9½ Weeks: The Float Rule In the Real World
This is likely the latest anyone has written a post about #MileMadness, as you’ll see this is a real update on spending that occurred in March. I’m sharing it to hopefully show how good ideas can turn bad and how important the float rule can be.
Some of you might remember that little tournament called #MileMadness which took place a few months ago. I’m updating my experience with one particular spending technique today, a full 9 and a half weeks after the tournament ended.
I’ve chronicled my experiences during the contest in an interview on Matt’s site, but I kept from openly discussing the Vanilla Reload Refund angle until after the contest was over. I’ll talk a little more freely about it here since VR’s are on life support for most of us. If you’re still able to buy them they are available to be refunded, but take my experience as a cautionary tale.
VR: A single Dipped Cone
I’ve often talked down about VR. However, I decided to purches them as part of my March spending strategy. I crafted a plan which would obey the rules put in place, and hopefully keep as much money in play as possible. My two biggest goals for the tourney were not paying purchase fees, and being able to cash out purchases without setting foot in a Wal-Mart (at night).
The rules of the tournament stated that a company guaranteeing you a payout would be as good as cash in hand the next day. The example in the rules was selling of a gift card; Once you had a promise of a check you could reset that amount of money the next day, even though the check might take a week to reach you. For VR I took this to mean that once I clicked refund, and Incomm promised a check, my cash for the tournament was free the next day. The judges agreed, and I spent March acquiring and refunding a fair number of these cards.
Beware the Float Rule
I’ve been playing this game long enough to know to obey (and fear) the float rule, which states that:
“If tomorrow your ability to cash out purchases went away would you have serious issues with paying your credit card bill? If the answer to that question is yes–you bought too many. See: MMR.“
I ran a test and refunded one VR, and about a week later a check came. One VR refund took a week, and so it would make sense that I could refund as the contest went along and have a steady stream of checks coming in. This was a terrible estimate of how the refunds would scale.
You need to always plan for the worst with the float rule. One single request doesn’t raise too many flags, but massive numbers like I was planning on refunding would certainly cause paperwork issues. I was expecting phone calls from Compliance Department mangers, and possible having to explain why, if I had no way of using the VR, I continued to buy and refund so many.
My answer whenever I’m asked why I’m doing what I’m doing is the simple truth, I do it for the miles.
With the float rule in mind I limited my purchases of VR to what I was comfortable floating. I assumed the wait to receive checks would be longer than the amount of time I had to pay my CC bills off. In my mind I estimated a month’s wait. When I’m wrong, I’m wrong…and this one I missed by a mile.
My first Refund was requested on March 7th, and over the next week I refunded 19 VR. I slowed my purchases a bit the next week, but still refunded another 15 over the last two weeks of the contest. A partial check for some of the refunds arrived before the end of April. Not Bad! My last refund was done on March 27th. If the timeline of the first check was followed I’d have the balance of my cash in Early to Mid-April.
9½ Weeks Later…
Only just yesterday did my check for all the rest of my refunds come in the mail, 23 in total. Incomm took their sweet time paying me my money. In their defense, I did get all of it back, every penny including my purchase fees. However they made me wait 9½ Weeks from the date of my last refund. In a way they received a 9-12 week interest free loan from me, and I had this money out of play for April and May–which meant I had to work around this in my spending.
There’s a happy ending to this story; all my money is back home, sleeping soundly. I knew going into this that my cash would be tied up, and it could be tied up for quite some time. I limited myself to what I knew I could float–and I’m writing this post to hopefully show you that when things go bad they can go very bad.
Would I have refunded so many of these if not for the tournament? No, probably not. But going into it I wanted to also use the information gained for future spending. Sadly, VR died right at the end of March, but the lesson to be learned from it can hopefully extend to many more of you, and not just to VR.
Whatever you’re putting your money into, whatever the technique to earn miles, never forget you’re spending real money. Matt wrote a great post about Manufactured Spending leading to debt, and I suggest you read it if you haven’t already done so.
Limit your spending to what you’re truly comfortable living without for 3 months (or more). You never know when you’ll have to spend Another 9½ Weeks without it.