This is a conceptual post, that will hopefully allow you to be more creative with your spending habits. The notion of gateways assigns a distinct event to each transaction, allowing you to track and maximize the flow of your money. I call it the gateway notion each transaction has the opportunity to stay within the system, or exit out of it. This concept was underlying the milemadness tournament in that the rules stated people must have a finite amount of money ($5,000) and it must not exit the system (through the gateway).
As an example. If you were to buy say $1,000 of gift cards and load them onto the evolve App and then pay your mortgage, it would exit the system. The money has been spent, and you would need a new cash flow to replace the $1,000. Sadly, many things in life do still require that we pay for them, so there are many ‘exit events’ that will occur. However, understanding the flow can help you defer the exit, boosting rewards!
Remember, the moment that your money exits the system, it can no longer be passed through a gateway. So the question is, if you were once satisfied with earning credit card points instead of paying cash, how many times do you want to earn those points on the same expense before you pay cash? Just one time is pretty boring don’t you think?
Can you figure out how I turned my $500 American Airlines lapchild fee into a cost of $482.05 and earned 1250 AA miles?
- Gateway1 ???
- Gateway2 ???
- Gateway3 ???
1: Reward Card
2: Purchase Gift card through Portal
3: Purchase AA Card through portal
4: Use AA card through portal.
Hmm… Interesting, and completely different from what I did.
Can you clarify where you earn on this system?
I did this 100% offline in terms of earning.
Purchased a $500 VCG for 5% back on ol’ amex blue. Use the gift card to send a $500 payment to citi via one of those fancy ATMs. Use Citi AA to pay for the lap fee. Still missing 250 AA miles.
You don’t earn points from credit balances…. Close on 2 of 3 though 🙂
I’m not sure I understand the “100% offline”. At some point you had to have used some form of payment to pay aa.com, no? Unless you phoned it the payment.
Phone in, sadly… Took an hour of my life 🙁
Okay, well this just became way more interesting (for me at least). The 5% card is easy…how did you “generate” 1250 AA miles out of thin air – all offline. That’s the question. Unless you got some kind of a “deal” on the gift card and then used the “extra profit” to purchase 1250 miles (which seems silly).
Well, I don’t want to spin your wheels, its not quite out of thin air as each of the ‘gateways’ takes time. All I am showing here is that you can make a payment in different ways:
No Gateway= paying by boring debit… money goes from bank account to AA no points/cash
1 Gateway= paying by CC, money goes from bank account to CC score 2x points
2 Gateways = paying by CC money goes from CC1 to AA score 2x, then CC2 to XX pays off CC1 for Cash Back
3 Gateways just inserts another step after CC1, basically a duplication of it, using a debit card that earns points at 0.5x
In step 2, you are paying off CC1 with CC2. Seems like that would be a no-no..
Exactly- the gateway allows to to do that. If it helps visualize, each gateway is a ‘gig’ or a ‘trick’
Please don’t let the cat out of the bag. This is too much fun. I think I may be getting warm. Would the cost of CC2 to CC1 be about 0.5%?
Technically the cost of CC2 to CC1 isn’t a cost, it is a net profit… if it was a net loss then it wouldn’t be a viable gateway.
I mean 0.5% in fees. Whatever percent on CC 2 would put you in the black. Am I on track here?
Nope, more like 1.2%
Just have to say, that is one fancy-lookin’ infographic.
Agreed with pfdigest, what infographic maker are you using. Looks like the ones Travel Is Free uses as well.
I may have stolen the idea from him 🙂 Actually, I stole it from someone else and then seeing Drew doing it reminded me that it was awesome.
I’m using Piktochart – though I don’t love it on the iphone – looks weird…
Thanks! I will start playing around
My guess (though I am totally improvising on the 0.5 mile part):
1. Buy $500 VGC and get 5% back with Blue
2. Pay for the $500 charge using Citi AA card and get 1,000 miles
3. Use $500 GC to bill pay (or pay over the phone) for the Citi card
4. Use debit card (not sure which one gives 0.5 AA miles – if it’s not a secret, can you let us know?) to bill pay $500 Blue card.
That’s 1,250 miles and some money back.
Pretty much, though how do you bill pay in 3? And I wonder if Billpay in 4 earns… Good idea if it does!
UFB