I will give all the details in this article. You may want to bookmark this post and refer back to it until you get a hang of how it works.
The whole idea behind this method is to buy Visa or Mastercard debit gift card with a credit card. Then to use those gift cards to liquidate them back into a prepaid bank account (Serve, Bluebird, or Target Redcard). Once you have the gift cards liquidated into your prepaid bank account you can pay your bills, mortgage, or simple have the funds withdrawn into your bank account.
So it looks like this:
Why Even do this?
So basically you are doing a big circle. Why even do this in the first place? Especially since you are charged fees ranging from $2.95 - $6.95 to purchase the gift cards. Aren't you losing money doing this?
The key here is to buy the 1) right gift card with the 2) right credit card at the 3) right place. If you do this you will actually earn more then you are spending.
Some people do this to make a little money on the side and others do it to help them meet minimum spending requirements so they earn the big bonuses on their credit cards.
What are the Right gift cards to buy?
You need a debit card that has a PIN number with it. Actually, most debit gift cards have PIN numbers available with them. If the card is issued by Bancorp, US Bank, or MetaBank you should be good. Although the cards don't say what PIN number is, just use the last for digits from the card number as your PIN. With many of these gift cards, there is no need to set up a PIN number.
American Express gift cards DO NOT have PIN numbers and you can't load them to your Serve or Bluebird cards. However, you can load a Target REDcard prepaid account with American Express Gift cards.
Next you want to purchase a card with the largest amount of money to help offset the purchase fee. Most places have gift cards that are up to $500 with a fee around $5. If you purchase a $200 gift card with a $5 fee then you will not be earning as much cash back on those cards.
Which Credit Cards to use?
Credit cards vary in how much cash back is earned. Of course you want to purchase gift cards with the largest cash back.
For example, if you purchase a $500 gift card with the Barclay Arrival Mastercard then you will earn 2.2% cash back on that transaction. That would equal $11. Minus the gift card fee of $5.95 (this fee will vary from location to location) you will come out ahead about $5 once you liquidate onto your Serve, Bluebird, or Target Account.
Now let's say you earned 5% cash back on that gift card. That would be earning $25 per gift card. Minus the fee of $5.95, you are making about $19/per gift card after liquidating it. Now what if you purchased 3 of those gift cards? $19 x 3 = $57.
So what are the best credit cards to use? You want to use the 5% cash back cards. Some credit cards have category bonuses every quarter.
3 Credit Cards that can earn you 5% with rotating categories:
Right now these are the category bonus offers
- Chase Freedom - Grocery Stores (up to $1500 in spending)
- Discover It - Gas Stations (up to $1500 in spending)
- Citi Dividend - Drugstores (only if you already have the card AND you got the targeted offer. Up to $6000)
Other good cards to use:
- Chase Ink/Bold Plus Business cards - 5% cash back at all office supplies stores and online. For example you can purchase visa gift cards online for $206.95. Your cash back will earn you at least $10 so you will in effect be making $4 per card.
- Barclay Arrival - 2.2% cash back (it's for travel only, but there are simple ways around this)
- Citi Double Cash - 2% cash back
- Fidelity AMEX - 2% cash back
- Capital One Spark Business - 2% cash back
- Any card that you are trying to earn a bonus offer on
Best places to find these gift cards?
One challenge is that some stores do not accept credit cards as payment for these gift cards. You'll have to try a few places to find stores that do allow credit cards for the purchase.
Most common locations for finding these visa or mastercard gift cards are:
Is it Worth it?
If you are spending too much time doing this or if you really hate doing it, then NO it's not worth it just to make a few extra bucks. You might as well use that time to learn a useful skill.
But if you enjoy it and you know how to do it without spending too much time, then YES it's worth it. It's especially worth it if it helps you earn the credit card bonus.
Personally, I use this method for 5% category spending or if there is a discount on gift cards at stores (every once in a while there is a discount promotion). I'm not fanatical about it, but do it when it's convenient to.
There you have it! Go out and give it a try!