If you have a credit card with an awesome cash back, rewards or air miles program, then brace yourself. What follows may be an opportunity for you to exact a bit of vengeance on credit card companies who have hit you with 29.9% interest rates, as well as over-limit and late payment fees.
The savvy deal hunters in the FatWallet Forums discovered over a year ago how to get credit card reward points quite literally for free. They take advantage of something called the Circulating $1 Coin Direct Ship Program offered by The United States Mint (that's our government's real mint, not the late-night TV fake mints that sell 9/11 commemorative coins and Obama memorabilia).
Here's how this particular grift works. "Currently, you can order either $250 or $500 in John Quincy Adams Dollar Coins from the U.S. Mint at FACE VALUE, with FREE SHIPPING AND HANDLING and pay with any major credit card," a user explains in the FatWallet Forums.
Are you with me so far? You pay for the coins using your credit card with the best available rewards program, say, 2% unlimited cash back in the case of the Schwab (Stock Quote: SCHW) Invest First credit card.
Since the U.S. Mint offers free shipping, you are getting the coins with no added fees. Upon receiving them, you take them to your bank, deposit them, and use the funds to swiftly pay off your credit card bill (before any interest accrues).
Net result? If you bought $1,000 in coins on your card and then immediately paid it all off, assuming you have 2% cash back, this means you just made $20 or more for only a few minutes of effort. In addition to that, you might also have accrued 1,000 points or air miles. The Mint gets its new coins in circulation, and you get a sweet reward -- everyone wins, except the credit card company (that's a change, isn't it).
But are people actually ordering these? You bet: just a few days ago a FatWallet user posted his recent purchase history:
$2500 Presidents shipped out on 08/21/2009
$2500 Presidents shipped out on 9/4/2009
$2500 Presidents shipped out on 9/22/2009
$2500 Presidents shipped out on 10/2/2009
$2500 Presidents 'in process, in stock and reserved' 10/2/2009
That's $12,500 in President $1 coins. Unless he plans on filling a very large bathtub with coins, one can perhaps speculate he is taking advantage of this popular loophole. Assuming he has that 2% cash back Invest First card, he'll net about $250.
Before you rush to do this yourself, keep in mind that you've got to time your purchase right. According to the U.S. Mint, it takes approximately 1-2 weeks to receive the coins. That means anyone interested in doing this should purchase the coins at the start of their credit card billing cycle to ensure that there's time to deposit the coins and pay the credit card bill. Otherwise you have to have enough cash on hand to float the balance, or you'll accrue interest.
We certainly don't recommend you do it, but other people are. We called the U.S. Mint and asked them what they thought of this situation and they said they weren't aware that it was even happening.
"I have not heard about that," Genevieve Billia, a U.S. Mint press representative, told MainStreet.
"We don't really ask about why you're buying a coin from us," she explained. "People are free to do with their coins what they wish."