Frequent Flyer Credit Card Rewards for Coin Purchases Headed for a Hard Landing

A government program designed to introduce dollar coins into circulation may unwittingly have paid for hundreds of free flights and hotel nights. The U.S. Mint recently launched a website offering free shipping for collectors and merchants who use credit cards to order rolled coins directly from the government. According to a recent Wall Street Journal report, a handful of the Mint's web visitors realized that they could earn significant rewards from their credit card companies by ordering thousands of dollars of coins, then depositing them in the bank to use for immediate payment.

Journal reporters found dozens of online forum participants bragging about converting thousands of dollars of Mint purchases into a variety of rewards and rebates. While not illegal, the plan strikes lawmakers and loyalty program managers as problematic. Banks often fund credit card loyalty rewards through interchange fees. Ultimately, taxpayers foot the bill for transaction and shipping costs of up to three percent per order.

Now that the coins-on-credit program has been targeted by some lawmakers as wasteful, many personal finance experts predict new restrictions on the Mint's direct fulfillment operations. Payment servers may flag frequent flyer credit cards as ineligible forms of payments, while credit card issuers themselves may opt to make coin purchases ineligible for rewards.