I still don’t understand...the article seems to say using gift cards to purchase money orders gets you rewards? you get rewards from using gift cards ?
“I still don’t understand...the article seems to say using gift cards to purchase money orders gets you rewards? you get rewards from using gift cards ?”
Rewards are from using the credit card to buy gift cards.
He bought gift cards (for a fee) and used gift cards to buy money orders (for a fee) and put the money in his bank account and paid the credit card from his bank account.
He nets the reward minus fees.
That’s how I understand it.
He used his 5% cash back credit card to buy supermarket gift cards. He gets 5% back on all gift cards he purchased (from the credit card company). He then bought money orders from the supermarket with the gift cards. There is a small fee involved say 1%. He used the money orders to pay back the credit card. He made net 4% on the total money spent for the month and his credit card balance was paid off.
In summary, just by rotating the money through: credit card buys gift card, gift card buys money order, money order pays back credit card, gain of about 4% on the credit limit of the card (assuming you had the where with all to purchase that many gift cards and money orders).
As I understand it, the credit card gave him 5% back on purchases. He used his credit card to buy store cards, say for example 7-11 cards. He buys $1000 worth of 7-11 cards and gets $50 back from the credit card company. Then he goes to 7-11 and gets a $1000 money order using the gift cards. Then he deposits the $1000 money order back to his bank and pays his credit card bill. He essentially got $1000 for a net of $951 give or take. If you are an OCD type and have the resources you could theoretically bank many thousands of dollars a month doing this. Imagine if you could do this with $3000 or $5000 a day.
So of course the IRS will call that $49 per $1000 as income.