February 2020 Update: As of February 15, 2020 the Rakuten card no longer earns 3x additional points for gift card purchases at GiftCards.com, GiftCardMall.com, and Raise. The card now only earns 1x, which combined with the standard Rakuten portal rates, results in a 2%/2 Membership Reward point payout.
For these reasons, the Blue Cash Preferred Card is now the best Membership Reward earning card to use for manufactured spending. The card earns 2x points on up to $50,000 in purchases each year.
Alternatively, the Citi Double Cash Card earns 2% cash back, uncapped. Cash back earned from the Double Cash can be converted into ThankYou points if you have a Citi Preferred or Prestige card.
The Rakuten card still has valuable ancillary benefits (price protection, return protection, purchase protection, and extended warranty), described in my original post below. Therefore I believe the card is worth keeping for general online shopping or online purchases made for buying groups.
What’s the best card for earning Membership Reward points?
Most people would probably say the American Express Gold Card. The Gold card earns 100,000 Membership Rewards points each year if you full advantage of the 4x points on up to $25,000 in purchases at grocery stores. Unfortunately, that’s only useful if you have a grocery store nearby that sells Visa or Mastercard gift cards.
Luckily, there is another card that allows you to earn Membership Reward points at the same rate, without an annual limit, and without schlepping to a grocery store. Ironically, it’s not even an American Express card.
It’s the Rakuten Credit Card.
What is Rakuten?
Rakuten, formally known as Ebates, is a shopping portal that provides cash back or Amex Membership Reward points on purchases made online or in-store. The portal consistently offers some of the best cashback rates, especially when they are running one of their frequent promotions. There’s no added cost to shop through Rakuten, and you can use any payment method to earn the portal cash back. However, using some coupon codes, such as those not listed on Rakuten, may preclude you from earning rewards.
Activating your portal rewards when shopping is as easy as clicking through the link on Rakuten.com, installing one of the Rakuten browser extensions, or shopping through the Rakuten mobile app. Earning cash back from in-store purchases requires you to add a card to your Rakuten wallet and enable it for in-store cash back. Then link one of the available in-store cashback offers to your saved card.
Besides helping you save on purchases you were already planning to make, Rakuten can be useful for reselling, buying groups, and manufactured spending. The additional cash back or points from Rakuten can often make the difference between a resale being profitable or unprofitable. Several merchants that sell Mastercard and Visa gift cards online are on Rakuten, including Staples, Gift Card Mall, and GiftCards.com.
The Amex Rakuten Partnership
Since early 2019, Rakuten has made it possible to earn Membership Reward points instead of cash back. All you need to qualify is an active personal or business card that already earns Membership Rewards. Unfortunately, there is still no ability to convert an existing Rakuten cashback earning account to one that earns Membership Rewards. However, it’s easy to sign up for a new Rakuten account and select Membership Rewards as your preferred reward currency.
All the cashback rates available on Rakuten tie directly to the Membership Reward earnings rates. For example, instead of earning 10% cash back through the portal, you would receive 10 Membership Rewards per dollar spent.
Rakuten Card Benefits
The Rakuten Credit Card (previously branded the Ebates Credit Card) has been around since late 2014, but only recently gained popularity following the integration with Membership Rewards.
The card has no annual fee and earns rewards for your Rakuten account.
If your Rakuten account earns cash back, then the card will earn cash back. Alternatively, if you signed up for a Rakuten account that earns Membership Rewards, then the card will earn Membership Rewards. If you have both types of accounts, you’ll want to login to your preferred Rakuten account and use the email associated with that account to apply for the credit card.
If you made a mistake and discover the wrong account is linked, you should reach out to Synchrony and request they switch the associated account. Several cardmembers report success with this, so if Synchrony tells you this is not possible, politely hang up and call back.
Regardless of the type of rewards earned, they will be added to your Rakuten rewards balance and paid out quarterly when you receive your “Big Fat Check” from Rakuten. Currently, those payout dates are May 15, Aug 15, Nov 15, and Feb 15, each paying earnings accumulated during the previous quarter.
Earning Rate: Extra 3% / 3 points through Rakuten
The Rakuten card earns 3% cash back or 3 Membership Rewards points when using the card on purchases made through Rakuten.com or in-store Cash Back Offers. It also receives 3%/3 points on Rakuten Travel and Rakuten Hotel purchases, both of which exclusively focus on Japan. The additional 3%/3x earned through the card is on the entire purchase, whereas regular Rakuten portal earnings are only rewarded on the order subtotal before taxes and shipping.
While the card is excellent for Rakuten-based spending, it isn’t beneficial for anything else. The card also earns 1% cash back or 1 Membership Reward point on all other purchases, again depending on the type of Rakuten account linked. You can certainly do better than 1% or 1 point per dollar with a different credit card.
There is no limit on the total amount of cash back or points you can earn from a particular store or in total.
Manufactured Spending with the Rakuten Card
That 3x / 3% earn rates on Rakuten portal purchases means you can shop at Giftcards.com or GiftCardMall.com and earn 4x membership rewards on your purchases (3x from Rakuten card + 1x standard Rakuten portal payout).
That can be a great source of manufactured spending, especially if you do not have a local option for buying Visa or MasterCard gift cards that earn 4x or 5x.
The Chase Ink Preferred previously earned 3x at Giftcards.com, but currently only earns 1x. You could still use a Chase Ink Cash or Ink Bold card to earn 5x on Staples.com $300 Visa gift cards. However, those cards come with a net fee of 2.98%. Alternatively, if you purchased the maximum amount of MasterCards from Giftcards.com, your total costs would come out to 1.72%.
Paired with an inexpensive way to liquidate the gift cards, the Rakuten card can allow you to purchase Membership Reward points for less than 1 cent per point.
Membership Reward points can be liquidated for 1.25 cents each if you have the Schwab Platinum card. They can also be redeemed at 1 cent per point through the Amex Travel Portal. If you have a Business Platinum card, you can take advantage of the 35% rebate on flights booked through the travel portal
Of course, the best use of Membership Reward points is usually transferring to one of Amex’s airline partners to redeem for international business or first-class awards.
The Rakuten credit card comes with a whopping $10/1,000 Membership Reward Point signup bonus after your first purchase. Undoubtedly, one of the highest signup bonuses around.
All joking aside, the card’s value is certainly in its 3%/3 points of extra earning capacity on Rakuten portal purchases and not in any of the other “benefits.”
Price protection, Return protection, Purchase protection, & Extended Warranty
In addition to being one of the best-earning credit cards, the Rakuten card also comes with a slew of shopping benefits when you use your card to purchase items:
- Price Protection: If you see a recent purchase available at a lower price within 60 days of purchase, you can get reimbursed for the difference in price. The Rakuten credit card provides price protection for up to $550 per item and $2,500 per year. That is among the best coverage of all credit cards that still offer price protection.
- Return protection: You can get reimbursed for the cost of an item if the store you purchased from will not accept a return within 90 days of purchase. The Rakuten card provides return protection up to $250 per item and up to $1,000 per year.
- Extended Warranty: Adds an additional year of warranty coverage for products purchased with a manufacturer’s warranty of three years or less. The cad covers up to $10,000 per claim and $50,000 per cardmember account.
- Purchase Security: This benefit covers new items purchased with your card against theft or damage during the first 90 days, up to $1,000 per item and $50,000 per cardmember.
For more details on the benefits above, see the Rakuten card benefits guide.
Approval Requirements for the Rakuten Credit Card
The Rakuten Credit Card is issued by Synchrony Bank. Luckily, Synchrony is not that difficult to get approved for a card with. The bank does not have any strict requirements similar to Chase’s 5/24 or Citi’s 6/6/ that will preclude you from getting approved if you signed up for too many other cards recently. As long as you have a decent credit score (700+), you have good odds of getting approved.
With that said, there is one step you can take to drastically improve your approval odds with Synchrony.
Freeze your ARS and Sagestream Credit Reports
When applying for a Synchrony card, it is highly recommended that you freeze your Sagestream and Advanced Resolution Services (ARS) credit reports before applying. Freezing is a good idea, even if you already have an existing Synchrony-issued credit card.
Many applicants report initially being denied for the card, freezing the two reports, re-applying, and getting instant approval.
I received a confirmation letter from SageStream about two weeks after sending my request.
On the other hand, ARS is still stuck in the stone ages. They only have a form for you to unfreeze or re-apply a freeze after you have previously requested one. If you have never requested a security freeze with ARS, you will need to either fax or mail in a request.
Advanced Resolution Services, Inc.
5005 Rockside Rd, Suite 600
Independence, Ohio 44131
Toll Free: (800) 392-8911
(Mon – Fri 9am – 5pm ET)
Fax: (216) 615-7642
While they do not provide a list of required documents on their website, they sent me a letter outlining the required items after my first request was insufficient.
Freezing your ARS credit file requires:
- A signed, written request
- Your full name
- Your address, including apartment number, if applicable
- Your telephone number, including area code
- Your SSN
- Proof of your identity (such as a Passport, Drivers License, State ID, Global Entry card, etc.)
In my case, they also required a copy of a W2 or pay stub showing my full name and social security number.
It took over 9 weeks to receive a response from ARS.
However, I took a chance and did not wait around for a response from ARS before submitting my application for the Rakuten card. I only waited three business days after sending in my freeze requests. Luckily, Synchrony pulled my credit report from Transunion, and I was instantly approved.
If you want to be careful, I would wait to apply until you receive verification from both ARS and SageStream that your file has been frozen. Alternatively, if you do not wait for confirmation, understand that you may need to reapply at a later date.
Synchrony does not appear to understand the concept of a reconsideration call. Most major banks (Amex, Chase, Citi, Discover, Capital One) will offer to take another look at your application if you call them after being denied. Unfortunately, my understanding is that Synchrony will just instruct you to submit an entirely new application (resulting in another hard pull on your credit report).
The good news is, if you receive instant approval, you will be given a temporary card number to use until your actual card arrives. Usually, this temporary card comes with a $1,000 limit.
Rakuten Credit Card Shutdown Risks
There are a few risks to keep in mind if you are considering using the Rakuten Visa Credit Card for manufactured spending.
Excessive Gift Card Purchases
If you’re consistently using your card to buy prepaid gift cards, there’s always a chance Synchrony or American Express could shut down or freeze your accounts. There are reports, albeit very few, of Synchrony reaching out to Rakuen Credit Card holders who put a significant amount of gift card purchases on the card. Granted, I have not seen any reports of a user’s entire account being shut down. It’s safe to say there is a limit to what Synchrony will tolerate.
American Express now has a stated policy that purchases of gift cards using their cards do not qualify for Membership Reward points. While this policy is not always strictly enforced, it’s clear American Express is trying to crack down on manufactured spending. It is unknown whether this policy will ever have any impact on the Membership Reward points earned through Rakuten.
If you are using your card to purchase thousands of gift cards each month, it wouldn’t be a bad idea to add in some other purchases from places besides Giftcards.com or Gift Card Mall.
Cycling your Credit
Cycling your credit is when you run up a balance on your card and pay it off during the same statement period. This practice can attract greater scrutiny and usually is not a good idea with any card issuer. Realistically, cycling once per statement period should not cause any issues. However, if you are spending 3-4x your credit limit in a statement period, you are much more likely to be called out.
Synchrony tends to provide relatively low credit limits compared to other issuers. Rather than cycling, you’re much better off starting slow and requesting a credit limit increase after three months of having the card.
Negative Credit Balance
Overpaying your credit can also lead to scrutiny from Synchrony, especially if you make multiple payments in a statement period coming from different sources. As with the other actions, there’s nothing inherently wrong with this or in violation of Synchrony’s terms. Unfortunately, card issuers often have a hard time distinguishing between someone merely trying to earn a lot of points and someone legitimately trying to perform fraud.
The Rakuten card can be an extremely valuable card for earning Membership Reward points. It can take some time to get approved, especially if you go through the recommended process of freezing your credit reports. However, with the ability to earn 4x points or cash back on Mastercard and Visa gift cards each month, it clearly deserves a place in your wallet.