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?

  • Your "loophole" nets you $25 cash back instead of $5. Woohoo.
    – D Stanley
    Commented Sep 23, 2021 at 21:26
  • Weren't you ever young and near broke? :->) Commented Sep 23, 2021 at 21:44
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    Never broke enough that I could spend $500 and be excited about getting $20 cash back. I could probably find more than $20 in savings just by shopping wisely.
    – D Stanley
    Commented Sep 24, 2021 at 2:33
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    Yes, this is a "loophole" , in the sense that it will work, until the bank catches on, cancels your account and forfeits your points. They can figure it out using heuristics based on your spending patterns, or, if the merchant is using it, on "Level 3" data. "Level 3 data refers to providing specific line item details at the time of a purchasing card transaction." So the store may tell Mastercard (and Citi) the exact items you have purchased, and Citi will then use this to shut you down. And may even charge you "cash advance" fees, adding insult to injury. @Zuriel
    – Tiberia
    Commented Oct 14, 2021 at 1:11
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    In practice Citi has not been known to shut people down for this type of activity, and likely has incorporated it into their risk/profitability models for this card. However, they have shut down some airline credit cards for similar loopholes. Other banks, notably American Express, aggressively investigate and shut down cardholders and take back earned points/cash back for this exact type of spending loopholes. TLDR. You can do it, but expect that it won't last forever, and the amount you'll make off this card is probably not worth getting blacklisted.
    – Tiberia
    Commented Oct 14, 2021 at 1:16

2 Answers 2


Credit card offers like this generally don't apply to gift cards. The card you are looking at specifically mentions "Only Purchases Earn Points":

You’ll earn Points for purchases using your Card Account, minus returns and refunds. Balance transfers, cash advances, checks that access your Card Account, items returned for credit, unauthorized charges, interest and account fees, travelers checks, foreign currency purchases, money orders, wire transfers (and similar cash-like transactions), lottery tickets, gaming chips (and similar betting transactions) do not earn ThankYou Points.

There is a list on that page of categories of purchases that qualify and gift cards are not among them.

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    The thing is, I think the bank will only know how much money I spent in a store, instead of what I have purchased. I doubt if the bank will ever know, or care, that I am purchasing gift cards.
    – Zuriel
    Commented Sep 23, 2021 at 21:17
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    @Zuriel That page also describes how the merchant category codes are automatically applied to purchases at the point of sale: "For example, your purchase amount would not be included in the restaurant category for purchases at a restaurant located within a retailer if the restaurant is assigned a “retailer” code instead of a “restaurant” code." So it's entirely possible a purchase of gift cards will ring up without the appropriate codes. Commented Sep 23, 2021 at 21:29
  • @jeffronicus Depends on the retailer. Amex has the same language, but my grocery store doesn't send Level 3 transaction data to them.
    – ceejayoz
    Commented Sep 24, 2021 at 12:58
  • I don't see "gift cards" in that list of things that "do not earn ThankYou Points"?
    – stannius
    Commented Sep 30, 2021 at 20:30
  • @stannius As noted in Eric's answer, they do warn users that they can take away all your points for what they deem to be "suspicious activity, as determined by us in our sole discretion," including "Using your Card Accounts or Citibank Checking Account in an abusive manner for the primary purpose of acquiring Points." They clearly want you to paying for stuff. Commented Sep 30, 2021 at 22:20

This may indeed be a loophole if you can purchase gift cards at an appropriate category of store with the credit card AND ensure that your spend at that category of store will be the largest on the credit card each month. However, 5% of $500 is $25, so your maximum potential reward each month for exploiting this loophole is not very big. There is also language in the terms and conditions that would allow CitiBank to take back any points you've accrued from gaming the system if they (in their sole discretion) believe you are gaming the system: https://citicards.citi.com/usc/LPACA/Citi/Cards/CustomCash/legal/index.html

Fraud, Misuse, Abuse, or Suspicious Activity

If we see evidence of fraud, misuse, abuse, or suspicious activity, as determined by us in our sole discretion, we reserve the right to take action against you. This may include, without limitation and without prior notice, any or all of the following:

  • Taking away your accrued Points
  • Stopping you from earning Points
  • Suspending or closing your Citi Account or ThankYou Account
  • Taking legal action to recover Rewards redeemed because of such activity and to recover our monetary losses, including litigation costs and damages

Some examples of fraud, misuse, abuse and suspicious activity include:

  • Buying or selling Points
  • Repeatedly opening Card Accounts or Citibank Checking Accounts for the primary purpose of acquiring Points
  • Using your Card Accounts or Citibank Checking Account in an abusive manner for the primary purpose of acquiring Points
  • Using your Card Account other than primarily for personal, consumer or household purposes
  • Points redemptions that you didn’t authorize
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    But how will the bank ever know I am purchasing gift cards?
    – Zuriel
    Commented Sep 23, 2021 at 21:21
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    @DStanley, even if I get caught, what is my offence? What's wrong with purchasing gift cards in a grocery store?
    – Zuriel
    Commented Sep 23, 2021 at 21:57
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    @Zuriel They will likely just take away your points and cancel your card. The important part is that they don't need to prove anything. If they suspect fraud, they are free to take action. Credit card companies are in the business of making money, not losing it.
    – Eric
    Commented Sep 23, 2021 at 22:15
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    @Eric, I don't see why they will lose money here. For example, what's the difference (to credit card companies) between me purchasing $500 worth of gift cards in a grocery store and purchasing $500 worth of seafood in this same grocery store? In either scenario the credit card company will make the same profit (right?).
    – Zuriel
    Commented Sep 23, 2021 at 22:29
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    @Zuriel - It's quite plausible that their systems will flag "This person is buying exactly $500 in this grocery store every month", and someone from Citi will call up the store and ask for all the information about the transaction. If everything turns out legit, that'll be the end of it and you'd never know. But if you're laundering money, or doing cash back shenanigans or otherwise abusing the system, they'll just cut you off. Will it actually trip their systems? No idea. But it's a suspicious pattern. Especially if that's the only time you use the card.
    – Bobson
    Commented Sep 24, 2021 at 6:44

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