By: Steve Lobell –
For those of us in the mileage earning/creation game, we’re always on the lookout for the next hot way to create the boatloads of miles we’re going to need to fund our outrageous free travel lifestyles. Over the past several years, we’ve taken advantage of enormous credit card signup bonuses, dollar coins from the US Mint, Vanilla Reloads and the Bluebird card, all of which are no longer doable. Well, I think I may have found the next one. It’s a bit riskier than some of the others above, but much more hassle-free in a lot of ways.
First, a bit of backstory. For the past several years, I’ve been a member of the AMC Stubs program, which is the loyalty program of AMC theaters (full disclosure- if there’s a loyalty program for something, I’m probably a member). But the program itself is not the important point here. About three months ago, AMC had an IPO and the company went public. Interestingly enough, they offered their loyalty customers the opportunity to buy up to $2500 worth of stock. As IPO’s are not usually open to regular people, I thought this was pretty cool, and followed the steps to reserve my shares.
It turns out that the IPO was being managed by a company called LOYAL3, which at that point I had never heard of. In any case, when I got to the checkout page on LOYAL3’s site, there was an option to buy into the IPO using a credit card! I had no idea how this was possible, and I still don’t really understand how LOYAL3 can afford this, as they have to be paying a fairly significant percentage (probably 3%) to their merchant services provider who processes the credit cards. To make things even weirder, they don’t charge any fees at all on buying or selling the stock, which as far as I know, makes them the only online brokerage to do this. Apparently, they are paid directly by the companies whose stock they sell, but I don’t know how this covers both the brokerage and credit card fees.
So now I was pretty intrigued. Did LOYAL3 only offer IPO’s? Nope. Turns out that they actually have approximately 50 other companies that you can buy shares in. All of them are name-brand companies, like Apple, Amazon, Berkshire Hathaway etc. And all of them can be bought with a credit card!
So what was the catch? There had to be one. And, of course, there was. More than one, actually. First off, you can only buy up to $2500 per month, per stock. You can set up a monthly plan to do this automatically, but it’s capped at $2500 a month no matter what. Second, it was only Visa or Mastercard. No running up huge balances on my Starwoods Amex, or my Amex Premier Gold Rewards Card, which have higher credit limits than any of my Visa or MC’s. Third, and most importantly, the trades were not executed like any other brokerage site I have ever seen. Once you put in the order, it could take three or four days before it was filled. And when you were ready to sell, if you put in an order before 2PM, they guaranteed that it would get sold before market close at 4PM, but if you got it in after 2, it would likely have to wait until the end of the next business day. So clearly, this was not going to be a simple mileage play. There is no easy day trading here, where you are holding a position for just a few moments before selling. You need to actually believe in the stock you are buying in order to do this.
All that being said, if you do enjoy a bit of risk, or if any of the 50 or so stocks that are available on the site would appeal to you regardless, then this can be an incredible play. Theoretically, if there are 50 stocks available, and you buy $2500 worth of each one every month for a year, you can earn 1.5 Million Miles annually! Additionally, Loyal3 runs a few IPO’s a year, like the one I participated in for AMC, where you can typically buy up to $10,000 worth of stock. In fact, they just ran another one last week for Santander USA, which I also participated in. The IPO priced at $24, and hit $26 on that same day, when I sold out of it. So that’s $10,000 on my Chase Sapphire Preferred card, or 10,000 Ultimate Rewards points, which I estimate to be worth 1.5 cents each, plus approximately $830 in gains from the appreciation of the stock. Not a bad day at the office!
After I sold the stock, it took a few days for the funds to be available in my Loyal3 available funds account, but once the money was available, I just transferred it right into my checking account and paid off my card. It really was a very simple process, and the Loyal3 site is incredibly well designed and easy to use.
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