Man Uses 'Unique Idea' To Earn Rs 2.17 Crore In Credit Card Rewards. Here's How He Did It

Some stories are incredibly intriguing and this is one of them. It's normal for people to get rewards when making payments through their credit cards. Though, the sum earned is usually insignificant, but a US physicist has earned a whopping $300,000 (Rs 2.17 crore) using his sharp mind.

According to a report in The Wall Street Journal, Konstantin Anikeev was interested in earning from credit cards and had been doing so since 2009. What started as a mere interest gradually turned into a hobby, which started earning him big dollars.

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How did he manage to earn $300,000?

Konstantin, as per the report, cleverly used a 'unique idea' to get rewards. He started buying a large number of gift cards from his credit card. He would first buy a gift card and then encash it. He would then deposit this money back into his bank account and then pay the credit card bill. These rewards from the bill payments were his earnings.

Put it this way, at 5% cash back, there¡¯s $50 generated from every $1000 ¡°spent¡±. When you spend millions and then convert it back to cash to pay the bills, it adds up, even if you incur $5-$10 transaction fees.

Also read: Credit Card Purchases Trigger Chemical Reaction In Brain Similar To Addictive Drugs, Says Study

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Here's where it gets really interesting. The credit card rewards are usually non-taxable. Therefore, if you spend a million dollars like actually spend a million dollars, and earn 5 million points back, the tax authorities won't be digging you as if that 5 million point is your income. It¡¯s not income, it¡¯s rewards or a rebate.

Goods purchased are taxed, as is your income, so your rewards earned for being a savvy consumer and earning a good rebate are not.

Over the years, Konstantin earned $300,000 (about Rs 2.17 crore) repeating this trick.

Meanwhile, seeing his income rise exponentially someone reported this to the US Tax Department. After which an investigation was carried out.

The case was referred to court where Konstantin arrived with a tub full of gift cards and defended himself by saying that the rewards were not his income but discounts and cashback given to him by the credit card companies.

Also read: We Are Eating And Drinking As Much Plastic As A Credit Card Each Week, Reveals A Shocking Study

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Hearing arguments from both parties, the court deemed that credit card rewards and other points are simply rebates and aren¡¯t taxable, so nothing changed there ¨C kind of. The judge, via a split decision also simultaneously ruled that buying money orders or reloading gift cards with a credit card could be taxable.

It therefore was of the opinion that Anikeev would have to pay taxes on the portion of the rewards earned, based on the many purchases where he was simply purchasing monetary instruments specifically for the purpose of generating income, not goods.

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