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The Day I Bought $15,000 From the US Mint
- jluxenberg 16y agoIn 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/ProductDisplay?catalogId=10001&storeId=10001&productId=16063&langId=-1&parent_category_rn=27238 http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductD...): 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 16y agoI would say this is more naughty than dishonest. Definitely something I would use to answer the naughtiness question in the YC application.
- eli 16y agoWell, 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.
- encoderer 16y agoBut they don't classify it as a cash advance, and that little comment isn't the law. For what it's worth, I usually keep one of the $20 rolls for tolls per $1000 order that I buy.
- frisco 16y agoThis 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 http://online.wsj.com/article/SB126014168569179245.html
- encoderer 16y agoThat'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 16y agoWith 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...
- Timothee 16y agoI agree with you that it doesn't seem much. However, it looks like an easy way to get the frequent flyer bonuses discussed in that other thread :)
- encoderer 16y agoTruthfully, 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.
- 16y ago
- slackerIII 16y agoAs a taxpayer, I'd just like to say, "screw you".
- frisco 16y agoThis 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!
- drags 16y agoThe Mint offers free shipping on coin purchases of greater than $300, I believe. Shipping 300lbs. worth of goods tends to be an expensive business.
- duck 16y agoActually it is at the expense of all cardholders (which would be most tax payers) since they aren't really doing any of these "programs" for free.
- jonknee 16y agoHow do you think rewards programs work? It comes out of the interchange fees that merchants pay. The Gov't paid a small percentage of the order to the credit card processor, the credit card processor paid a percentage of that out as rewards. The mint was technically always going to lose money, but it was trying to get the coins in circulation. This meant they lost money and failed at their goal. Oh and there's shipping. 300LBs anywhere isn't going to be cheap.
- pivo 16y agoIf the government thinks it can get coins into circulation by having people order them from the government it's going to fail no matter what. Not saying this makes the guy's scheme is OK, just that the mint doesn't have a chance. Why won't depositing these coins into the bank get them into circulation? It has to be either because the bank won't hand them out unless you specifically ask for them or because people don't want them. That's a sure sign that a coin is DOA.
- exit 16y ago> that only left myself as the scam artist and I knew I wasn’t trying to cheat anyone what about the airlines?
- davidu 16y agoI 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.
- gregable 16y agoI 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 16y agoI 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 16y agoI 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.
- okmjuhb 16y ago"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 16y agoThe 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.
- tkeller 16y agoHe'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 16y agoNow imagine the same feat repeated every 10ms with billions of dollars and you have the modern institution of high frequency trading.
- beej71 16y agoWhen you deposit your money in the bank, make sure it doesn't look like you're structuring: http://en.wikipedia.org/wiki/Structuring http://en.wikipedia.org/wiki/Structuring
- Magnin 16y agoOk, 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 16y agoJust charge everything and get the same rewards.
- dgallagher 16y agoNeat 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.
- num1 16y agoFor reference, the program he is referring to can be found here. http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductDisplay?catalogId=10001&storeId=10001&productId=16063&langId=-1&parent_category_rn=27238 http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductD... 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."
- meric 16y agoDamn, 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. :(
- lambda 16y ago> 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.