Update: Racking Up 100,000 Miles & $200 Cash with Loyal3

Update: Racking Up Miles & Points with Loyal3

(Update 12/5/14: Loyal3 no longer allows stocks to be purchased via credit cards.)

I wrote an article a few months ago about a new company called Loyal3 and how you can use a credit card to purchase stocks for free.  Now I don’t really invest in many individual stocks due to the uncompensated risk, but I do like exploring new ways of ‘manufactured spending’.  MS as it’s known in the travel hacking industry is the technique of spending money on a credit card without actually spending the money.  Sometimes there are fees associated with certain MS techniques but the best techniques are free or cost you 1% or less.  A 1% fee on $5,000 in spend isn’t too bad if it means you’ll get reward points worth $500-$1,000 tax free.

Since a lot of the top sign up bonus credit card offers require high minimum spends, the only way for normal people like me to achieve these are through MS techniques.  I use two main strategies to MS: I send money (up to $1,000 for free per month) through Amazon Payments and I’ll buy prepaid debit cards and unload them through Bluebird (a free bill pay/checking service from American Express).  The former is pretty easy but the latter can be kind of a hassle since it involves finding stores that accept credit cards for prepaid gift cards and then going to Walmart and dealing with those clowns to load the damn card.

The Original Plan

I’m kind of lazy so I like lazy MS techniques that let me sit at a computer.  Making two trips to two different stores just won’t cut it for me.  So when I heard about Loyal3 I was pretty excited since it would allow me to buy and sell stocks with a credit card with no fees.  My plan was to buy the stocks one day and sell them the next but unfortunately Loyal3’s system doesn’t quite work that way.  There is a 2-3 day lag time in-between placing orders and the actual purchase and another 1-2 days of lag time between the sell order and the actual sale.

If you could buy and sell stocks instantaneously with Loyal3, I’m sure they would catch on to what people like me are doing pretty quickly and they would shut that avenue down.  But even if you’re ok with the short wait period, Loyal3 has still been flagging accounts for buying and selling too quickly.  So in order to MS with Loyal3 you have to be ok with holding your stocks for a couple weeks and unloading them slowly.

My Latest Credit Card

At first, I wasn’t really ok with this method since I have alternative means to MS.  But during my latest round of applications, I actually found out that you could apply for the American Airlines Citi Executive card more than once.  If you recall, I applied for this card back in March since it came with a 100,000 point bonus after spending $10,000 in 3 months.  I already had a few other cards that I needed to apply for but I decided to throw this one in anyways and this card put me way over what I can normally MS.

Related Article: Turn a 30,000 Starwood AMEX Offer into $1,750

So in this case, it made sense for me to try out MS’ing with Loyal3 since without them, I would not have been able to apply for my second AA Citi Exec card.  As an even bigger bonus, if I was able to spend the $10,000 within 37 days of the annual fee posting (right around the date of the first statement) I could actually cancel the card, keep the points, get my $450 annual fee refunded and keep the $200 first purchase bonus.  So basically I would get 100,000 points and $200 in cash if I could hit the spend quickly and then cancel the card.

When Does Loyal3 MS’ing Make Sense?

The way I look at it is I’m already getting $200 for free plus the 110,000 points (bonus + spend) so what price am I willing to pay for that amount of points?  The price I’m willing to pay is how much I can comfortably lose with Loyal3 and break even.  I wasn’t willing to risk all $10,000 at once so I bought in chunks of $2,000 between my two Loyal3 accounts (mine and my fiancee’s).  So even if the market has an absolutely horrible week and drops 10% I still won’t be out more than a couple hundred bucks.  Since AA points are valued around 1-2 cents/point I could probably ‘lose’ close to a thousand dollars and still come out ahead as long as I would be ok with exchanging cash for points.

My Strategy With Loyal3

Loyal3 used to have a $2,500 per stock credit card purchase limit but since writing my last article they dropped it down to $50 per stock.  This isn’t the end of the world but it does make the process a little bit slower.  I did a bunch of small test runs with Loyal3 but ultimately the strategy that worked best was buying stocks in groups of 10 per day.  For 4 days in a row, I bought 10 different stocks with my credit card for $50 each.  At the end of the week, I had $2,000 invested and I waited 1-2 weeks before selling.  In the mean time, I went over to my second Loyal3 account and did the same thing.  So the whole process ended up taking about a month and a half and I ended up investing close to $8,000 with Loyal3.  I was able to do normal spending of around $2,000 during that month too to hit the $10,000 minimum.

What Were The Results?

This strategy worked pretty well although my second account did get flagged.  I think it got flagged because I was trying to buy too many stocks at once.  Once I started doing them in groups of 10 and 4 days in a row there were no problems.  The markets had a pretty good run during the last month so I actually ended up making $50 or so.

At the end of the day I used Loyal3 to MS close to $8,000 and it took just over a month.  My Citi AA Executive card statement closed on 6/18 with $10,750 worth of spending and the next day 110,000 points posted to my American Airlines account.  I sent a secure message to Citi the same day and asked them to cancel my card and within a couple days I had my $450 annual fee refunded.  The total haul for this credit card was 110,000 points and $200.  And without Loyal3, none of that would have been possible.  I’ll let you guys know if I decide to do a third card :)

Readers, what do you think about this MS strategy?  Is it worth the risk for 110,000 points and $200 in cash or does it sound like something you wouldn’t be willing to do?

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-Harry @ PF Pro

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Hi, I'm Harry, the owner and head writer for Your PF Pro. I started this site back in 2011 in order to create a place where young professionals could come and get all of their financial questions answered. On the site, you'll find articles on everything from asset allocation for retirement to saving money at Chipotle! So enjoy..

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    • says

      Shaun, thanks for stopping by my bro haha! Yes you are definitely right, I’ve updated the link. Thanks for letting me know.

      And thanks for the compliment, will do.

  1. Nguyen says

    Thanks for a very informative article. I assume you buy 10 different stocks each time with $50 per stock. May I ask if your credit card gets “fraud alert” when you charge the same amount 10 times? Thanks.

    • says

      No problem, I was doing 20-30 stocks at once at first and Loyal3 kept cancelling my buy orders because it was triggering a fraud alert with Citi. I kind of just experimented until I found a number that worked, didn’t seem to have any problems when I did 10 stocks at once.

      I think other banks might work better though because they send instant text messages or phone calls when a fraud alert is triggered so you can confirm and then the transaction will still go through. With Citi, they call you hours after the transaction and ask for you to verify it and at that point Loyal3 has already cancelled your order.

  2. Jiffy says

    Can you answer the question of how – when you merely try to bastardize a company like Citi by reaping the rewards they offer, and offer them zero business in return, you ever expect any of these types of offers to continue to be available in the future?

    • says

      Yea Citi and the other credit card companies are total saints. Preying on the weak, uninformed, and poor in order to charge them 25% APR when they don’t pay their bills. Where do you think they get the money to hand out offers like this? From rich guys like me? No way, give me a break buddy.

    • scott says

      This comment is hilarious. I love how Citi first wastes money to overnight the T&C for the cards via UPS. They then waste more money to put the card in some elaborate, fancy box which you will never use, and then ship that overnight via FedEx. Even worse, at times when they ran out of boxes they would ship the card in an envelope; when they got more fancy boxes in they would ship those overnight without any cards inside! This is how the banks are using all that bailout money we gave them.

      And how is no one giving any business to Citi here? We have to spend $10K in 3 months on that card plus pay the $200 annual fee. Something tells me Citi is very happy and making out pretty well here.

      • says

        Yea the braniacs working at Citi either don’t care or are just completely oblivious in which case I feel even less remorse for taking advantage of them. And you’re completely right, they’re getting a nice littlle 3% transaction fee on all that money I spent with them so they should be happy. I guess Loyal3 is the real loser here.

    • Kevin says

      Citi (and the other companies) could care less – they make swipe fees every time a card is used for a transaction. Rest assured, the banks aren’t losing any sleep over this.

  3. scott says

    But won’t you have to list every single stock purchase and sale on your 1099 next year? That’s what prevented me from trying this method.

    • says

      I’ll probably handle it the same way I handle my Lending Club taxes, just sum everything up and list it that way. But I’ll wait and see how Loyal3 does it. It’s in their best interest to figure out a way to make it easy on the consumer though.

    • says

      $200 profit plus 100,000 points that I can redeem for about $3,000 in flights = $3,200 tax free. At a 40% marginal tax rate, that is $5,333 in extra income. Hopefully it will take me 5 hours or less to figure out all those tiny short term gains and losses so that I can make sure I stay above $1,000/hr.

  4. says

    With regards to canceling the card within a month and not paying the fee, how does that work, and does that work with Amex (eg. for 100k platinum) to not pay the $450 fee? Thanks!

    • says

      The AF is charged after the first statement closes and you’ll also get the $200 credit at this time. You then have 37 days to cancel the card and you get the AF refunded. Make sure that you spend the $10,000 (don’t forget the AF doesn’t count as spend) a couple days before your second statement closes. Once the second statement closes, you should be around 30 days and you can cancel once your 100k points post to your AA account.

      I used this strategy on my second card, but still have the first one. I think it may work with Amex but I don’t recommend burning that bridge, Amex is a lot smarter than Citi too. Citi is really weird about these kinds of things and people have been taking advantage of these AA offers forever without any repercussions FOREVER. I think I signed up for 6 or 7 50k Citi AAdvantage cards before they closed that loophole.

  5. deWeb says

    AMEX will prorate the AF if you cancel the card before the first year. At list that was my experience.

    • says

      Yea that sounds about right, I probably wouldn’t risk it though unless I really needed to cancel for some reason. Amex is one of my top 3 favorite companies in this world so I wouldn’t wanna do anything too shady to them. Citi on the other hand…haha.

  6. says

    Buying stock with a credit card is something that has never been accepted in the brokerage world. I guess if you can manage your purchases wisely it makes perfect sense to buy stock on credit as long as payments are made on a monthly basis ans it doesn’t hurt getting the CC rewards either. Thanks for sharing this info about Loyal3.
    DivHut recently posted…Dividend Investing For Our Furry FriendsMy Profile

    • says

      Yep times are changing and I think there are many ways to use this Loyal3 platform to your benefit. I mean if you buy stocks with a 2% cash back card like the Barclay Arrival you are guaranteeing yourself a 2% tax free edge. Traders would kill for that. Studies have shown you can diversify with 10-20 stocks and get a lot of the same diversification benefits as an index fund. I’d gladly trade that 2% guaranteed return for a little less diversification :)

  7. Ryan says

    This only makes if you plan on investing anyways and for a long time hold. If you buy and sell every day (or ever week) just for MS your tax return will be a PITA. I am not aware of Loyal3 exporting/importing stock transactions into tax software yet. You need to list ever stock sale on your tax return.

    • says

      That’s a fair point and it’s also one of the reasons why I don’t plan on using Loyal3 as an ongoing MS method. But I’m sure this is one of the things Loyal3 is working on and I wouldn’t be surprised if they had something figured out around tax time to make it easier for investors.

  8. Nun says

    I don’t understand the complaints about filing taxes. Make lots of buy orders and then 1 sell order. You only have to list that as 1 transaction. You combine the buy orders into 1 basis and you’re done.

    The only pain is when you have lots of sells. Then your tax form grows.

    Am I missing something? That’s been my experience (but haven’t used loyal3 until this year).

    • says

      Yea I don’t either, that’s exactly how I handled my taxes for my Lending Club account if I remember correctly. Just add up all the basis’ and do it that way.

    • Ryan says

      Correct – but I am not referring to the 1 sale. I am referring to the people on FT, etc. that are buying every day AND selling every day. They are not buying every day for a few weeks and then selling once. They unload it every day.

  9. says

    Hey Harry,
    You have made some really good points in your article and you made out like a bandit. My approach is that I use a Quicksilver Capital One card to earn 1.5% cash back on Loyal3. I purchase 4-6 stocks a week so I am getting $3-$4.50 ever week of free money. And like you mentioned I am up 1.5% right from the start. As long as I pay my balance in full before the due date I am always winning. I am going to ride this one out before Loyal3 catches on. This seems to good to be true. Thanks for sharing.

    • says

      I know, I’m lucky. That’s a pretty good strategy too actually, I was thinking about doing the same thing with my Barclay’s card since it gets 2% back on all purchases. What is your plan if the stocks start going down while you hold them? I think this strategy works best when you can afford to hold the stocks long term since investing in a bunch of blue chippers with a 1.5-2% margin is basically a no brainer over long periods of time.

      • says

        Hey Harry,
        I am currently investing for the long term into dividend paying blue chip stocks. Because I am 29 I don’t plan on selling for the next 20-30 years. I am willing to hold during the 30-50% dips because I will still be receiving passive income. I would still buy more if the stocks were cheap, unless I was broke or didn’t have a job. I currently have 50% of my assets in cash which is pretty high for an emergency fund and that’s because I like to invest small amounts of capital vs. all at once. This is one of the reasons why I enjoy using Loyal3 besides that fact that I am earning 1.5% cash back on each purchase.
        Brian recently posted…Build a Dividend Growth Portfolio For as Little as $300 on Loyal3My Profile

  10. James says

    Does this only work with airline rewards card basically? I don’t travel much so I really don’t have an airline card. Nor do I have a long credit history for cards that require excellent credit even though I’ve kept my credit score around 730 for the 15 months I’ve had credit cars for. I’ve done a few hours of research on this subject and it seems very interesting. However, I’m guessing it wouldn’t be a good idea to MS with my 2% cash back credit card since it’s much more risky to try to make a profit off of 2%? Also what does buying stocks off of Loyal3 come off as on your credit card statement? Does it count as online shopping? I was hoping to use my Discover IT to MS 1500$ (max 5% cash back on online shopping) on my Discover it card.

    • says

      Well if you’re going to buy the stocks and hold on to them for a long time then a 2% cash back rewards card is the perfect card. Traders would kill for a 2% edge and you just guaranteed yourself one right there. But you need to know what you’re doing stocks-wise if you’re going to use this strategy.

      If you’re just using Loyal3 to MS then I’m not sure if I’d use a 2% cash back card. It would likely work out ok but there is a very real (although unlikely) possibility that you could lose in any given week. The only reason why I did it was because I had 100,000 points at stake and a $600 swing from the AF refund/Statement credit. So for me, I was willing to risk a lot more and obviously it worked out very well.

      • James says

        I guess that makes sense. I heard that on average returns from certain periods are like 10% (or less) on average. If you consider that you a 2% profit off the bat, that’s pretty great. I’ll probably put a little money to invest in this for the long term to see how it is. It’s not like I’m going into this blind though. I’ve read some books on investing and tried investing in other markets so yea….. Anyhow, my biggest problem right now is whether I should put more money into investing into stocks in the longer term. As I have my own online business which I started a year ago. I currently make about $600 a month on average from $3000 of sales each month. Barring taxes, I should be making about a minimum of 20% off of what I invest into it each month. (20% should be the minimum considering that I spent much less than the sales I made or otherwise I wouldn’t be making any profit). Correct me if I’m wrong in calculating it that way.

        Also, I guess you don’t know about the card transactions then? I was really hoping I could use my discover card to ms the 5% cash back. It’d be a nice 75$ per month for 3 months haha!

        Anyways, thanks for the previous response! Thanks for writing the article as well! It was very informative. I may perhaps try this one day when I get a travel card. (I just hope L3 doesn’t kill credit cards off of their site completely by then!)

        • says

          Probably or less :) but yes if you do consider a 2% profit off the bat, I think it’s a no-brainer if you were going to invest anyways. I know most people love to invest in individual stocks but for people who believe in math, it just doesn’t make sense. There is uncompensated risk to investing in an individual stock. You’re not rewarded for taking on more risk (diversification risk) so why not do an index fund? Same return, less risk. But if you can guarantee yourself 2% gain, things change big time especially considering there are some studies that show you can get the same diversification benefit of an index fund with something like 13 stocks (there is a lot of debate over this though).

          Are you saying you can increase your sales and still make 20%? That’s a pretty solid return my friend, if that’s the case maybe you should consider re-investing 75% of your earnings into your business and investing the rest in the market? I’m assuming you have w2 income too where you can do a 401k, otherwise make sure you are considering a roth/trad ira and/or solo 401k depending on income.

          I doubt that the Discover card would work but you could always give it a shot with $10 and let us know.

  11. John says

    Harry, nice article. I just found out about Loyal3 and was thinking about doing the same thing. However, I was a little hesitant because I was afraid that when you purchase stocks with credit cards, it would appear as a “cash advance” instead of a regular “purchase” on my monthly statements. In which case, the rewards for using my credit card would be washed because I would incur a cash-advance fee which is pretty high.

    When you purchase stocks on Loyal3, do the purchases appear as regular “purchases” or “cash advances?”

    Thanks in Advance,

    • says

      Oh thanks for the reminder, I actually need to update this article since Loyal3 no longer accepts credit cards probably because of people like me. On to the next MS technique, I love this game :)


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