Liz Pulliam Weston

The Basics

People who charge everything

This high-wire strategy can offer tremendous rewards -- free trips, for example -- but it can damage your credit scores, and slip-ups will cost you money in fees and interest.

By Liz Pulliam Weston

One of Larien Koci's credit cards provided the Knoxville, Tenn., woman with $4,500 in free gas.

Boston resident Alex Perri's card has bestowed six free business-class trips to Europe.

Maury Malaise of Montgomery, Ill., saved $3,400 on the purchase of two cars with credit card rebates and has $1,300 banked for his next car.

Johnna Frantz of Hillsboro, Kan., used credit card rewards to buy a refrigerator, pave a patio, update her husband's wardrobe and get presents for relatives. Her next bonus: a new dishwasher.

Their payoffs may be different, but their strategy is the same: These "plastic warriors" are determined to charge everything they can to their credit cards so they can maximize their rewards. They don't carry balances -- paying interest would wipe out their benefits -- but they put every purchase and bill possible on their cards.

"We figure if we have to pay for something, we might as well be earning something in return," summed up Winston-Salem, N.C., resident Kelly Piercy, who charges utility, cell-phone and Internet bills, among others.

I'm a fairly recent convert to the ranks of frequent chargers. For years, I all but ignored the rewards programs attached to my cards. Then one program coughed up $600 in Visa gift cards for a single year's worth of spending. I was hooked and started actively looking for ways to turn more of my spending into rewards.

Fortunately, racking up rewards is getting easier as a growing array of businesses, utilities and government agencies accept plastic payments. Virtually all of my household and business bills are now charged automatically to credit cards, as are most of my other purchases.

The number of billers willing to accept credit cards has grown so quickly in recent years that these hard-chargers often express frustration when they come across one that won't.

"I can't pay my long-term-care insurance or the local garbage service with my credit card, which irritates me," said Marilyn Davis of Longview, Wash. "There are some services in town that don't accept credit cards, either, because of the (merchant fee they're charged by the credit card issuer) or because they are just not willing to admit it is the 21st century."

Home remodeling on a credit card

Maximizing rewards is so important to Davis that she made sure her contractor accepted plastic when commissioning a $40,000 sunroom addition. She had enough money tucked away in certificates of deposit to pay cash, but she preferred to earn rewards. Davis put each of three payments to her contractor on United Airlines Visa card, then paid off each charge a few days later with proceeds from the CDs. Her reward: a trip to see her aging father in Nebraska.

"The contractor was happy, (and) I got my sunroom and a first-class flight to the vacation Mecca of the Midwest," Davis said.

Rewards cards have grown from a handful of airline frequent-flier cards to a truly stunning array of cash-back, travel and points programs. Nearly 60% of credit card solicitations include some kind of rebate or rewards program, according to market research firm Synovate, and there are thousands of different programs from which consumers can choose.

As the offers have proliferated, so has the resolve of some card holders to squeeze every possible dollar, point or rebate from their spending.

Sometimes that means switching cards based on the type of purchase. Michel Washington of Owings Mills, Md., divides her spending this way:

  • Books, restaurant meals, music and movies go on a Citi mtvU Platinum Select Visa Card because it offers 5% back for those specific purchases.

  • Certain other types of spending wind up on Washington's Discover Card, which offers 5% rebates on spending categories that change four times a year. In the fall, the cash-back bonus applied to apparel; starting in January, travel will earn the rebate.

  • Just about everything else goes on his Chase Cash Plus Rewards Visa card, which earns 5% rebates on gas and 1% on all other purchases.

"I am one of those people who use credit cards for everything," Washington said. "If I ever end up someplace that only takes cash, I am in trouble because I never have more than $30 on me, and I will carry around that same $30 for weeks."

Eric Bair of Palo Alto, Calif., is even more gung-ho: He uses six rewards cards for his spending. In addition to Citi mtvU and Discover cards, Bair charges gas, grocery and drugstore purchases to a Chase Rewards Plus Visa, which offers 5% back on those purchases. He charges air travel to a Citi PremierPass, which gives three points for every mile flown. His RBS Custom MasterCard offers 5% back on a different spending category each month, and everything else winds up on his Orchard Bank MasterCard, which gives him a 2% on virtually every purchase.

Several of the rewards-mongers I interviewed said there are side benefits to charging almost everything: They find it easier to track their spending, for example, and many prefer paying one or two larger bills each month rather than several smaller ones.

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What to watch out for

But racking up rewards has its perils. Among them:

Interest rates on rewards cards are high. If you carry balances, you shouldn't use rewards cards because the hefty interest rates more than wipe out any benefits. Instead, transfer your balances to a good low-rate card and concentrate on paying off your debt. When you're in the position to pay in full every month, then you can go shopping for a great rewards card.

There is no one-size-fits all. Curtis Arnold of CardRatings.comconstantly is asked which is the best rewards card. There's no such thing.

"It depends on your personal circumstances, your lifestyles, your spending habits," Arnold said. Arnold, for example, isn't a big fan of airline-affiliated cards for most people because the annual fees offset the benefits for many chargers. But elite frequent fliers and international travelers can get good value from such cards. Likewise, Arnold puts most of his spending for his family of seven on an American Express Blue Cash card, but it's not a great card for people who don't charge several thousands dollars a month because its top rewards don't kick in until $6,500 has been spent. Finding the best card or combination of cards requires research and vigilance because:

The deals change constantly. One reader touted the great deal he got on his Citi Platinum Dividends Rewards card: 5% back on purchases made at groceries, gas stations and pharmacies. The only problem: The deal had quietly expired, and Citi had reduced the "everyday purchases" rebate on those categories of spending to 2%. He's looking around for another card.

The more generous the reward, CardRatings.com's Arnold said, the more likely it is to change. Consumers who want to play the rewards game for all it's worth have to invest at least some time in monitoring the deals.

Bair, the one with six rewards cards, makes a part-time hobby out of tracking his accounts and looks constantly for better deals. He thinks the $700 in rewards he has earned in the past two years justify his investment of time.

"I open every credit card offer that I get in the mail. I end up recycling the vast majority of them, but occasionally I find a good one," Bair said, such as the invitation-only RBS Custom Cash Card.

Bair also cruises the finance forum at FatWallet.com, where new and changing credit card offers are discussed.

Continued: Chasing rewards can hurt you

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