
The Day I Bought $15,000 From the US Mint - davidedicillo
http://tylertervooren.com/advancedriskology/the-day-i-bought-15000/#
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frisco
This was figured out by FlyerTalk last year and worked for about 3 months
before the Mint caught on and changed the terms of credit purchase to be a
cash advance, which doesn't qualify for rewards and carries additional
interest terms. That said, it was pretty clever and awesome while it worked.

WSJ article: "US Helps Frequent Fliers Make A Mint"
<http://online.wsj.com/article/SB126014168569179245.html>

~~~
encoderer
That's not true, at least not absolutely true. I've done this as recently as a
month ago. I've been doing $2000 a month for the last year on my Bank of
America 2% cash back rewards card ($40 cash a month into my bank account).

The way the Mint reacted was by imposing a new limit to the dollar amount one
can buy in a month.

~~~
ryanwaggoner
With all due respect, is this really the best way you can think of to convert
time and risk into $40? Just seems like a lot of hassle for not a lot of
money...

~~~
encoderer
Truthfully, it takes absolutely no time at all. I'm not so wealthy that I'll
turn down $500 a year for virtually no work. I don't think I'll ever be.

Buying the coins takes a matter of minutes. They sit at home until I need to
run to the bank. And at the bank, depositing rolled coins is painless. Never
had even a hiccup at the bank.

My usual contracting rates for smaller projects are $75 to 100 an hour so this
is right inline with that.

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jluxenberg
In his assessment of the risks involved, the author didn't mention the
possibility that purchasing coins from the mint could be considered a cash
advance, which is like taking a 15% APY loan with interest accruing
immediately after you take the advance.

EDIT: Also, looks like the mint has caught on to this guy
([http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductD...](http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductDisplay?catalogId=10001&storeId=10001&productId=16063&langId=-1&parent_category_rn=27238)):

 _The immediate bank deposit of $1 coins ordered through this Program does not
result in their introduction into circulation and, therefore, does not comply
with the intended purpose of the Program._

Not sure that's legally binding, but it's at least a dishonest thing to do.

~~~
sachitgupta
I would say this is more _naughty_ than dishonest. Definitely something I
would use to answer the naughtiness question in the YC application.

~~~
eli
Well, I mean, you're kinda stealing from the government. They're the ones
paying the processing fees. Just because it's legal doesn't make it honest.

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okmjuhb
"Assuming the US Mint and my bank weren’t trying to scam me, that only left
myself as the scam artist and I knew I wasn’t trying to cheat anyone, so that
took care of that concern."

I guess if ignorance of the way he's hurting people counts as "not cheating
them" this is true.

He gets the airline miles because the US mint takes in between a 1% and 3%
loss on the transaction to pay the credit card company. They also lose money
when they ship him the coins for free. The reason the US mint is willing to do
this is because coins are so much cheaper for them in the long run than bills,
once they go into circulation; they're paying this guy and UPS a fee for
helping them put dollar coins into circulation. This guy is taking that fee,
but not putting the coins into circulation. Its not like the money in his
rewards account appeared out of nowhere.

~~~
asmithmd1
The US Mint buys brass slugs an turns them into US dollars -- I bet there is a
pretty high margin in that business so I don't think they are taking any loss.
More like the US taxpayer is taking the loss.

~~~
eli
The intrinsic value of the metal has literally nothing to do with it. If you
take $0.01 of brass and turn it into $1 coin you didn't make any "profit."

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gregable
I bought a $250 pack (minimum purchase) of these coins from the Mint, incented
slightly by the $5 in profit I'd make from the credit card transaction, but
mostly because I thought it would be fun.

I however have intentionally tried to "put them into circulation", using them
to pay for small items at the farmers market, drive-through windows, tips,
etc. I've had to explain them a few times, but most people think it's
interesting and it makes for a few seconds of friendly conversation. I think
I've burned through around half so far.

~~~
encoderer
I use them all the time for $1 tolls.

I expected to have a "this is a quarter, sir" moment but I've used them
hundreds of times and never have.

Leads me to believe this is commonplace.

~~~
wesgarrison
I love the golden dollars and I'd be ok with getting rid of paper dollars
entirely because coins last a LOT longer.

I'm not sure what certain uh, industries, that deal in single bills a lot
would do, though.

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slackerIII
As a taxpayer, I'd just like to say, "screw you".

~~~
frisco
This exploit wasn't at the expense of the taxypayer; it's net-zero for the
Mint. It's at the expense of the airlines who have to back the miles generated
from nothing.

Edit: Ok I admit defeat here. I don't think the costs are anywhere near
interesting from a where-does-my-tax-money-go perspective, but I concede that
the Mint must spend _some_ amount of money on it. I won't delete the comment
for historical purposes but consider it retracted!

~~~
gregable
Doubtful. Credit card companies charge a percentage of the transaction cost to
the seller. Usually sellers just mark up their goods accordingly, so the buyer
is the loser. The buyer's only recourse is to use a rewards program to get
some of that markup back. The credit card company lost little if anything, and
probably profited on the transaction.

The mint was eating the entire credit card transaction cost, so that $300 came
from the mint, and probably more as well. Not to mention the shipping charges,
and the cost to re-process all of those coins when they came right back to the
mint. The line item profit to the mint is still positive since it cost way
less than $15,000 to make those coins and they can re-sell them. But in
reality, it just means that either the mint prints more dollars to make up for
the loss (taxpayer loses in inflation) or more taxes are raised to pay for the
loss (taxpayer loses more directly).

The bank where he deposited the coins also was forced to eat processing cost
and shipping charges to return the coins to the mint. If lots of people
started doing this, the bank would end up having to raise rates, charge for
the service, or put significant limitations that would hurt legitimate usages
(ex: laundromats).

All in all, this is a naughty hack. The hacker came out ahead, the credit card
company came out ahead. The bank lost a little, the US government and taxpayer
lost big. The economy as a whole loses as well - a lot of busywork was
created, but no net value.

~~~
cullenking
Not sure why you were downvoted, you made good points.

------
lambda
> that only left myself as the scam artist and I knew I wasn’t trying to cheat
> anyone, so that took care of that concern.

Er, yes you are. You are causing a bunch of people to do a bunch of work
producing no useful value for your own enrichment. Sounds like a scam to me;
even if it's technically legal, it's still unethical.

There are really two scams going on here. One is the credit card companies
charging merchants fees and passing some of the money on to their customers in
order to incentive the use of the cards. This eats into the profit margins of
the merchants, who don't have much power to refuse credit card payments
because the guy down the street/other store on the web will accept them.

The other is using a credit card to buy cash, deposit it, and collect the
rewards. Those rewards are coming out of merchant fees that the mint is
paying; you're basically just having the mint pay you to give some extra work
to your bank to sort out the coins. And of course, you're abusing the good
will of you bank, who's (probably) sorting out those coins for free, which you
just have on credit and are doing nothing of value with, and will not be
deposited in your account long enough to be worth anything to the bank in
interest.

So yeah, it's a scam, and you're the scammer. This is not something to be
proud of. Go produce something of value, that someone will pay you money for;
don't try to find clever ways to get "free money," since anything that
involves "free money" is either a charity or a scam on someones part.

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davidu
I think this guy is making this story up. It used to be true, back in early
2009. The mint changed their policies long ago. He wrote this post in summer
2010.

I call BS.

~~~
jwegan
He does start of his post with "Late last year", I would say it is entirely
possible.

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tkeller
He's trying to write this up as a neat hack ($300 for an hour of work? where
do I sign up?), but all he's really done is waste a lot of other people's time
to exploit a silly loophole. I wonder how many man-hours the bank spent moving
and counting 300 pounds of coins, not to mention how much tax money was spent
shipping the damn things to him. What an unproductive waste.

~~~
iskander
Now imagine the same feat repeated every 10ms with billions of dollars and you
have the modern institution of high frequency trading.

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dgallagher
Neat arbitrage play (with some minor risk as noted in the article).

If the Mint isn't losing any money on the credit card transactions (think
PayPal fee's), then he's essentially getting free money from his credit card
company. Otherwise I'm curious who wrote the law to let the Mint sell $15,000
for ~$14,500 (guess) after CC fee's and shipping... ;)

The poor bank definitely loses out. They have to spend all those man hours
processing coins, money which they won't make back in interest as he'll clear
out his savings/checking account rather quickly to pay the credit card fees.

\--------------------

EDIT: Per frisco's link:

 _The Mint says it costs, on average, about $3 to ship each 250-coin box. So
$10,000 in coins would be 40 boxes, or $120 in shipping. As for credit-card
costs to the government, a Treasury Department agency handles all government
credit-card transactions and negotiates costs. No particular credit-card
expense is charged to the Mint, a spokesman says._

So, $15,000 in coins would have been sold at a loss of $180 to the U.S. Mint.
That doesn't take into a lot of other costs like manufacturing.

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Magnin
Ok, so buying it and immediately putting it back into the bank is not nice...
but what about people who pay cash for everything?

Would it be worth it instead of pulling the cash out of the ATM to instead buy
coins every few weeks and spend those? You get the best of both worlds: you
get the reward points, and you control your spending by only having a fixed
amount on you at any time. Bonus is that you're not going to carry $100 around
in $1 coins, so your spend is likely to drop more. (or you have to plan ahead)

I'm sure cashiers wouldn't like you (what, you want to pay for your new
computer in 1000 $1 coins?)

~~~
wmf
Just charge everything and get the same rewards.

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num1
For reference, the program he is referring to can be found here.
[http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductD...](http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductDisplay?catalogId=10001&storeId=10001&productId=16063&langId=-1&parent_category_rn=27238)

I love how that in bold blue letters the page says:

"The immediate bank deposit of $1 coins ordered through this Program does not
result in their introduction into circulation and, therefore, does not comply
with the intended purpose of the Program."

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beej71
When you deposit your money in the bank, make sure it doesn't look like you're
structuring:

<http://en.wikipedia.org/wiki/Structuring>

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meric
Damn, I thought I stumbled on a way to cheaply convert foreign currency into
US dollars, but their website only accepted US addresses, and now I realize,
probably only US currency, too. :(

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exit
> _that only left myself as the scam artist and I knew I wasn’t trying to
> cheat anyone_

what about the airlines?

