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Last Saturday I teased readers with the post titled “Found! The perfect perpetual point machine.” I followed up that post with “One card to rule them all” in which I showed how to use American Express prepaid cards to earn nearly 5 points per dollar everywhere.
I detailed the idea behind Perpetual Point Machines in the post “The Perfect Perpetual Point Machine, Part 1.” There, I defined a Perpetual Point Machine (PPM) as a scheme in which, after a little push, points and/or miles are accrued over and over again, forever, with little or no additional work. I also laid out a few rules of what makes a perfect PPM:
- It may take effort and money to setup initially, but must not take much effort or money to keep it going.
- It must be able to generate hundreds of thousands of points per year.
- It must do no harm.
- Ideally (but optionally) it would also do some good for the world.
The idea of a scheme like this going forever is obviously ridiculous, but it would be great to find one that lasts a few years at least. The Amex prepaid card meets the basic requirements of a PPM. It takes a little work to order and register your card. After that, it takes just a little effort to fill it up regularly. The points are earned, indirectly, through regular everyday spend.
How long will it last?
If you read the comments of my previous posts on this subject, you’ll see a healthy debate about this. Some argue with conviction that this deal will be dead within hours. Others argue that it can last quite a while. The truth is, we simply don’t know. Earning points through credit card sign-up bonuses is currently the best PPM that exists, and while it has changed drastically over the years, it still lives on. In this case, the deal can be shut down instantly if Office Depot stops allowing credit card purchases of reload packs. Or, it can be shut down later by Chase if they change the bonus rules for the Ink Bold. Feel free to make your predictions in the comments below (but please keep the debate civil!).
Judging Perfection
Let’s see how this PPM stacks up against the rules I laid out for “perfection”:
Not much effort: For people who live or work near an Office Depot that carries reload cards, this condition is met. Simply walk in once a week, or once a month, and buy a few cards. No problem.
Hundreds of thousands of points: Since the Amex Prepaid card is limited to $2500 per month, this PPM is capable of generating 150,000 points per year (2500 X 5 X 12). Does that count as “hundreds of thousands”? Close enough in my book.
It must do no harm: Uh, well… OK, that’s where this falls down a bit. Chase loses money on 5X transactions. Just like big credit card sign-up bonuses, they do this in order to attract and keep customers. So, if we abuse this perk, then yes you can argue we are harming Chase. American Express does very well with this scheme unless people abuse the ATM option. However, anyone who does that will get shut down by Amex, so Amex is fine. As to Office Depot, I truly don’t know. I’ve been told by an industry expert that they do make money with the sale of these reload packs. So, until I learn otherwise, I’ll assume Office Depot earns a profit from these sales.
Do good in the world: That really depends on how you use your prepaid card. If you use it to make charitable contributions (and add a little bit to cover the charity’s credit card transaction fee), or you use it to make Kiva loans, then we’re doing good! OK, that’s a stretch. This was an optional requirement anyway.
Overall, I’d say this is a really good, but not perfect PPM. What do you think?
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Looks like I found one drawback of using this method for regular spending. Pay at pumps like to do a day to two hold just like when you check in a hotel and it puts a hold on some of the funds. This makes it difficult to spend a $100 card if $75 is tied up at the pump.
Quite irritating!
Thanks for the encouragement — another OD store sold me the temporary reloadable Amex prepaid card without questions or issues; after ordering the permanent card, I went back and bought a couple of reloads for when it arrives, and again no problem.
I went to OD today and bought 2 reloads with my ink bold card. No questions asked.
I stopped by OD this afternoon (hoping to break in my shiny new ink bold #2), and before I could whip it out, was told that the my reloadable Amex prepaid card and the initial fill-up would have to be purchased “with a debit card or cash, like any gift card”–“OD policy”. Based on a scan of the comments, it looks like a few others may be seeing/hearing something along these lines, so wondering how much more effort to put into this play (we have another OD here in town, less conveniently located, I could try if others do better going forward).
I was trying to work it so that everyone made a buck (except OD!). The built-in assumption was that the $500 was sacred – you coughed up the $500 and then you got to spend it. But I missed a piece – InComm can get a chunk of the processing fee when you spend using the card. If I stick with 1%, then they will get $5 once you have spent all $500. They could easily use some of this to kick back to OD a % of the overall refill amount. If everyone can make a buck, then there is no reason to stop this from running indefinitely!
FM, I appreciate you sharing the PPM. While it isn’t one I think I’ll use myself (mostly because it’s inconvenient for me location-wise), it’s good to know. I debated the issue vigorously in a previous thread, and I am glad you shared your discovery with your readers.
FM, do you know if the Am Ex reloadable can be used as a debit card? If so it could be a great vehicle for paying taxes.
Piecerate: No, you can’t use it as a debit card.
Ajit: thanks!
It looks to me as if OD is the one losing out here – especially so on the bigger purchases as the credit card processing fees have a percentage component, but the margin on the reload cards is fixed.
Say, for example, that OD buys the reload packs for $1.00 each. For each sale they clear $2.95.
Let’s assume that OD has processing fees of 1%, with no fixed component. On the $503.95 sale of a $500 card they will pay $5.04 in fees – more than their margin.
Further, let’s assume that Chase gets $4.00 of the fees. That’s more than enough to cover the 2,500 UR points being cashed in for airfare at $0.0125 per point.
So, I’d expect the pushback to come from OD – unless they are happy with using the $500 reloads as a loss leader to get people in. Or, unless most of the reload purchases are much smaller (I’m not sure why you would reload less than $500 though) so that they are making money overall.
Biggles209: I agree with your logic, but there are at least two other possibilities: 1) OD earns a % of the overall refill amount; or 2) this particular credit transaction is processed and paid for by InComm (the company behind Vanilla), not OD.
Should have known it was credit card related. It doesn’t matter as I don’t spend enough each month to make it worthwhile
Mike and gregorygrady: You can’t have your cake and eat it too. By purchasing gift cards/prepaid credit cards/reload packs in order to “extend” or “earn” cashback you are violating the terms and conditions you agreed to when you accepted the credit card.
@James: Are you serious or are you just yanking our chains? I’m gonna guess the latter. While I fully believe a memo will go out this month, I’m guessing it takes Office Depot at least a week to realize this is happening and try to clamp down on it.
@Scottrick: Whoops, I commented too soon before reading all the comments. Looks like FM already confirmed my guess in his later comments.
@Scottrick: The PPM FM had in mind was cashing the Amex out via an ATM, but FM chickened out from pumping that idea (and thus his PPM) once he realized he would likely cause mass Amex FRs to his readers if he suggested this approach.
This new card makes it much easier to facilitate credit card spending at 5X, rather than using multiple gift cards. And if you have a lot of recurring expenses its easy to drain this card. But if you don’t have a lot of expenses, then you still need to develop a strategy for getting the money back off this card through gift card churning or the purchase and sale of merchandise or something else. I assume FM understands this full well and will address this problem in upcoming posts as he has in past ones.
Piecerate: I’ll continue to write up options for increasing credit card spend, in general. If you choose to use these cards for that spend, that makes sense to me 🙂
This makes more sense now how it could be turned into PPM, since many of your earlier endeavors cost had a cash return over 95%. Although since I value UR points at 2 cents, I could lower my cash return to 90% and still come out ahead. I agree it would be stupid for anyone to try to combine both approaches without many more layers of obfuscation. Smart move.