Free flights through $1 coin loophole

Shrewd credit card customers are using the U.S. Mint's coin-buying program to rack up loads of frequent-flier miles.

By MSN Money Partner Jul 15, 2011 4:00PM

This guest post comes from Paula Pant at


Would you take advantage of a federal loophole that gives you a free first-class flight anywhere on Earth?


That's what hundreds -- possibly thousands -- of shrewd travel enthusiasts are doing, in light of a 2005 law that unwittingly created a weird case of supply and demand.


The law intended to push more $1 coins into circulation. Dollar coins are cheaper for the U.S. Mint to maintain because coins don't need to be replaced as often as the $1 bill.


The U.S. Mint sells the coins at face value, using taxpayer money to cover shipping and handling costs. If you want to buy $1,000 in coins, you simply pay $1,000 on your credit card and wait for the shipment to arrive in the mail.


Credit card rewards enthusiasts leapt at the program. They use a simple strategy: Purchase coins. Wait for coins to arrive in mail. Deposit. Use deposit to pay credit card. Repeat.


Some use this program to earn cash-back rewards. Tyler Tervooren, author of the blog Advanced Riskology, bought $15,000 from the U.S. Mint to earn $300 in cash-back rewards.


"It took ... some quick math to realize I could make $300 to help pay for my new computer for ... very little work," Tervooren wrote on his blog.


Other reward enthusiasts use this program to build frequent-flier miles. If someone charges $35,000 on a Continental Airlines credit card offering one mile per dollar, for example, that person will earn enough points to fly round-trip to the Caribbean or Central America. An additional $5,000 in spending will merit a round-trip ticket to Hawaii. Post continues after video.

The U.S. Mint caught on when they noticed that a tiny group of people were ordering the majority of the coins, according to NPR's Planet Money.


A spokesman for the U.S. Mint calls this an "abuse." Depositing the coins directly in a bank doesn't put the coins in circulation. The banks simply send that money back to the Federal Reserve -- often still clad in its original U.S. Mint packaging.


But until another act of Congress is passed, there's little they can do.


"It’s not illegal," U.S. Mint spokesman Tom Jurkowsky told Planet Money. "But it's an abuse of the system."


U.S. Mint officials have tried to stem the onslaught of requests by limiting the program to selling $1,000 every 10 days per customer. At that rate, the most one person could purchase is $3,000 per month -- which means it would take one year of regular coin purchases to earn a free flight to Costa Rica.


Committed credit card rewards enthusiasts are willing to do that. "I still do this on a regular basis,” Tervooren wrote, "but no more $15,000 coin runs for me."


Readers, what are your thoughts? Is this an unethical waste of taxpayer money, or a great way to get the government to send you first-class to Bora Bora? Let's hear your comments.


More on and MSN Money:


Jul 19, 2011 3:10PM

Since no one actually understands how this works...I will explain it.


But first... wow, way to be 3 years late to the game NPR and MSN.  Let me first by saying the WSJ published this front page in 2009.  This is old news...  Back then we could buy $24,000 dollars at a time as often as we wanted with no $1k limit every 10 days.


The amount of people commenting without even understanding the entire process fails to amaze me as well.


First off, this is mainly costing the banks money and not the credit card companies.


The US Mint is forced by regulation to mint these coins and get them into circulation.  Once they leave the US Mint they are in circulation.  They can never be returned back to the Mint.


We have 10 parties involved in the process and just about all of them come out winners.


US Mint

Pitney Bowes



Credit Card Company

Reward Program (Airline, hotel, etc)

Local Bank

Armored Car

Federal Reserve



1) US Mint mints the coins and gets them into circulation (winner as their job is done)

2) Pitney Bowes handles the distribution (winner as they are paid for their service)

3) UPS ships the coins overnight (winner as they are being paid for their service)

4) Yourself - you keep the points, miles, cash back, etc

5) Credit card company is taking 2-4 % of the transaction in merchant fees (winner)

6) Reward program sells their miles, points, etc to the CC companies so that they can award them (the 2-4% the CC takes is paying for this) (winner as they make millions of dollars selling the points to the CC company)

7) Local Bank you deposit the coins into (loser as they need to store them and the money will be immediately withdrawn to pay the CC, they also pay the Fed for storage)

8) Armored car to transport coins from local banks to main branches or the Fed (winner - paid by the weight they transport - huge cash cow for them)

9) Federal Reserve has to store all these coins (winner/loser - they have to store them but the banks pay a fee for this)

10) Taxpayer (loser - they pay for Federal Reserve operations as well)

Jul 19, 2011 2:00PM

It does not cost the mint $1 to mint a $1 coin. It costs them closer to 10 to 15 cents per coin to make. This is why coins are no longer minted in silver, gold or copper. See intrinsic value of metals.


The Mint's bank account does not go down a $1 per dollar coin it mints. Hopefully you can understand this.


They then sell you the coin for $1, essentially making money. Which is what the mint does, make money.


Whether or not they pull a dollar out of circulation per dollar minted is arbitrary as the Federal Reserve prints the money, not the mint. I'm not going to go into depth regarding monetary policies; as this would be over most of your heads. Let 's keep this simple.


Shipping costs and credit card fee included the cost to the mint is less than the $1 they charge you per coin.


So let's put the torches down and congratulate the astute individuals who figured out how to win for once in a system that is bent against us and not for us.

Jul 15, 2011 8:32PM
Aw c'mon, people.  A few little guys found a clever way to make a LEGAL buck and suddenly there's an outcry about tax dollars!?!  Go pick on Haliburton or GE if you're so dang worried about the misuse of tax dollars.
Jul 19, 2011 1:28PM
I love how the government calls this "an abuse of the system".  Isn't that what they, and big business, have been doing to us for years????  Its about time the common guy finds a loop hole that benefits us.
Jul 18, 2011 10:18AM

To all the posts that say it's the banks paying out for these rewards and not the government (i.e., taxpayers), WRONG!  When you use your card to purchase something, like $1,000 in coins for example, the credit card charges the merchant (in this case the government) a fee of around 4%.  If you have a rewards credit card, the CC company turns around and gives 1% back to the card holder and hangs on to the remaining 3% as profit.


Savvy reward card holders understand that to actually make money using their cards they need to pay it off every month so as not to pay interest.  In these cases, the money these CC companies make comes solely from the merchant.  It's absolutely ridiculous to think that I could go to a bank, say "Hi, I would like $1,000 please, but not from my savings account, I would like to charge it to the Credit Card."  The bank then says, "No problem..."  They give me $1,000 but they are charged (by the credit card) $1,040 for a net loss of $40.  THIS IS WHAT THE GOVERNMENT IS DOING PEOPLE.


I loved the I Love Lucy reference... perfect analogy!

Jul 19, 2011 12:51PM

Of course it is unethical, and of course it is abuse.  But that's what our country is about anymore, isn't it?  We have lost all ethics, all pride, all sense of right and wrong in pursuit of the mighty dollar.  You can justify it any  way you want to, but in the end, you are "legal" but wrong in what you are doing.  Period.


Jul 19, 2011 3:39PM
so it's called an "abuse of the system"...US citizens have been abuse BY THE SYSTEM for many many years...payback is a bitch!
Jul 19, 2011 1:40PM

It always amazes me how you "anti-government" types freak out over people "cheating" the system for a few hundred bucks, but you have no problem at all with big business skimping out on BILLIONS of dollars of tax payments.


In fact you want to give them even more "tax breaks" to steal even more from you.  lol



This country is so freaking broken...................

Jul 19, 2011 1:08PM

Your worried about this when our governement is WASTING TRILLIONS...yes TRILLIONS. I say lets fix the Trillion problem first and then fix the Thousands problem later.


Jul 19, 2011 1:20PM
It seems to me that if the U.S. Mint would just flat out stop printing $1 bills and only put into circulation $1 coins then the situation would remedy itself eventually.  The fact is paper currency, especially the dollar bill, does not stand the test of time when said denomination is used with great frequency.  Switching to only the dollar coin would also, over time, save energy since it last longer.  The U.S. Mint wouldn't have to print new dollar currency as often due to wear and tear as with paper currency .       
Jul 15, 2011 7:52PM
u can't blame the intelligent person for using this trick. lets look at the us mint / federal government who decided to make all these coins when NO ONE wants them. they r being stored in a warehouse ( they r building another at $300m cost to taxpayer because they r running out of room) and won't finish making these coins til 2014 because it would take the congress to pass another law in order for the mint to STOP. now u wonder who is running this country, the inmates or the voters???? if we( the voting public) re-elect even one of these clowns in nov, we deserve what they do to us.
Jul 19, 2011 2:15PM
Considering the government is wasting Billions each year to make and then store these coins I think someone should get something out of them.  First we should stop allowing them to be minted in the first place.  It cost the people $568,000 a day to mint these and then 99% go directly to storage.  We are now in the process of building another vault for $750,000 to store them.  Wy make them in the first place.  Who is costing the government more those taking advantage of the loophole or the government itself in making them in the first place.  Keep on Flying the free way I say!
Jul 19, 2011 2:28PM

Love it.  Greedy PIGS at big banks spend countless hours and ways to screw their customers with fees.   Credit Card Companies screw customers over by raising interest rates for no reason, jacking up fees, and suddenly, making 25,000 "free tickets" almost impossible to find anymore (i.e. Bank of UnAmerica). 


Funny, when CONSUMERS find a way to "screw" over the pigs for once, then all of a sudden the pig supporters start crying "foul" and "unfair."  If you are so concerned about the taxpayers having to pay the dollars for the government screwing up this program (free shipping, for example) then you seriously just need to get out while you are still behind (before you get further behind).  This problem is a grain of SAND in the BEACH of problems that are given to the greediest and richest in this country.


*runs home to grab his credit cards and start "abusing the banks"*


Jul 19, 2011 1:02PM

For all of those people who say that there's nothing wrong with this, you're wrong: its costing the tax payers a WHOLE LOT. So, lets take the guy that got $300 worth of benefits for $15,000. That $300 is costing us:


- Cost to ship out 267 lbs of coins WITH INSURANCE (couple hundred bucks right there)

- 4% Credit Card Cost - $600

- Cost to have the coins shipped from the bank back to the reserve


So, that $300 of benefits probably cost the tax payer $1,000 - $2,000 and the coins just made a big circle.


Thanks guys!!!

Jul 19, 2011 1:47PM
Why there are some of the people that comment upset at the people that do it , They way I see it is I only make 33k a year and if I could work the system to my advantage to gain a couple of bucks or 300, i will do it too, how about the CROOKED politicians that put Hundreds of thousands or even millions un to their pockets at the tax payers expense, and they're constituents don't do nothing about it com election times. so please spear me the CRYING  about a few buck if you could get away with it and it is not Illegal more power to you.
Jul 19, 2011 3:14PM
hulk317 - this has been public knowledge since 2009 when the Wall Street Journal published it front page.  As you can see, it is still around 2 years later.
Jul 19, 2011 2:17PM

This was a bad decision by congress to allow this and they should put a stop to it immediately.


If they are serious about waste and abuse they should stop the production of pennies which cost more to produce than they are worth!

Jul 19, 2011 3:21PM

Why does everyone think the banks & credit card companies are getting screwed. They charge a percent of the transaction to the mint. The tax payers are covering the full cost and the card companies win too.

Jul 19, 2011 2:19PM
The U.S. Mint sells the coins at face value, using taxpayer money to cover shipping and handling costs.


So basically they are scamming the taxpayers into paying for their flights.  How wonderful.  I would bet you a shiny $1 coin that some of these people are the same ones that are fanatical about excess government spending...

Jul 19, 2011 12:58PM

The U.S. Mint sells the coins at face value, using taxpayer money to cover shipping and handling costs. If you want to buy $1,000 in coins, you simply pay $1,000 on your credit card and wait for the shipment to arrive in the mail


So the taxpayer is getting screwed because it's their money that pays for shipping and handling.

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