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For those of you who got in on the one-day Amex Business Gold Rewards 75K sign-up bonus offer and are now wondering how to meet the $5,000 minimum spend requirement in 3 months – and for the rest of us hoping to continue cashing in on prepaid and reloadable cards in order to keep racking up the points on transactions like mortgage payments and rent – TPG contributor Jason Steele presents some ideas on using Green Dot MoneyPaks.
Back in December, I took a comprehensive look at reloadable prepaid cards in a four-part series including the following posts:
In this week’s series, I’ll be focusing on one particular kind of reload card, Green Dot MoneyPaks, and how you can use them to maximize the points and miles you earn on everyday transactions as well as tools to meet minimum spending requirements on new credit cards.
I have done a lot of research on how to earn the most points and miles with the least effort, which is a goal that I am sure we all share! What I have concluded is that, at least in my area, Green Dots are superior, but only when purchased with the best credit cards, and loaded onto the optimal prepaid card. So over the course of this week, we’ll look at different options for making the most of Green Dot and the credit cards you use to purchase them.
A Primer on Prepaid Debit/Reloadable Cards
Prepaid debit cards were designed for the sizable number of Americans without a bank account, and these products are exploding in popularity. These prepaid debit cards are part of a payment network such as MasterCard, Visa, or American Express. Cardholders can add funds from to them from their bank account, through direct deposit, or from a compatible reload card or pack like Vanilla or Green Dot. These products are intended to be a substitute for traditional banking services or debit/credit cards.
These cards allow you to make purchases from retailers just as you would with a debit card. But in addition, most of these cards can be used at ATMs to withdraw funds, and many can be used for electronic bill payment to any person or business and even to issue checks like you would from a bank account so that you can pay for things like mortgages, car payments and utilities that you might otherwise not be able to with a credit card - thus opening up the opportunity to earn points/miles on transactions you could not previously earn points on. So apart from being great tools for consumers who might not be able to use traditional checking accounts, prepaid debit cards are great for travel rewards enthusiasts since these products offer an irresistible opportunity generate credit card activity to earn points and miles, also known as ‘manufactured spending’.
Not only that, but if you apply for several credit cards at once, or just one with a high minimum spending requirement in order to earn a big points sign-up bonus, then using these cards can be a good strategy to meet that minimum spending in a hurry without having to make tons of random purchases so that you still have the funds you put on the card to spend over several months that might be longer than the minimum spending requirement period.
What You Need To Get Started
There are three products one needs to acquire in order to participate in this activity. First, you need to order a reloadable prepaid debit card. There are hundreds offered, and they are often available for free or at a nominal, one-time cost. Others have a monthly fee, but I avoid those products (and I’ll walk you through which ones are best in a later post). Some of the most popular out there include the Bluebird and Serve cards from American Express, both of which you can obtain for free online (although you can only have one of these two particular cards from Amex at a time). Once you register for a card, it is mailed to you, then you just have to call in and activate it like you would with a credit or debit card, and then you can start adding funds and using it.
Next, you need to purchase a compatible reload pack with your credit card. These are physical cards, sometimes called packs, that are sold at retailers on the gift card rack. Reload cards cannot be used to make purchases directly, but once you buy them by putting money on them, their value is transferred to other financial instruments such as reloadable debit cards or prepaid cards. The customer chooses the amount of value to be loaded, typically $20-$500 although some have limits as high as $1,000. In addition, a fee usually around $3.95 – $4.95 is charged at the point of sale.
There are four primary reload networks that I am aware of: Vanilla, Green Dot, Reloadit, and PayPal. Customers purchase these reload packs from participating retailers, and go to the web site for the reload network in order to apply the purchased funds to the compatible prepaid card of their choice. Note that the reload pack is not a credit card and cannot be used directly to purchase anything. The reload pack can only be used to add funds to a compatible prepaid card. These reload packs are completely separate products from prepaid cards.
And of course, you need to have a credit card to pay for the reload packs, preferably one that offers the greatest possible rewards for your purchase.
Generate Points and Miles With Prepaid/Reloadable Cards and Reload Packs
Once you have the three products necessary here is the process of loading the value from the reload card onto the prepaid card and then using it to pay your bills.
Step 1: Purchase the reload pack from a retailer that accepts credit cards for these purchases. Frankly, this is the hardest part as many retailers will only accept cash. For example, both TPG and I have been able to purchase Green Dot reloads, which they call MoneyPaks, using our credit cards at Rite Aid drug stores, while other folks have reported not being allowed to use credit cards for these purchases. Likewise, Vanilla Reloads are available at many CVS stores for purchase with credit cards, though a lot of people report that their local CVS is either out of them much of the time, or requires them to pay with cash or a debit card – thus making it nearly impossible to earn points on these transactions. However, once you locate a retailer that will let you purchase reload packs using a points-earning card…
Step 2: Go to the web site for the reload network. For example, www.moneypak.com is where you apply Green Dot Money Paks to compatible prepaid cards. At this site, you will enter your prepaid card number, the zip code the card is registered to, and the MoneyPak number that is revealed when the protective coating is scratched off of the back of the cardboard reload card. Vanilla Reloads makes it even easier, just enter the number of your prepaid card and the number on your reload pack and the funds are loaded into your almost instantly.
Step 3: Remove funds from your prepaid card. This is the step that makes all this worth it – being able to use the funds on your prepaid card to pay bills you might not otherwise earn points on, such as car and rent payments, mortgages and utilities.
The easiest way to remove funds is buy using bill pay services that are already included in many prepaid cards. Using this function, you can pay any person or business. You can use this to pay utilities, rent, mortgage payments, or even the credit card account you used to purchase the reload card. With some prepaid cards, you can go to an ATM and withdrawal cash, although there are usually fees associated with these transactions. And finally, you could use your prepaid card to make purchases, but that would offer little benefit over using your credit card unless you were able to buy the reload pack at a merchant offering a category spending bonus, such as a drugstore, supermarket or gas station and then use the card to make purchases you’d only earn 1X points per $1 on anyway.
So those are the basics of using prepaid debit cards and reload packs to your advantage to rack up miles and points and as a useful took for meeting minimum spend in a hurry without actually having to spend a lot of money on random purchases.
I’ll get into specific prepaid and reload products and strategies in additional posts throughout this week starting tomorrow, I’ll explore the differences between the Green Dot and the Vanilla reload networks.