Here’s the premise: You love to travel, especially for free, and your credit card company rewards your purchases with frequent-flier miles. Here’s the problem: Purchases aren’t cheap. Here’s the diabolically simple solution: Use your credit card to buy money, use the money to pay off the credit card bill, and see the world on the house.
Thanks to a persistent and mostly unsuccessful government effort to promote the everyday circulation of dollar coins, savvy “travel hackers” around the country are following this loophole all the way to Bora Bora.
After ordering thousands of one-dollar coins, shipped for free and with tragic enthusiasm by the US Mint, schemers turn around and deposit the coins in their bank account, sometimes without even removing them from their packaging, and then start making arrangements for someone to feed the cat.
"We've used them to go on trips around the world," said Jane Liaw, a 35-year-old public health researcher and science writer in San Francisco, as reported by NPR. She added that she and her husband were currently planning trips to Greece and Turkey, "all on miles and points."
Although the dollar coin scheme is totally legal, it may not be totally harmless. Travel enthusiasts who are swapping coins for miles at a Pac-Man addict pace are contributing to an already towering heap of unwanted one-dollar coins in Federal Reserve vaults.
The ever-swelling backlog of superfluous coinage is partly the result of a 2005 act of Congress that required the continuous minting of one-dollar coins in spite of a general lack of public demand. So far, there is about $1.2 billion worth of golden dollar coins languishing in Federal Reserve vaults, and by the time every president has his face on one, that number could be $2 billion.
The US Mint started to catch on to the frequent-flier mile scheme when they noticed that a few unusually loyal customers were repeatedly ordering vast quantities of one-dollar coins. NPR reports that, according to Mint spokesman Tom Jurkowsky, the top 20 customers bought between $219,000 and $696,000 worth of the coins. Officials also began taking note of all that untouched Mint packaging accumulating in banks.
Jurkowsky told NPR that the Mint responded by sending letters to the outstanding schemers and imposing a strict order cap of 1,000 coins every ten days.
"It's not illegal," he said, as quoted by NPR, "But it's an abuse of the system. That's not what the system was set up to do. The system was set up to promote the use of dollar coins and we are simply trying to do the right thing here."
After the Mint got wise to the ruse, orders for the Native American dollar coin, a coin that bears Sacagawea’s resemblance and is only available directly from the Mint, saw a dramatic drop. They fell from 88.7 million in 2009, to 52 million in 2010 and 19 million so far in 2011.
