I Think Manufactured Spending Is Dumb

I was once brought to task for being a hypocrite — saying I don’t see anything really wrong with skiplagging, while slating people who engage in manufactured spending.

People seemed to see them as some sort of equal level of naughtiness. I think that’s totally inaccurate and I think at this point in the world of digital finance, engaging in manufactured spending is just straight up dumb.

My only caveat: go for it, if you’re a cash rich retiree who owns their house outright and has money under the mattress, has seen the world and has already burned all their rewards points. But then of course, why would you ever bother?

I love how democratizing credit card rewards makes travel, but that will never mean that everyone gets to travel first class, every day. Here’s why manufactured spending makes less sense now than ever before.

Opinion: Manufactured Spending Is Dumb

I remember the conference rooms back in the mid twenty teens.

I’d be speaking at a travel conference about maximizing loyalty programs or effective tricks to finding cheap flights, but if my session was up against someone talking about manufactured spending, using a loosely secretive title, I’d be talking largely to myself.

In that other room, it would be standing room only. Points had always been around, but they’d primarily been enjoyed by people with high levels of income, or big organic travel.

Manufactured spending, which is effectively the dark art of earning rewards through spending, without “actually” spending money was changing that for millions. Looking like you were spending money was enough to trigger thousands worth of rewards and all the first class travel you could eat.

Like any seriously addicting thing, this was no gateway drug. This was hardcore. People went berserk. There was a time when I almost cared enough to dive in. The reasons I didn’t then, are the same I don’t now. Yet all around me, the thirst for knowledge was growing like a cult.

So why don’t I see skiplagging and manufactured spending as equal? Skiplagging can get you put in the naughty corner with one airline, but manufactured spending can bring complete and total financial ruin not just for one, but for a family. Each passing day sees it happen more often.

Back in the day, I’d speak to people who were making a living of $50k a year, yet spending around $50k a month on their credit card and earning up to 250,000 points per month. How? They weren’t “actually” spending money.

The “juice” of all those points just required an utterly bizarre squeeze.

They’d swipe their rewards card, earn the points, then find a way to convert the things they just purchased in the swipe, typically gift cards, back into a cash like instrument to pay their bill. This could take hours, or even days.

They’d turn credit into real money, then pay off their credit card bills with real money, having earned huge points in the “wash”.

A voice in my head always said “this is not sustainable” and “this won’t end well”. Plus, the same way credible travel bloggers always say “if you’re paying interest, you’re not earning miles for free”, I’d say spending hours of my free time to earn miles certainly also cuts into the miles “for free”. I value my time very highly.

For these hooked individuals, the pursuit of the juice meant a squeeze that required countless hours scouring entire states for certain gift cards or other items from shady corner stores, or finding fintech products that coded credit card purchases as debit. A new “hack” would come up and people would abuse it to the max, until it stopped.

Souring The Juice

People like to blame blogs for ruining the “glory days”, or taking the “ease” out of their beloved manufactured spend hobby. That’s a conflation based on timing.

Blogs grew as the data driven internet grew, and that rich data brought banks greater transaction detail and the ability to parse information from more sources. Risk became artificial intelligence. Data analysis did far more to start the downfall of this hobby than people sharing “secrets” on the internet.

Too Risky For Banks

Aside from the fears of lending significant amounts of money to people who would have little means to pay it back, like someone who makes $50k a year, but spends $50k a month on their card, banks also didn’t like drawing increasing inquiry from the IRS and FBI about the possibility of people using credit cards to launder money.

Whether they were or not, money launderers were the only people engaging in similar behaviors, so it was pretty logical to raise the flag, whether offside or not.

In a post terrorism and drug enforcement environment, that sort of thing wasn’t all a big joke to any parties involved, and banks certainly don’t need any unnecessary heat or bad headlines.

I didn’t take banks a very long time to start parsing out who actually had income and spent money, and who was just acting like it. Those who ripely abused the system are largely to thank for the “once per lifetime” bonuses we now see on cards.

This era also helped lead to some seriously irregular financial conversations, which got all parties to an increased level of alertness. Sometimes, for some, with the FBI.

This Is Why Manufactured Spending Is Dumb

One of my secret, guilty pleasure hobbies is reading the comments of what they call “shutdown” posts. These are where banks have wised up to people engaging in any irregular activity with their cards, and people whine and bicker about their entirely logical account shutdowns.

The message boards of these issues are like an echo chamber, where everyone says their spending was “normal”, you know, just “a few thousand in grocery gift cards each month and some PayPal Key”, as if it’s all just “normal”. Or talking about how they only had 6 personal Amex Platinum Cards at max sign up bonus, not 10!

Who needs two?

I never hear anyone saying “well, I just lived my life and bought what I needed” — that never happens. To anyone not engaged in the hobby it’s just not normal. Getting the same credit card over and over again is not normal, either. You get it, you enjoy, you keep enjoying until it’s no longer useful, right?

Anyway, these increasingly frequent and regular account shutdowns are exactly why manufactured spending is dumb.

Unlike someone who might skip a flight segment, who could face losing their miles from the airline they annoyed (but almost never does), manufactured spenders face actual, real life financial ruin. It’s not just someone potentially taking one pot of airline miles.

Because many of the moves in this hobby also involve other people, such as a “P2” or a second player helping your earning, innocent people can get caught up and jammed.

Looking to get a mortgage? Good luck doing that after all your accounts are abruptly shutdown by the bank. Auto-finance? The same. Had plans to liquidate manufactured spending items, but credit card company shuts you down and wants the cash ASAP — good luck.

Or maybe even worse — find yourself in a tricky spot, where credit as its designed to work could provide the grace period needed for the rest of the finances to work out? That’s tough, when you no longer have access to credit products.

The juice isn’t worth the squeeze, if you ask me.

Sustainable Opportunities Exist

There has never-ever, in the history of credit card rewards, been larger welcome bonuses or higher multipliers on spending. People can travel like rockstars without making rockstar money. That, my friends, is incredible — and actually sustainable.

People hardly get out of bed for bonuses under 100,000 points these days and 5X is the new 2X for earning points. It may not add up to first class every day, as people in the manufactured spending game might think they deserve, but it can add up to many things which are wonderful.

The points might be might be helping to save enough cash to afford a trip at all, or securing an upgrade to make the trip more memorable. If it makes you happy, it can’t be that bad. And if points make your travel life better, they also can’t be that bad.

Credit card rewards were never meant to have someone who organically spends $1 million annually earning the same level of reward of someone who will take 20 years to earn that amount, let alone spend it.

Points have created such incredibly lucrative opportunities in travel for anyone who bothers to dive in with both feet. Like most things in life, people just get greedy.

If people spent as much time on the earning of actual money as they did on the amount of time it takes to tap into successful manufactured spending tactics, many probably wouldn’t need to bother. They’d be the employee of the month and up for a promotion.

All I can say is that my voyeuristic pleasure of watching “shutdown” posts is keeping me very busy these days. With each week, there are new reports of massive account shutdowns and sob stories of people who feel wronged.

If you’re impervious to the potential negatives of this bizarre habit, rock on rockstar. If not, I think manufactured spending is dumb and anyone doing it, should be prepared for what it brings. It’s not always first class!

There are just too many fair, equitable and sustainable opportunities out there in our heavily competitive banking and rewards environment for anyone who isn’t a narcissist to justify their insistence on how this hobby makes sense in a wholistic way.