Home > Gift Cards > A Caffeine-Induced Points High

A Caffeine-Induced Points High

September 7, 2012 Leave a comment Go to comments

Tupac once proclaimed that California knows how to party. It also knows how to make points-junkie friendly laws.

According to this chart, California is one of several states that allows consumers to “cash-back” a merchant gift card. Look at the first column for the states and the fifth column for “redeemable for cash” laws. Out of all the states that allow it, California’s law is the most generous — the only stipulation is that each card have a value of less than $10. This means that if you buy a $25 gift card through a portal and spend $18.85, the merchant is obligated to give you $6.15 in cash if you request it.

This law applies to all sorts of merchants, as long as they offer a branded gift card. This excludes American Express, Visa, or other prepaid general transaction gift cards.

Today, I’ll talk about a specific, lucrative example — Starbucks. It’s one of the places I visit at least a couple times a week — it’s a great place for me to sit back, catch up on wi-fi and internet when I’m out and about, and drink some mediocre semi-burnt coffee. What I like a lot about Starbucks is their rewards system – it’s a transactional-based model, where you get a free drink for every 15 “stars” (transactions). Whenever I purchase multiple things, I buy them in separate transactions (usually by realizing right after I buy a coffee that, “OH, I also want a bagel!”). Of course, when the free drink comes in, I tend to do a venti triple shot whatever-the-most-expensive-drink-is redemption. It’s the points-junkie mantra — “earn low, redeem high.”

You can get these rewards by registering a Starbucks gift card to a Starbucks account. Once you reach 30 stars, you’ll get Starbucks Gold status. While you’ll get one gold card, any Starbucks gift card that’s connected to your account will earn Starbucks Stars.

Taking advantage of the law.

First, a disclaimer. The law says that you must have less than $10 on the card. For calculation purposes, I’m going to do a situation where you end up with $9 on the card (because I hate coins).

Let’s say you buy a $50 Starbucks gift card. And let’s say you buy it at an office-supply store, with a Chase Ink card. For a $50 card, you’ll earn 250 Ultimate Rewards points. You only have to spend $41 to get that card to $9, where you can cash out. Thus, for $41 of spend, you’ve earned 250 Ultimate Rewards points, or 6.1 UR/$ at Starbucks. Not bad – Chase Freedom comes close to that if you get 5.1x + 10 points per transaction during this quarter’s restaurant bonus (Starbucks is a qualifying merchant).

It gets better.

Staples recently increased the price of their $50 Starbucks gift cards to $51.99. However, Staples also has a 4x bonus through the Ultimate Rewards Shopping Portal (which is sometimes 5x). For an extra $2, you earn an extra 218 Ultimate Rewards points. Considering that an Ultimate Rewards point is worth at minimum a penny, you’re still coming out at a 18¢ profit on incremental points. Since most people tend to value Ultimate Rewards points closer to 2¢ each due to their partnerships with United and Hyatt, you’re coming out with a $2.36 profit. This is a no-brainer in my book. Spend the extra $2!

Once you spend $41 on that card, you can cash out. For about $43 of spending ($41 on the Starbucks gift card + $2 to Staples), you’ve earned 468 Ultimate rewards points, or 10.9 UR points/$ at Starbucks.

Oh, but it gets even better.

I did this earlier with the Chase Freedom at grocery stores when that earned 5x. I could buy a $15 gift card at a grocery store, spend it down to $9 and cash out. For $6 of spending at Starbucks, I earned 86.5 Ultimate Rewards points (since I got 5x on the $15, an extra 10 points for the transaction, and an extra 1.5 points for the 10% bonus). That came out to 14.4 UR points/$.

In fact, once in a while, I find multi-packs of 3 Starbucks cards for $30 at a local grocery … $10 each! If you have a 5x grocery card and spend $1 on each card, you can cash out for 54.3 UR points/$.

But here is where it gets fun. Once you have a Starbucks account online, you can transfer balances between cards. Since I tend to visit Starbucks anyway, I transfer balances to my card to be just above $10. Once in the store, I purchase an item to bring the balance below $10, then ask to cash out.

The pot’o’gold here is finding Starbucks cards being sold for incredibly low prices. I’ve seen my local grocery store sell single cards for $15, and multiple card packs with $10 gift cards and sometimes $5 gift cards. This is very rare – I’ve only seen these in the wild one or two times. However, this means that if you find eleven $5 gift cards, you can actually transfer money to it from your $50 card and cash out without a single purchase. If you can buy the $5 gift cards on Freedom during a 5x grocery quarter, and the $50 card through the Staples portal, that’s 760 UR points for…. $2? That’s 380 UR points/$! Frequent Miler, I think I may have found a theoretical Perpetual Point Machine. 😉 Of course, this hinges upon finding that elusive $5 gift card.

The trick works if you can find the cheapest gift cards with the best bonus multiplier. I’ve found the $50 gift card with the 9x-10x multiplier. The cards are also sold at many grocery stores at lower prices, meaning they can be used for cards that have bonuses there. I’m currently working on the spend for my US Bank FlexPerks Visa, where I calculated that I need $3425 of 2x spending to get a maximum of $800 of travel, or a 23.3% return. If I buy a $15 gift card at my grocery store, I’ll get about $3.50 worth of points back. However, I can cash out at $9, so I’ll have earned $3.50 worth of points after spending $6 at Starbucks, or a possible 58% return on my cup of coffee.

Should I have shared this?

Well … I came up with this by myself, so it’s not like I’m stealing this from FT or MP. In fact, I shared it on Flyertalk and only a couple people seemed to take any interest in it. Honestly, the only thing that can be abused about this is buying tons of $5 gift cards and loading them up and cashing them out. Buying higher value cards means that you’ll be doing some purchases at Starbucks. Those $5 gift cards can be very rare — I found them at my local store just once, and have found less $10 cards and more $15 and $25 cards lately. Starbucks could take away the ability to transfer gift card balances, but that might upset everybody else who doesn’t do this sort of thing. They could also only sell really high-value gift cards, but that might upset a lot of people, especially during stocking-stuffer season.

I have found that showing up with multiple gift cards and asking to cash them out without a purchase tends to get a manager involved. One manager told me that they are worried about fraud. While you can push them to follow the law, it’s really not worth your time and effort. That’s why I tend to do them one at a time, and only after a small purchase. Besides, I’d rather keep the possibility of this going as long as possible.

Also, I haven’t shared everything about this, as the people who want to go out and try this might find an infrequent loophole in the transactional process that makes it even more lucrative. But that’s not worth blogging about – I’d rather everyone who tries this find this gem on their own.

Lastly, this is an actual law on the books, not something that Starbucks does out of the kindness of their hearts. The corporation was actually sued for $225,000 in California a few years ago for not obeying this law, and many stores have a sign on their windows that spell out that they will cash-out cards under $10. It’d be tough for them to stop doing this.

What I wanted to show from this is that there is no reason why, if you live in the greatest state in the union, you shouldn’t be earning more than 10 UR/$ for your morning cup o’ joe. And for every 15 of them, you should be earning a free one.

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Categories: Gift Cards
  1. Sapan
    September 8, 2012 at 9:13 am

    It was great meeting you yesterday. Thanks for the post. I am finally getting the importance of having a card like Chase Ink.

    • Amol
      September 8, 2012 at 11:30 am

      Good meeting you and everyone else too! The Chase Ink has become my new workhorse … it really is a great card.

  2. Ryan from MA
    September 8, 2012 at 12:19 pm

    this is pretty awesome….im in Mass and it’s $5 and less to cash out. I feel like this will be fun and keep you busy but the long term buildup will be small right?

    • Amol
      September 8, 2012 at 12:24 pm

      It is a small buildup, but for someone who actually visits Starbucks several times a week, it’s certainly doable in the course of a normal transaction. It’s why I decided to post it: the ability to abuse it is limited by the fact that it’s small-dollar, location-dependent, and dependent on finding certain level gift cards.

      If anything, I may have given the idea to someone who wants to try it, and they might find a way to make it even more worthwhile.

  3. David
    September 10, 2012 at 5:12 pm

    I saw the 5 x $10 SB GC pack at Safeway this AM and thought of this post. I didn’t pull the trigger though…b/c I’m a Peet’s customer.

    • Amol
      September 10, 2012 at 5:15 pm

      Haha! Peet’s is awesome but the one near me is very small 😦

      I noticed 3 x $10 cards available at Office Depot the other day … 😉

      • David
        September 10, 2012 at 6:21 pm

        Excellent! I have found myself trying to see how much monthly spend can be replaced by GCs found at OD. I can use Shell, but that’s about it…the chain restaurants maybe 1X/year, and can’t plan BK or Pizza Hut/KFC. I might be able to plan Nordstrom/Macy’s purchases better…

  4. Amol
    September 10, 2012 at 9:58 pm

    I do gas gift cards (ARCO, since they don’t take CC at the pump) and stuff we use like Target/Macy’s. My Freedom does 5.1x so I tend to use that for a lot of stuff (since I don’t want to come up against the Ink Bold 5x limit with stuff I could get 5x with on Freedom).

  5. Julian
    September 17, 2012 at 12:08 pm

    That’s some good stuff! I like your original thinking… this might not be a huge point-machine, but it might lead to other bigger methods. Added your blog to my reader!

  6. Amol
    September 17, 2012 at 2:41 pm

    Thanks for reading! Yeah, I agree, you won’t be earning a first class ticket just from doing this, but with many of us spending on gift cards for category bonuses, this is a step that could increase those earnings more. I’m still trying to see if there are ways to expand this greater … though the reason I shared this is because it’s very difficult to abuse and get shut down.

  7. WishyAnand
    January 24, 2013 at 10:44 pm

    Wow now that is super creative! I know all the baristas at the few Starbucks’ I frequent, so would be a bit embarrassed to do this (plus in WA the rule is $5 or less it seems), but I never thought of making more than 5x on Starbucks cards purchases via Ink.

  8. JakePB
    March 7, 2013 at 9:36 pm

    I’ve been in the greater San Jose/Oakland area this week and 3 out of 6 Starbucks have told me “we don’t do that.” Very frustrating.

  1. November 28, 2012 at 12:16 pm
  2. December 30, 2012 at 6:03 am

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