Reply
Contributor
NewSurrender
Posts: 81
Registered: ‎05-06-2012

What's to stop people from doing this?

So I was at the grocery store today and passed the prepaid/gift card fixture and had a thought.. Discover More and Chase Freedom both offer 5% back periodically at supermarkets and BCP offers 6% yearly.

 

What's to stop someone from buying a Visa or AmEx prepaid card at a grocery store, getting the 5/6% cashback and using it elsewhere, effectively getting 5/6% cashback everywhere you shop? I'm guessing there's something to stop this sort of behavior. I know merchants are categorized (such as retail, grocery, restaurant, etc), but do specific items get this same treatment too? When you run your card, can Chase/Discover tell you're buying $20 of food and $80 of gift cards?

 

There's gotta be something stopping people from doing this, besides the fact that it's slightly immoral. Also, does that mean that if I go to the grocery store and buy stuff such as toothpaste and deoderant, I won't get the 5% bonus?

 

Stupid question, I know, thanks in advance for the answers.

Established Member
mwm1212
Posts: 30
Registered: ‎01-15-2012

Re: What's to stop people from doing this?

No they do not know what you are purchasing and I would not go as far to say it's immoral. There are far sketchier things you can do with a certain other card at a different store, but I won't get into all of that.

 

Also, Discover and Freedom cap the rewards when they run the 5%, I believe the AMEX cashback cards are not capped..... If you were to take full advantage more power to you. It would be a lot of hassle juggling gift cards for everyday purchases.

Discover More -- $7,000 l Chase Sapphire Preferred -- $8,500

FICO (EQ) -- 767
Established Member
yejun
Posts: 16
Registered: ‎04-12-2010

Re: What's to stop people from doing this?

Prepaid card will usually cost extra to purchase I think.

Established Contributor
Koop10010
Posts: 731
Registered: ‎02-15-2012

Re: What's to stop people from doing this?

I can't see how it's immoral.  I've noticed that Visa/Amex gift cards often cost more than they are worth, like $52 for a $50 card after an "activation fee" or such.  That will often blow your margin.  It can be a good deal with other gift cards though; I can't see anything wrong with it.

FICOs (2/24/12): EX 752, EQ 740
Chase Sapphire Preferred, Freedom; American Express PR Gold, Blue Cash Everyday
Moderator
Revelate
Posts: 8,335
Registered: ‎12-30-2011

Re: What's to stop people from doing this?

[ Edited ]

yejun wrote:

Prepaid card will usually cost extra to purchase I think.


+1

 

Pre-paid cards fall under a special category where it will almost certainly be counted as a Cash Advance (in general, to be avoided like the plague for a whole lot of reasons).  Specifically, there are fees associated with that which will wipe out any 6% earning you might actually make.

 

Not a stupid question at all.

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 679, EQ 8 708, TU 711, EX 702* (07/14/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


Take the myFICO Fitness Challenge
Valued Contributor
Repo-ed
Posts: 2,953
Registered: ‎02-09-2012

Re: What's to stop people from doing this?

or just use another card to buy stuff from staples that gets a rebate, then hock item on ebay.

 

 

I don't even call that immoral.

Valued Contributor
navigatethis12
Posts: 1,881
Registered: ‎01-24-2012

Re: What's to stop people from doing this?

I do this kind of stuff all the time or liquidate the gift cards. I do not see it as immoral as the credit card company is still getting their cut of what you spend. The only deterrent is that some places do not allow gift cards to be purchased with a credit card.

Established Contributor
SamsungHDTV
Posts: 517
Registered: ‎10-25-2011

Re: What's to stop people from doing this?


NewSurrender wrote:

So I was at the grocery store today and passed the prepaid/gift card fixture and had a thought.. Discover More and Chase Freedom both offer 5% back periodically at supermarkets and BCP offers 6% yearly.

 

What's to stop someone from buying a Visa or AmEx prepaid card at a grocery store, getting the 5/6% cashback and using it elsewhere, effectively getting 5/6% cashback everywhere you shop? I'm guessing there's something to stop this sort of behavior. I know merchants are categorized (such as retail, grocery, restaurant, etc), but do specific items get this same treatment too? When you run your card, can Chase/Discover tell you're buying $20 of food and $80 of gift cards?

 

There's gotta be something stopping people from doing this, besides the fact that it's slightly immoral. Also, does that mean that if I go to the grocery store and buy stuff such as toothpaste and deoderant, I won't get the 5% bonus?

 

Stupid question, I know, thanks in advance for the answers.


It's the purchase fee when you buy a prepaid visa card. The last time I remember the for these things are: 

 

$25 Visa gift card cost $3.95

$50 Visa Gift card costs $4.95

 

So at these rates you would be losing more in cash then you would be gaining in rewards. $50 dollar purchase @ 5% would be only $2.50 return vs paying $4.95 fee. So throw that out the window.

 

Anything you buy at the grocery store will get the 5% cash back. Whether its toothpaste or deodorant, your grocery store goes by a merchant code saying it's a grocery store. There's no way to say what's grocery and what's not. Another example is 5% cash back on gas stations, everything is 5% at a gas station regardless if its gas as long as the gas station propery claims its a gas station.

 

But you could use this to go buy vendor gift cards that don't charge a purchase fee at grocery stores (e.g Starbucks, Chili's, I-tunes gift cards) and earn 5% cash back. 

 

I'm a personal banker and do a lot of auto loans serving the Houston area.
I suggest first time car buyers to read the sticky guide in the auto loan section.
I try to check these forums often, but if I missed your post, please feel free to message me with a link to it.
Mega Contributor
Creditaddict
Posts: 18,830
Registered: ‎10-23-2007

Re: What's to stop people from doing this?


Revelate wrote:

yejun wrote:

Prepaid card will usually cost extra to purchase I think.


+1

 

Pre-paid cards fall under a special category where it will almost certainly be counted as a Cash Advance (in general, to be avoided like the plague for a whole lot of reasons).  Specifically, there are fees associated with that which will wipe out any 6% earning you might actually make.

 

Not a stupid question at all.

 


Wait a minute... Purchasing a Visa or MasterCard pre-paid card at the grocery store like Ralphs is NOT going to be a Cash Advance transaction with your credit card you are using.

But yes I have looked at this, it was a big topic with 6% on Blue plus Amex and buying a pre-paid Amex and going to Costco and paying that way and getting your 2% for executive and 6% for blue grocery!!

but yes fee would probably wipe out and less you spend more.

Fico Scores: EQ 639 Navy, TU 665 GE, EX 677 Prosper (07-09-14)
You will have to put up Electric Fence to keep me in the garden!
Highest Limit: Fidelity Amex $25k (AU)
Lowest Limit: Buckle $250
Over 30 Cards in between :smileytongue:
Valued Contributor
boomhower
Posts: 1,863
Registered: ‎09-20-2011

Re: What's to stop people from doing this?

Buying the Visa/Amex cards as mentioned usually costs more than what it's worth with fees and such.  But buying store based cards, namely Walmart and Amazon, is a great way to maximize savings. 


myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
FICO Score - The Score that matters
Fair Isaac Corporation is a BBB Accredited Financial Service in San Rafael, CA
FOLLOW US Social Media Facebook Twitter Pinterest Google+