In this story I wrote for CreditCards.com on which cards personal finance experts use themselves, Liz Pulliam Weston, MSN Money columnist, and Ron Lieber, NY Times columnist, are both whip-smart and serious about leveraging their credit cards rewards programs.

In the course of my conversation with Lieber, I asked something about how the card issuers figure out which rewards programs will make them the most money. He said:

Despite more than a decade of watching this stuff pretty closely, I haven’t yet figured out exactly where the breaking point is for the issuer. When I see a new deal, I can’t always tell in advance whether it’s sustainable, or will attract so many gamers it won’t work.

Gamers are those who, like Pulliam Weston and Lieber himself, have the best credit scores and who aren’t in hock to the industry. In other words, those in the position to actually make money back from their cards in the form of free airline miles, hotel stays, cash back, and merchandise. (It helps if you travel a lot.)

Before they had a child, for example, Lieber and his wife were able to parlay 280,000 frequent flyer miles into first-class, round-trip tickets to Australia for their honeymoon. (I wonder which he’s most wistful for now — the freedom before child, or the days before air miles started to disappear.)

Talking to them was eye opening — I actually had to look up the difference between a “charge card,” a term I hadn’t heard since I don’t know, the ’80s? Which is of course what American Express’s best cards are, versus a plain old “credit card,” which the rest of us schmoes use to carry a life-draining balance. Only two of the six experts I talked to didn’t carry American Express.

David Bach, not in the article, also carries American Express. Suze Orman? Never found out. She never consents to be a panel of experts, said her p.r. rep (who was in fact, according to this story, probably her partner). She prefers to be the expert. Indeed.

While I was reporting this story, I was envious. Aspirational. But the more I read about the behind-the-scenes news on the new credit card legislation, the more I realize — or am reminded, as we all have been with stark clarity — what a giant shell game it all is. Nobody’s getting any rewards, or cash back, or zero interest rates for free. Your 2 percent cash back reward is somebody else’s 27 percent interest rate. Whatever the rules, it’s ultimately the credit industry’s game.

What surprised me most was talking to Chris Farrell, public radio’s Marektplace Money correspondent. Like most of the other experts, he travels frequently for business. And, as a former merchant seaman, has raved about a financial services firm open only to those in the military (USAA) that issued his Master Card. But he’s not that interested in leveraging his cards for perks.

Two years ago, he says, he switched to paying for everything mostly in cash or with his debit card. “I tried a Microsoft Money program, and it didn’t do anything for me,” he says. “I tried the envelope thing, and that worked for a little while, but what really worked for me is converting to a debit card and cash and monitoring my checking account online.”

“Psychologically it’s easier to spend more on plastic. Moving to cash works for almost everyone I talk to who is trying to cut down on spending.”

I have to think that the current trend this way, and not some slight leveling of the playing field, is the biggest threat to the credit card industry.

Related posts:

1. Credit News Roundup: What The New Law Means for You Your Money: Guide to New Credit Card Rules, NY Times...
2. Pay Off Debt First, or Save? When I first started this blog, I envisioned socking money...
3. Where We Are Now, and How We Got Here If you’ve got a little time, I have seen no...
4. Credit Card Rate Hike? Take These Steps To Negotiate A reader writes: Like most folks, we have lived on...

Tags:   cash economy · Chris Farrell · creditcards.com · Liz Pulliam Weston · Ron Lieber1 Comment