While travel rewards cards offer pretty lucrative offers on their own, some people ramp up their earnings by making strategic purchases and manufacturing spending.
That second part of the equation-manufactured spending-can take place in a handful of ways. Still, the gist of the process is this: By buying gift cards or items to resell, you can earn points while breaking even or turning a profit.
While buying gift cards to earn more rewards can make sense at times, it's important to note the fees involved in the process. For starters, many Visa or MasterCard gift cards come with a fee at purchase. For a $500 card, that fee usually equals around $5.95.
You must also consider the costs of liquidating those gift cards. While many people use them to pay for bills or regular purchases, some buy money orders they can deposit in the bank. Typically speaking, a $500 money order will cost at least .70 cents, but up to $1.50.
Fees aside, there is still ample reason to use your rewards credit card to buy gift cards. The key here is making sure the rewards you earn are more valuable than the fees you'll pay.
If you're buying a $500 gift card and paying a $5.95 activation fee, for example, you need to make sure you're earning more than enough rewards to cover it. Generally speaking, a card that earns 1.5 to 2 percent cash back (or $7.50 to $10 in rewards for every $500 you spend) will do the trick.
Another instance where it makes sense to buy gift cards? When you'll turn a profit.
[READMORE]READ MORE: Earn 5x Points With Chase Freedom This Quarter [/READMORE]
This is an easy feat with certain cards that offer bonus categories. For example, the Chase Freedom card is currently offering five percent back on your first $1,500 spent at grocery stores and drug stores from April through June of 2017. If you purchased three $500 gift cards at one of these stores and paid a $5.95 fee on each, you would pay a total of $17.85 in fees in exchange for $75 cash back.
A final instance where buying gift cards can make sense is if you're trying to meet a minimum spending requirement and falling short.
If you're after a $500 signup bonus, paying a $5.95 gift card fee to boost your spending is a smart move. This is especially true if you buy a Visa or MasterCard gift card you can use for regular expenses or bills. Also, remember that you can buy no-fee gift cards for your favorite grocery store or any other retailer you patronize often.
If your goal is earning more rewards over time, don't rule out the possibility of buying gift cards. However, you should be aware of the risks.
While buying gift cards is fairly safe these days, thieves and crooks have learned some creative ways to drain gift card balances and leave card buyers empty-handed. If you end up with a drained gift card, it's on you to report the situation and try to get your money back. As a result, you should always keep all receipts and paperwork for any gift cards you buy until the balance is at $0.
For the latest travel news, updates and deals, subscribe to the daily TravelPulse newsletter.
Topics From This Article to Explore
