Gold Dollar/Frequent Flier points "scam", does this still work?

[Anoat]

A friend of mine told me about this "scam" that people have been using for a while, not sure if it still works or is illegal?

Basically, you use a credit card that racks up frequent flier miles with each purchase to buy those gold dollar coins from the U.S. Treasury dept. in bulk at a flat exchange rate (or may pay small interest charge depending on card). Then once the coins are shipped to you, you take the coins to a bank and deposit them into your account or exchange for cash or what not. But the flier points stay on the card, and after enough purchases you've got yourself free plane tickets.

My friend says he has not personally done it but knows people that have gotten several free trips out of this. I'm not so sure, it seems pretty shady and I don't think card companies would leave that big of a loophole open?

[Ksandra]

lol never heard of this. I guess the US's only solution so far is to put a cap on the amount ($1000 every 10 days).

http://www.huliq.com/10178/it-fraud-...ld-flyer-miles

In 2009, the Wall Street Journal did a story on the practice of exchanging US Mint issued coins by the bulk. But the story doesn't label the savvy traveler's practice government exploitation. NPR broke the story again this week and called the practice of purchasing dollar bill coins from the US Mint, and then depositing the purchase into the bank for sky travel rewards "exploitation" of the federal government.

In 2008, NPR reported, the top 20 customers of US Mint coins purchased between $219,000 and $696,000 worth of dollar bill coins. Banks started reported large deposits of US Mint issued dollar bill coins. But by that time, credit cards had been paid and frequent flyer miles for the purchase paid. Frequent flyer discounts are huge with frequent travelers, particularly those who want to up their membership status to elite or first class cabins for life.

The government discovered the plot of frequent flyers when banks reported customers cashing in hordes of dollar bill coins from the U.S. Mint. In some cases, the coins were still sealed in its government package.

In response, the feds issued a limit on the purchase of dollar bill coins. The coins can only be purchased every ten days in maximum amounts of $1,000. The US Mint website also cautions that depositing the coins into banks is not the purpose for which the program was intended. The program’s goal is to circulate and integrate the dollar bill coins with existing paper bills and cash money.

Only certain credits offer frequent flyer miles and these credit cards usually are held by consumers with large credit lines. Chase, Capital One, American Express, Southwest, Continental, Delta and Citi Advantage are among the more elite credit card lines that offer flying rewards.

Purchasing monstrous dollar bills in coins and then returning the coins to a bank is believed to contribute to the surplus of unused dollar bill coins. The dollar bill coins are of American Presidents, and American Indians. The First Ladies gold coin equals $10. The American Buffalo coin is 24k gold and the equivalent of a $50 bill. The government sells bulk coins at $140,000 per bulk bag with a shipping percentage totaling $1,400.00.

Coin collectors typically collect coins because they are rare, understanding that their monetary value increases as the coins become more rare.

The government’s cap on the amount of coins one person can purchase in a ten day period isn’t a viable answer for a way to get the coins circulating into the hands of American consumers.

Apparently there's articles still pretty recent about people doing this (that one is from july 13, 2011), so I'd say it's not "illegal" yet and probably still works. There are no laws against you putting that coin directly into a bank. However I'd imagine if CC cards catch it they may close your card out. (though I only did a quick search and noticed no where that CC are cancelling people).


That's also insanely unethical lol.

[Lucavi]

Which makes it perfectly American.

[Ksandra]

I also did find this if you're thinking about doing it:

http://www.freerepublic.com/focus/f-news/2752107/posts

But of course, be wary, and don’t blame me if anything goes wrong. Keep in mind that credit cards can be very dangerous if you don’t keep on top of things, and if you plan on getting a ton of cards to multiply the benefits of this, it could hurt your credit score. And also note that if you’re sending them straight to the bank, you’re not really supposed to do that, and the Mint may ban you from buying them (it has done so to less than 400 people, who were probably buying tens of thousands on multiple cards).

One more thing to keep in mind is that credit card companies calculate miles differently, and usually counter-intuitively. You would think that earning 3,000 miles means you can get a free round-trip ticket to somewhere 1,500 miles away. But the way Capitol One does it, 100 miles will pay for $1 of an airline ticket, meaning if you buy a $500 ticket, it will cost you 50,000 miles. A bit of a buzzkill. So before you get too excited, be sure to find out what you can actually get for your “miles.”

And the Mint is still working to stop this practice. According to the Wall Street Journal, “The Mint has added a warning to its Web site that credit-card companies could consider the purchases cash-equivalent transactions not eligible for miles, and Mint officials plan to contact credit-card issuers ‘to try to implement a solution,’ he says.” So beware, this scheme may become obsolete in the next few months, leaving you with a new credit card you don’t want.

[Darus Grey]

Why would the CC cancel your card? they're still getting their cut regardless. If anything they would actively encourage you.

[Overburn]

Don't they make money off interest?

As I understood it, you just pay off the card right away with the deposited coins and get the rewards for spending. Seems like the easy solution would be to have a delay before you can aquire rewards/

[Darus Grey]

They make money off the actual sale, i.e. you spend $1000 on coins, the CC company takes 6%, the treasury only gets $940, and of that 6%, 1-2% are set aside as the equivalent of your reward points.

It's why reward points are stupid to begin with, you're paying for them, they're not free.

[Skyylya]

They make money off the actual sale, i.e. you spend $1000 on coins, the CC company takes 6%, the treasury only gets $940, and of that 6%, 1-2% are set aside as the equivalent of your reward points.

It's why reward points are stupid to begin with, you're paying for them, they're not free.

Not really because it's not an additional charge. It's not the 1000 + 6% with 1-2% set aside for your rewards. You're still only paying the cost of the purchased item so it's more like the person you are buying from is paying for it for you.

[Darus Grey]

Because merchants don't raise their prices to compensate for that extra cost...gotcha

[Skyylya]

And other than at gas stations where do you find stores that charge extra for using a credit card vs. cash? You can add whatever details you want. The prices are what they are regardless of what method of payment is used. The prices are raised for people that use their credit card, debit card or cash or check. The rewards aren't stupid, it's people that don't use them that are stupid. So who is more stupid the person who pay's that raised fee with cash, or the person that puts it on their points credit card and gets some of their money back?

[Blubbartron]

Might lack a little tact in the delivery, but Skyylya has a valid point. Prices are raised for everyone, regardless of payment method.

[Skyylya]

Might lack a little tact in the delivery, but Skyylya has a valid point. Prices are raised for everyone, regardless of payment method.

Been a lifelong problem lol

[bechyni]

I can help you with that

[Skyylya]

12 step program?

[bechyni]

Something along those lines

[Skyylya]

I'm all ears. Right now I have to go enjoy my Saturday off with some good brew, sushi and whatever else I can rack up points with!

[bechyni]

That means after you take me out to a fancy dinner we can get to work on that problem of yours

[Niiro]

I can't help but picture someone walking up to a bank teller with boxes filled with thousands of dollar coins, you'd think it more than a bit fishy.

Likewise, trying to get around it by simply banking your normal source of income and paying for things with handfuls of dollar coins in stores and such seems equally strange.

Why are miles earned on a credit card redeemable for money from the government in the first place?

[Ksandra]

Why are miles earned on a credit card redeemable for money from the government in the first place?

I don't think you understand how it works, or your question is worded wrong lol. you don't redeem money from the government with your miles. You get free miles via buying coins which earns you points then using those coins to pay back the balance.

[Kiehl]

Decent way to build credit?