“If somehow he was able to turn CC purchases into cash, at no discount, that’s a huge tax policy problem.”
I assume there is a fee for the money order.
In a $500 transaction, the 5% rewards would yield $25—more than enough to cover gift-card fees of about $5 and the $1 fee on the money order.
I’m not quite sure how this scheme worked. You can’t buy money orders with credit cards but I guess some stores will let you buy them with store gift cards? I think MOs are as cheap as 99 cents per. So if you can buy $1000 worth of gift cards, at 5% rebate you get $50 back, or $49 after fees. Deposit money orders to your bank and pay off the charge before interest kicks in. Recycle this every day it can add up to about $18,000 a year. Perhaps he had even greater spending power so maybe tens of thousands a year for the physicist?
For $500 card purchase +$25 rebate, $5 card fee, and $1 money order.