Bluebird, from American Express is a powerful tool in your manufactured spend strategy. You simply apply for the card and purchase Vanilla Reloads from local stores and earn points in the process.
The only fees are on the loading side, as the Vanilla Reload cards come with a purchase fee of $3.95 per card, and each card can be charged to a value between $20-$500. As you can imagine, that $3.95 is a percentage in relation to card cost, so if some poor sap was to put $20 on the card and pay $3.95 they would be paying a 17% penalty for the privilege of owning a card.
However, on the flip side, when loaded with $500 the fee becomes a minor percentage, the penalty for buying the card drops down to 0.8% per transaction. Since we know that some cards, like the Fidelity Amex offer 2% Cash Back we can find a Credit Card Arbitrage opportunity for 1.2%. In other words, for every dollar we buy, even with the fee we are earning a profit of 1.2 cents.
Fixed and Variable factors in this study
There are a number of things that are fixed in this study and some that are variable, understanding these will help us shape the best strategy:
- $5,000 (10 x Vanilla Reload Cards) per month per Bluebird Card
- $60,000 Annual Manufactured Spend that this Bluebird will generate
- $474 Amount in Annual Fees to buy 10 cards x 12 months
- Fixed Category Spend Multipliers such as 2x at Gas Stations for cards like the Ink Bold and 6% Cash back at US Supermarkets for Amex Blue Cash Preferred Card. These are often capped.
5x Earnings in Rotational Spending Categories for Chase Freedom Card – this year has offered Q1 and Q3 as Gas Stations earning 5x Ultimate Rewards or 5% Cash Back. The DiscoverIT Card also offers similar rotating bonuses and can earn 5% Cash back for Gas Stations.
Another variable factor is short term earn bonuses. These are quite common from AAdvantage Cards from Citibank, and also the US Airways cards, typically offering a bonus if you spend $750 per month for 3 months. Should you qualify for one then that would make the card an obvious choice for spending on, though rarely more than the minimum they ask for.
Value for Big Spenders
As mentioned above, you are able to generate $60,000 per Bluebird card owned, if you owned two cards you could earn manufacture $120,000. It is important to break this down here because that doesn’t mean you need to put it on two credit cards. You could buy as many Vanilla Reloads as you like – even $500,000 per year on the same card (theoretically) but each Bluebird can only handle $60,000 of that action.
Certain cards trigger bonuses for high spend, I would separate these into two categories:
Category 1 Private Banking Affiliated Cards
These cards require banking relationships, and are aimed at high net worth individuals, fees range from $450-$595 per year for these cards. The Amex cards are Co Branded versions of the American Express Platinum card and come with the same perks of the regular Amex Plat.
- Goldman Sachs Amex Platinum 40,000 Membership Rewards points when you spend $100,000 per year. Note, a $5MUSD Investable Cash Requirement to get into the Wealth Management Group and access this card…
- Morgan Stanley Amex Platinum – $500 credit for spending $100,000 per year. Note, they claim no charge for additional cardholders which is a great way to share the perks of the Amex Plat, which would normally cost $175 per additional cardholder. Requires a Morgan Stanley Brokerage Account.
- JP Morgan Palladium Card – designed to compete with Amex and is own brand card. Offers 35,000 Ultimate Rewards from Chase for $100,000 in spend per year.
Category 2 Cards that require no relationship to obtain
These cards are much more accessible and have a lower entry point regarding fees.
Hotel Branded Cards
- Hilton Reserve Visa from Citi – $40,000 grants Hilton Diamond Status
- Fairmont Visa Signature – $12,000 grants you a Free Night Stay annually.
- American Express Starwood SPG Card – $30,000 grants SPG Gold status
- Marriot Rewards Card – $3,000 gets you 1 Elite Night Credit, this is credit towards Elite Status with Marriot.
Airline Branded Cards
- Chase British Airways Visa – $30,000 spend generates a Travel Together ticket, this ticket means your Avios reward booking is a two for one deal.Due to exorbitant fees that come with this most people never use this feature.
- Chase Southwest Airlines Visa – $10,000 grants you 1500 Tier points, you can earn up to 15,000 tier points by spending $100,000 in the year – these count towards elite status and help gain the very valuable Companion Pass.
- Chase MileagePlus Explorer Visa – $25,000 spend generates a bonus of 10,000 United Miles, which are worth a bit less since devaluation but still remain very useful.
- American Express Platinum Delta Skymiles Card – $25,000 grants you 10,000 MQM miles, and another 10,000 MQM can be earned at $50,000. These count towards elite Status on Delta.
- American Express Delta Skymiles Reserve Card $30,000 grants you 15,000 MQM miles, and another 15,000 at $60,000 in spend. These count towards elite staus with Delta.
- Citi Executive AAdvantage Card – $40,000 spend grants you 10,000 AAdvantage EQMs which count towards your Elite Status.
- Citi AAdvantage Platinum Visa – $30,000 spend grants you a $100 Flight Credit on American Airlines
The American Express Premier Gold also offers 15,000 additional MR points for $30,000 spend in one year.
Profit per card for $60,000 Annual Spend
The winner is the Amex PremierRewards Gold Card (PRG Amex – #8 on this list) , it actually comes top in spending at the 60K and the 100K level. The defining factor for this victory is a combination of 2x earning at Gas stations, matching the Ink Bold and the earnings boost for spending $30,000 in a year. Additionally the PRG Amex doesn’t suffer from the $50,000 Earning multiplier cap of the Ink Bold, which means that card from chase will start earning at just 1x for the final $10K of earning.
The American Express Blue Cash Preferred comes in a respectable second place, it starts out a clear leader earning 6% Cash Back at Grocery stores, but that is capped out at $6,000 – the remainder earns 3% Cash back so the real value of this card is in pure cash. The only reason it did not win was my valuation of Membership Rewards points. The Ink Bold did tie with this card based on me valuing the Ultimate Reward points at 1.8 cents each, which might perhaps a little on the high side. I would give the edge to the Blue and rank the Bold in 3rd spot due to this.
A note on Valuations
I decided to value based upon my subjective criteria. The basic premise of which was:
- Airlines that give good international awards are worth 1.5cents per mile.
- Ultimate Rewards and Membership Rewards can transfer into such airlines so I give them a 20% weighting for their flexibility making the 1.8 cents per point.
- SPG points offer the value of UR and MR points above plus offer a 25% bonus when transferring in blocks of 20000, so I gave them 2.25 cents per point.
- The Barclaycard arrival I weighted at 1.1% additional to its 2% earning in order to reflect the Travel bonus you gain from it.
- The hotel cards I gave my own personal pricing based on value to me.
Profit Per card on $100,000 Spend
The top spot remains dominated by the Amex PRG, and the Amex Blue Cash Preferred solidifies its position in second place. The reason it pulls further ahead of the Ink Bold is that once the Ink hits the $50,000 limit it starts earning at 1x instead of 2x for Gas. Also the relationship cards kick in here as they offer generous bonuses at the $100,000 level which is a unique bonus to them. However, they all do carry hefty fees along with more complicated acceptance so they aren’t really ideal candidates for this.
Being fickle with your loyalty is best
Rather than loyally manufacturing vast amounts of profit from just one card it is better to spread your spending around as follows:
- First $6K Groceries Amex Blue (6%) $360
- $30K Gas Amex PRG 2x + 15,000 = (2.5X average, valued at 1.8 multiplier for 4.5%) $1,350
- $1.5K Freedom and 1.5K Discover when they are at 5x $150
- $21K Gas Amex Blue Preferred (3%) $630
Cost of cards $474
Total Profit from the above hybrid approach: $2,016
When is a Gas Station not a Gas Station?
A popular category for bonuses is Gas Stations, many of the cards offer bonuses in this category, and the Freedom and Discover card regularly offer 5x rotating categories. The thing that matters when charging your card is what merchant code is sent to the Card Issuer. There are instances of when certain vendors that actually aren’t Gas Stations at all code as such, and they do offer Vanilla Reloads. A famous recent example of these was 7-11 stores, some of the offer the category of Gas Station and some do not. Also, finding ones that accept credit cards for payments is a skill in itself.
What if everything fails?
There will be cities, such as Manhattan where finding multiplier stores just doesn’t seem possible, in these cases you can find a non multiplier store, such as a CVS and pay for it with a card that has built in multiplication. The cards I would pick for this would be the Fidelity American Express and the Barclaycard Arrival. These both offer great value, and in a year at $60,000 spend will generate a profit of between $700-$800 respectively.
The race for Status
Some of you might be interested in leveraging the status that can be earned for higher spends and value that above the points/cash alone. Certainly things like the Hilton Honors Diamond Status have value, but lets keep perspective and realize that the Citi Hilton Reserve does offer Gold status as standard, so you are only going from one level to the next. I have never held Diamond Status but Gold with Hilton is in my opinion the best ‘mid tier’ status of any program and certainly good enough for me in itself.
Those of you just short of an American Airlines or Delta Elite Status tier level may wish to focus on those cards to help push you over the limit, but for me, I would rather take the Amex PRG points at 2x if I can find a gas station, and the Barclaycard Arrival at 2.22% if I cannot.
The Hunt for 5x
If you can find a 5x card that doesn’t have earning caps, your earning potential is massive. $100,000 at 5x would generate $5,000 at 1 cent a point, netting a profit of over $4,000. As a family you could hold one Bluebird per person, so a couple could clear through $120,000 and if you have hard working kids they can pull their weight and offer you a further $60,000 each. A family of 4 would be earning over 5 figures per year with a 5x card!
Don’t like the Valuations? Here’s the Excel Sheet
Please feel free to play around with the numbers. Bloggers, feel free to reuse and republish this using a simple common license by including the following text (and hyperlink): Chart Data Courtesy of Saverocity Travel