coin.
Why the reason for the distrust? Americans claim they are difficult to spend, not recognized by many merchants, or just weigh down pockets too much. Perhaps we should ask our foreign neighbors how they have integrated them into daily life. America is one of the few countries in the developed world to use a $1 banknote and the only one of the top five traded currencies (including the Euro, British Pound, Japanese Yen, and Australian dollars) to use a bill in such a small denomination. Canada replaced the dollar bill with the “loonie” coin in 1987 and the British pound note has been out of circulation since 1983. Is taking away the $1 bill the only way to get Americans to use the coin? We reported earlier this year on a possible way to earn frequent flyer miles by purchasing dollar coins, a legal (but not encouraged by the US Mint) practice that may actually contribute to this back log of currency. Maybe go out and spend the coins instead and hope the trend catches on.
Photo courtesy Flickr user cometstarmoon. Hat tip to Honza Kerver for the NPR story link.
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.
In the why-didn’t-I-think-of-this department, The Wall Street Journal wrote earlier this week about a brilliant
scam plan that hundreds of frequent fliers undertook to essentially get thousands of frequent flier miles for free. According to the article, people were using credit cards with mileage awards to purchase thousands of Native American and presidential $1 coins for face value from the U.S. Mint, then depositing the coins directly into their banks when they were delivered.
A San Diego traveler named Patricia Hansen purchased $10,000 in coins from the Mint to earn 10,000 frequent flier miles. A New Jersey man bought $15,000 dollar coins and says that he had the UPS man load them directly into his trunk. The mileage trick was made even more profitable because the Mint paid the shipping charges on the coins.
A commentor who calls himself “Mr. Pickles” over at FlyerTalk, a forum where a community of travelers share tips and tricks for racking up miles, claims to have purchased $800,000 in dollar coins before depositing them into a number of different banks. He even posted photos of the coins when they arrived.
According to the Journal article, U.S. Mint officials were alerted to the miles-for-nothing program in late August of this year when they “noticed a sharp uptick in ‘large repetitive orders’ from a group of individuals… At about the same time, the Mint received reports from banks around the country that coins were being deposited that were still in their U.S. Mint boxes,” according to Mint spokesman Tom Jurkowsky.
Said Mr. Jurkowsky, “Is this illegal? No. Is it the right thing to do? No, it’s not what the program is intended to do.”
By the way, the scheme is still being tried by a few hardy folks over at FlyerTalk. Check out FlyerTalk’s FAQ about the program– including whether you can still take advantage of it– here.
For a more conventional way to rack up miles, check out Gadling’s Guide to Mileage Running.