Confessions of a 'manufactured spend' expert ….

My recent posts on the 3V Virtual Visa card have focussed minds on the topic of ‘manufactured spend’ – ie creating artificial financial transactions purely to generate credit card spend to generate airline miles.

It is very low-key topic, because by definition it depends on people not overdoing it.  3V is different because the cards are being used as they are intended and because Tesco is big enough to have enough stock.

With so many prepaid cards now on the market, there are clearly other opportunities.  If you have a branch of ‘The Range’ near you, for example, this Flyertalk thread outlines an interesting game you can potentially play with their prepaid card.  (I have never been to ‘The Range’ and, living where we do, I am very unlikely to do so, so you won’t find me posting about this one unfortunately.)

The Range

I received this email from a Head for Points reader who wanted to share some of his experiences.  He gave me permission to reproduce this (I have done some minor editing and merged two emails into one story):

a)  My first purchase was a o2 Money Card whereby you could top-up in o2 shops with Amex (technically not permitted but no staff knew about the card and it went through the till points no problem) and then withdraw at £200 a time from cashpoints. This card has since been withdrawn but I had to stop after reaching their £10,000 per annum top up limit.

b)  I moved to the Orange Cash Card when this was released. This card could again be topped up in Orange shops using Amex in the same manner as the o2 Money card. The problem here was withdrawing the balance as there were no free cash withdrawals with this card. I did this in a number of ways:

Depositing the balance at MetroBank branches. Unbelievably when they first opened they were allowing customers to deposit money into their accounts via POS terminals. I never did test whether CCs would have worked but they accepted the Orange Mastercard Debit no problems. This was eventually shut down after this was detected by the bank’s Operations Manager and my account was closed.

Purchasing shopping centre gift cards issued by Flex-e-Card. These were issued as Maestro debit cards supposedly only to be used within the shopping centre listed. They however were able to be used at any physical POS Maestro terminal (not online – you had to sign for these, no chip & pin). I liquidated these through an obscure feature called Saveback at Sainsbury’s which allows you to deposit money into online Sainsbury’s bank accounts in-store in similar fashion to ‘cashback’. Money from the Sainsbury’s online account would then be wired back to my LTSB account.

c)  I purchased UKASH vouchers from Co-Op stores from their Paypoint terminals using the Amex (again no Paypoint transaction is meant to be permitted using credit cards but the Co-Op terminals processed the payments no problem). These were then deposited into bookmaking accounts and bet on extremely low odd results with the winnings then withdrawn back to my bank account or with some bookmakers in cash in their stores. [This was not risk free as I could have lost the bet at the bookmakers – I worked in the industry so perhaps would have more confidence than others with this].

I would like to say that sometimes positive externalities will also come your way. For the Orange Cash Card not only was I accruing miles by topping the card up but each £ I topped up I was also given Orange points to redeem on their side for things like money off bills and in store vouchers. And with the Maestro shopping centre gift cards, even more unbelievably, the volumes I was purchasing these in meant I was offered me Kindles and iPads as sales incentives to keep me with their centre when I indicated I was considering heading elsewhere.

One thing I would however highlight about all of these schemes is they all have pretty finite lives.  The o2 Money Card was restricted up to £10,000.  The Orange Cash Card was revoked by the issuers on suspicion of money laundering (despite me providing ample documentation to the contrary – I think in the end I was just costing them too much money).  The MetroBank account was closed after an investigation by the Ops Manager,  the UKASH vouchers were eventually traced back to me and I had to provide notorised documents showing the provence of the funds to one of the gambling sites I had been using.

The reader ends with some sound advice as to why you will never find a huge amount of detail on this topic on the internet:

A lot of the activities that you will conduct to simulate manufactured spending will essentially mimic money laundering type actions and as such will often arouse suspicion. Other actions will only be able to be taken so far or undertaken so many times before a stop will be put to it. That is why it is pretty much impossible to publicise specific schemes to wide audiences in the way that the US Mint coins were.  The best way for people to be able to fly under the radar is to inform people through past examples so they can find their own.

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  1. Squillion says:

    Interesting stuff.

    I have already had 3 phone calls from the fraud depts of different companies and from MBNA asking me what’s going on with the 3Vs. They were easy enough to satisfy and even vaguely amused at the explanation. 2 of them were all ears actually and clearly going to try it for themselves.

    Nothing to worry about as I’m not doing anything wrong or remotely ‘scammish’ but I could understand that certain people might feel uncomfortable to get calls like this. My wife, for one 😉

  2. So all of this for how much profit?

    I once bought a UKASH voucher in cash for £100, pretended it was lost due to a website error, and got two £100 vouchers as compensation. Completely untraceable if you cover your tracks properly.

    • 21h21j says:

      There’s a big difference between exploiting points earning opportunities and lying for financial gain.

  3. All the staff at my local Tesco had received a memo last week outlining restrictions on the sale of 3V cards, although nobody knew quite what the restriction was. I was told first that the limit is two per person and then that they could only be sold for cash. When pressed, the duty manager called head office who confirmed there is no restriction on volume nor purchase method. So I cleared their shelves of all 20 in stock without a hitch.

    I’ve been using these to pay off my gas and electricity bills (Ecotricty, if you want to add that supplier to your list, Raffles) and my council tax bill (Leeds).

    • All very odd. Even if you have to pay cash, that does not remove the main benefit which is 150 CC points for every £50 you spend!

      • True, but I wanted the 2×500 MR points too so I stuck my ground!

        Incidentally, the staff thought the restriction was in some way related to a scam where one person attempts a large purchase but doesn’t end up paying. Meanwhile, their mate (who has already noted down the cards’ numbers) activates the cards in the interval between them being swiped and the TX being cancelled. Wow. Sounds a bit complicated (and impossible, since they’d have had to scratch the panels to reveal the PINs).

        Could be a load of rubbish, but it was the nearest thing I got to an explanation for this local policy. FWIW, this branch is in a less than salubrious part of Leeds…

  4. sandgrounder says:

    I’m pretty sure in the Amex Ts&Cs you aren’t allowed to disguise a transaction. I think padding your spend to meet a bonus or companion voucher target is pretty easy and won’t be detected if you don’t rush. Manufacturing spend on a grand scale like this is playing with fire. I know I wouldn’t like to lose my Amex relationship in pursuit of a short term gain.

  5. Mr Bridge says:

    there has been talk of restrictions on gift cards, and cards being voided at the the till.
    James ward says that the manager at his tesco called head office, and was advised of no restriction.
    I was told by a checkout girl, that I could not buy 8 b+q vouchers, but she called super who said there was no restriction. I think its localised, in order to keep checkouts moving, something tesco is hot on. Therefore seems silly that they should put on the CCP’s. Maybe the gift card thing might get removed, or maybe tesco HO will like the revenue they generate.

    I too have had cards voided by the till in tesco, but what i have done is the following.
    I went into my clubcard account and ordered a new card, giving reason as ‘old one damaged’ **** do not select lost**

    My new club card arrived with a new number, but my old clubcard is still shown as live, and stil works fine. i also set up a cc ac for my partner, and did the same. So now i use 4 cc’s to split up gift card purchases and dont have a problem with voids any more.

  6. Tangey says:

    Squillion, you said you got a call from MBNA. I assume this was the issuing company of the card you used to purchase the ve cards. Assuming you purchased from Tesco, how did MBNA know you were purchasing 3v cards. Surely then don’t get an itemised list of your purchases from tesco, just a total spend and tesco marked as the merchant ?

    I agree with sandgrounder, you don’t want to lose a credit card issuer over short term gain. However at least there is a nominal valid reason for these purchases, the Clubcard points promotion.

    I’m assuming the instituitions losing out on this are Primarily 3v and Tesco. 3v are getting nothing from the purchase/spend, and one assumes charges tesco slighlty less than face value for the card.Tesco is paying a transaction fee for accepting the Amex payment at checkout, which might be covered by their small mark up.

    At the best of times the 3v prepaid business model must work on very fine margins.

    • Agree re Tesco, but I’m not quite sure why 3V should be losing out here? Obviously they make lots more profit if folk forget to use the cards but they’re being used as designed so I can but guess they’ve worked out they’ll get enough in margins from card transaction fees when used for sales to make it worth their while. Agree it must be pretty tight margins but I can’t see how this is doing anything but helping them by pushing more spend through on their cards? Some folk are even paying the fees to combine them and then withdraw the cash so they’ll definitely make some money on them.

      • Andrew (@andrewseftel) says:

        3V will be making their margin on non-redemption and fees. The transaction interchange that they pick up on £25 spend will be tiny, perhaps 10p. That might not even cover the cost of the physical packs, let alone any commission or discount to face value that they give to Tesco. One non-redemption will pay for a lot of cards used fully, but it’s still a percentages game and this extra population using 3V might be enough to push the whole thing underwater.

      • 3V is clearly losing out. I reckon – after knocking off Tesco’s margin and the cost of making the cards, getting numbers allocated from Visa etc – they get about £20. They therefore need to make £5 ‘profit’ on your card (either from the card not being used or from the monthly fees from month 9) to make money overall.

        If you assume that 90% of all 3V cards sold in Tesco this week have been instantly redeemed by HFP readers, they are never going to make enough from the other punters to cover it.

        They don’t even get merchant fees from us, as we use them as debit cards and so the fee to the store is paltry.

        • Hmm interesting figures – I must say at those sort of rates I can’t see them making great money normally, even without savvy HFP readers – I’d imagine most folk would try and use up the full value of the card, although appreciate that may not be the case. To rely on folk not redeeming doesn’t seem too stable a model though.

        • Trevor says:

          Apparently gift cards work for retailers as something like 25% are never redeemed! That adds up to a lot of free money before even contemplating expiries. So I reckon 3V isnt losing out on the whole based on that model/equation (but possibly would be with us savvy spenders, tho in all reality they were in business before we got on board and we are not their majority market). Tesco certainly won’t be losing out else they wouldn’t stock/offer/promote the cards.

        • Iain Beale says:

          Raffles do o you actually know anything about this for sure or are you just batting about random figures? Sounds like the latter. 3V relying on customers wasting 20% of any money they spend buying the cards just to break even is laughable.

        • Best guess. But let’s be realistic – Tesco isn’t going to sell them without making at least £2 per card and manufacturing / distribution / fees to Visa etc must be £3ish.

          As the cards aren’t reloadable, the ONLY way that 3V makes money is from the monthly fees from month 9, taking all the money left in month 12 and what is probably a very modest amount from people moving balances from card to card for £1.75. They don’t even get merchant fees if the cards are used as debit cards.

    • Squillion says:

      It was MBNA’s computer picking up odd spending patterns. They didn’t know anything about 3V.

  7. Tangey says:

    The restriction of cash might mean that Tesco doesn’t want to pay the Amex/ credit card fee. Might suggestion that the Amex fee for say £300 of 3v cards is more that tesco’s slight mark up on the cards.

    I assume the mark up on these type of cards is a lot smaller than on the retailer specific gift cards.

  8. Simon says:

    I had problems purchasing 6 gift cards at Tesco last week along with one pre order of Call of Duty and 2 packs of crackers, I went to pay and the till started taking the gift cards off purchase price, a supervisor came over and advised it was better putting the gift cards through as a separate transaction to the other items which worked, I’ve had no problems purchasing 10 3V cards (with no other items) in 2 other Tesco’s.

    I read about the Range card from the link to the Flyertalk thread in one of the 3V articles, there is a Range next to my nearest big Tesco, I went in but couldn’t see any vouchers for topping up their prepaid card. I read The Range don’t take AMEX either.

  9. Tangey says:

    The guy on flyertalk who has been investigating the range for over a month has yet to get the system to work for him, in particular the all important bit of being able to withdraw to a bank account. The latest info suggests the website has the option in place. But there has been no report of whether its working or not. Tread carefully unless you are sure you know the system.

    • Steve says:

      That person is me.
      I’m hoping to pop to The Range this week IF I can get the system to recognise my phone number, as you need to top up the card, from the vouchers, via SMS.

      However with the current 3V cards at Tesco I don’t see the point in (me) doing a 90 mile round trip for the sake of £1:1 mile when the 3V currently gets me £1:225 miles.

      • Steve says:

        My mistake – its early!!
        its 1:9.5 – which is still much better.

        • Simon says:

          Hi Steve, I’d phone ahead and make sure The Range you are heading to sells the vouchers, I couldn’t see any in The Range I went in, I didn’t ask at customer services as I don’t have the card so they might have been hidden somewhere.

        • Steve says:

          I’ve heard that they keep them in the till because they are already ‘live’ and don’t need activation.

  10. Idrive says:

    In addition to what said already, bear in mind the Tesco has very low fees for AMEX transactions as all these retailers. If you can even pay 45p for a snack or chewing gum everywhere (Tesco, Sainsburys, M&S), be sure it’s not a matter of transaction fees. Though, as long as you buy some groceries it should be fine for them (the small off-license round the corner lets you pay by card tobacco&beers only if you even by something else from the shop, without a minimum of even £5).
    Also, 3V can only be happy about their volumes getting higher and higher, gaining market from other prepaid cards. At the end of the day they get some sort of commission from VISA which receives the fee from retailers and having less fixed costs (no plastic cards costs), they have only administrative costs which are already paid for.Therefore that’s why small denominations for the gift cards.

    and no one can challenge you at Tesco because if you want to spend your balance on the internet and do not want to use your real card or have no prepaid cards or else…you are free to do so.
    It’s not Tesco to check the AML limit, it’s 3V. So, as all new things, it’s just ignorance on their side, in my opinion and they should just be happy. Have you ever been asked questions if you buy 10 bottles of Passata or 10 boxes of Cornflakes? 🙂
    I only had problems a few times when stocking up with Tesco Extra Power Pain Relief, a limit of 4 boxes per transaction and the cashier asking if I was planning to kill myself with them. therefore, i was buying 4, requeieng and buy some other 4.

    • Sir Stamford says:

      That’s a lot of Tesco Extra Power Pain Relief …

      If you use Idrive for your cloud back-up service, it is no surprising you need so many.

      Sorry I couldn’t help myself not posting this cheeky reply!!!

      Sir Stamford

  11. Mike Jones says:

    Tesco Wembley has a huge stock of 3V cards. I’ve just had £200 worth and there was still plenty left.

    • Which Tesco store in Wembley Tesco Extra or Express?

      • Steve says:

        I’d say the Extra – might take a drive over tomorrow and see -will let you know

  12. Bobby says:

    Tesco Hatfield must of had over £5k worth of cards this morning. I brought 50 and hardly dented their stock.

  13. bookish says:

    Where are you finding the 3V cards in Tesco? Are they with all the other giftcards on the display? None at my local Extra, not even an empty space.

    • Trevor says:

      I’ve been checking my local Extra almost daily and the empty space has been filled with other cards which is exactly where they are.

    • Simon says:

      Same here, went back to 2 Tesco’s where I’d bought the last 3V cards last week and they had filled the empty space with other cards.

  14. Colin MacKinnon says:

    Baby milk powder is also rationed: see google for China demand for foreign baby milk powder.

    So don’t use the 3V to buy painkillers and baby formula!

  15. Andrew says:

    Is this CC bonus still on, the website says at the bottom that branded Visa cards are excluded?

    If so, does anyone know of a Tesco store in London that stocks them?

    • Steve says:

      In slink posted here last week or so there was a link to Tesco that said the Visa cards were included in the bonus cc offer – I’ve had over 3,000 bonus miles posted already.

  16. Mr Bridge says:

    this is money:
    “Consumer spending bounced back last month, giving a fresh boost to hopes that the economy may finally be starting to grow, according to exclusive research for The Mail on Sunday.
    Spending on credit and debit cards jumped by 3.6 per cent in April year on year, outstripping inflation and indicating a sharp upturn in consumer confidence, according to Barclaycard.”


    • Steve says:

      Just checked my clubcard statements – 12,000 VS miles posted today, and I wouldn’t hesitate to say that at least 8,000 of those are due to the £v cards

  17. Yozza1977 says:

    Anyone else noticed the 3V visa is classed as a debit card, but prepaid mastercards , such as the Range one, are classed as credit cards by Santander bill pay for HMRC and council tax. Annoying as this was a good way to generate credit card miles by diverting spend through other cards. Back to the drawing board.

    • Steve says:

      The RPPMC was never intended to be used to pay for things due to this, snd the extremely poor earning potential