I have recently applied for a new credit card that and cardholders can get 5% cash back on purchases in their top eligible spend category each billing cycle, up to the first $500 spent (then 1%). The rule seems crystal clear, but there seems to have a loophole.
Say in a particular month, I plan to spend $100 on groceries, $100 on petrol, $100 on Amazon, $100 on home improvement stores and $100 on Walmart. What I can do is go to a grocery store and purchase five $100 gift cards, one for each category. Then I will use these gift cards for my expenses. The bank thinks that I have spent $500 in only one category and will give me 5% cash back for all the $500 that I spent, though I will actually spend this $500 in different categories.
Is this a loophole? Is this strategy legal or a fraud? Is it a good idea?