'manufactured Spending': How A University Student Racked Up Travel Rewards

Releasing the X4X coins through the banking system would have resolved all the issues.

--> Cash only, no CC points involved
--> Banks get the goodwill, new clients maybe
--> No rep commissions involved, less greed
--> Fewer redemptions - obviously
--> Attract collectors, not speculators

I can't fault the ones who saw an opportunity to collect travel miles. I do fault the RCM for failing to execute on a really good idea.

Not really, you still have to look ahead and avoid the same mistake.

Here is an video of the law student, Avery Campbell, explaining "Manufactured Spending".

http://www.ctvnews.ca/video?playlistId=1.3680016

Apparently the FV coin program is only one aspect of "manufactured spending". He and another group of people do this on s regular basis with other things. So the free 1st class ticket, hotel stays, etc. are not only from the FV program but other spending.

From the article:

"There is a large manufactured spending community online, but much of it is hush-hush. Manufactured spending is frowned upon by merchants and credit cards because it's not the way loyalty programs are meant to work. There are inherent costs when someone manufactures spending, such as handling or administrative fees, which are often incurred by the merchant"

Campbell, who said he's aware of another "really large program in Canada that's ripe for abuse," admitted that manufactured spending does come at a cost to someone.

"Companies want to make profit," said Campbell. "Manufacturing spending hurts their bottom line. Someone has to pay for it at the end of the day and usually it's the seller of the product. And other purchasers of the product who aren't doing manufactured spending have to subsidize for people like me."

Actually, the equation works more like ZERO bucks to gain 100 dollars of air miles.

And if it can be done...

From a BBC article, it is explained how he did it. You are right, he did not go the route of 1% rewards. He did it through something called credit card churning. Credit card companies often offer 15,000, 20,000, 30,000 points when signing up and spending xx$ amounts within a time period. These point are good enough for a flight. Also, you do not need to spend hundreds of thousands on coins to do it. Usually you need only to spend $2000 to $5000 within a few months to get the points.

By credit card churning, that means cancelling your credit card when you get your points and re-applying and doing it again and again. You could do it with different credit cards at the same time. In this case, the guy was redeeming the coins at the bank to pay off the credit card bill he used for buying the coins. So he got the points for free.

From the BBC article:

Avery Campbell, 24, uses a strategy called "manufactured spending", which means shopping just to earn points on credit-card rewards programmes.

Recently he bought coins from the Canada Mint to collect points, then used the same coins to pay his bills.

The scheme has helped him travel to "every inhabited continent" - sometimes first-class - for little or no money.

"I have pretty darn good credit," he told the BBC while waiting to board a flight to Chicago where he will be attending a manufactured spending conference.

Manufactured spending works when customers are able to buy something on their credit cards that can be used like cash, collecting points essentially for free.

Mr Campbell uses these loopholes to help him do something called "credit-card churn", which is when you sign up for a new credit card in exchange for a large amount of reward points.

Most credit-card companies have a minimum amount a customer must spend in order to qualify for the points.

In the case of the Canadian Mint, Mr Campbell was able to collect points from buying the collectors coins on his credit card, then pay back that same purchase using the legal tender.

These purchases helped him meet his minimum spend quickly, and without incurring debt.

The British Airways flight would have cost about C$400 ($314, £238), he says, but he used his points. This time he flew coach, but he has travelled first-class on Lufthansa and Emirates airlines.

I know they minted a pile of these coins, but I have to wonder about the number of redemptions.
What proportion of coins still remain in collectors hands? Is is possible to tell, are they tracking
the coins redeemed. Are some 200 for 200 or 50 for 50 harder to find now?

John100... do you know if the redemption amount has been published? You would think that in the annual report, they would report on this failure too. Otherwise, an FOI request is in order.