Credit Cards: Gaming the System!

In another thread the Wizard got me thinking about how to handle credit cards. Debt is bad, but eliminating high interest debt like credit cards is a smart move, and getting advice to do that is comparable to the gambling advice of avoiding high House Edge games like Keno.

I resent credit cards, because actually I would prefer not to have them. Because you *must* have them to really function in society today, I feel free to "game the system". So I do. Certainly I have never paid a nickel in credit card interest in the last 20 years except once when my wife forgot her payment on a discover card [since then I've taken over all that remembering business!]

I'm sure we all know some things we can do. Yes, I try to get cash back, but I go beyond that. Assuming we are all gamers, I'm curious what others here do to game the system, and does anybody else go to extra lengths ? I'll reveal what I do if there is interest.

I simply pay my credit card off as the first thing I do with each pay cheque. Rarely it takes two pay cheques, but I've normally planned that spending in advance.

By not spending above my income, life is simple.

I also get points/cash back, but that's a bonus rather than something I hunt for.

I could function with out a credit card if it wasn't for needing to fly to see the parent every so often. As it is, I use it as a convenience for myself.

No, I don't game the system. For me, credit cards are for the convenience of not carrying cash. That was the purpose they were originally created for. Except when I am on a trip involving casinos, I carry little cash, and I try to avoid coins as much as I can.

I now carry three cards: Visa, Discover, and AMEX. In the past half-dozen years, I have used Visa about a dozen times and Discover half that many, always at places that didn't accept AMEX, usually gas stations. I use AMEX fairly heavily -- a few thousand a month of personal expenses. I no longer have business expenses. I use an AMEX card that pays its bonus as frequent flyer miles -- probably not the best way, but it gives me plenty of miles that we use for plane tickets. I never pay credit card interest, but I do pay a $150 annual fee to AMEX. Each year when I pay it, they provide me a coupon for a free, round-trip, domestic airline ticket that I use for cross-country flight, so I view that as a negative net cost.

My card usage is intended to minimize the thought/effort involved in paying for my daily or travel expenses. Of course, I have the monthly bills direct debited so that I don't have to go to any effort to make certain they are paid on time. I do that with all my bills. All I have to do is make sure I have money in my accounts, and I track that like a hawk.

While I use the frequent flyer miles I earn with the card, any "gaming" of the system that required effort or planning would be contrary to the reason I use the cards. But as they say, different strokes.... YMMV.

I put everything I can on my card (which earns miles), then pay it off every month. There is an annual fee, but like in Doc's example, it comes with a discounted airfare ticket to use each year. So long as I use the ticket (never a problem) then I come out ahead.

btw I realized after posting this, that on a related matter the stock market going down today is related to the news that the Senate wants to regulate certain charges


http://www.emailwire.com/release/40458-DJIA-slid-122-lead-by-financials-MasterCard-Incorporated-CA-Inc-Visa-Inc-CRUS-JCP-NFLX.html

Not really sure what is meant by "Gaming The System".

The wife and I use credit cards, and, yeah, we don't always pay them off in full. We have our good and bad months. But if we're good for a couple months in a row, we can get them paid off.

"Gaming the system"? She keeps her eyes open and frequently transfers balances and gives me new cards to use. Usually it's because the current card's initial low interest period is ending, etc.

Doing this sort of thing can be tricky.

My brother had an argument with an AMEX rep for some reason. At one point he told her that if she can't help him, he doesn't want AMEX anymore. So she started pecking away at her computer. A minute later she says, "OK. Your account has been cancelled and you'll get a final bill in a couple days." He says that's not what he meant. She starts pecking away again, and finally says "OK, Your account was cancelled, and there's no way to revive it. So I opened a new account and you'll get cards for it in a couple days." Sure enough, he got the cards a couple days later.

You know how AMEX cards have that little thing on them that says "Member since" and the year? Yep. He lost all those years! He couldn't get them back.

Bottom line: AMEX plays the system to their advantage.

Quote: DJTeddyBear

Not really sure what is meant by "Gaming The System".

herewe have a great numberof people offering credit card servicesbacked by either Visa or Mastercard. Many offer long term 0% interest for fixed terms. I take gaming the system to mean switching cards when the 0% interest period ends, thus not paying any interest on your credit cards.

Understood.

Based on that, my wife 'games the system' quite well.


Then again, she is also the one at a casino who will find the one machine that always pays off. You know. The ATM. Sigh...

I read a story where the fed was selling $250 worth of dollar coins for $250 and sending them with free shipping. So people would buy lots of them with there credit cards and getting the point/miles and then turn them in at there bank and pay the bill.

I use the Costco American Express, which gives me some percentage rebate on everything I purchase. The rebate has to be used at Costco. I forgot what the percentage is, but every year I get a voucher for about $400. I also have a policy to not make credit card purchases under $300 or so. I figure there is some small probability with every transaction that my information will fall in the wrong hands, and that person will use it to steal my identity or make false charges.

I knew somebody who used to transfer balances between credit cards with a teaser period of 0% interest. He did that to earn interest on the money elsewhere. However, with savings rates now close to 0%, why bother?

Quote: Croupier

I take gaming the system to mean switching cards when the 0% interest period ends, thus not paying any interest on your credit cards.

Sometimes called "surfing", going from one deal to the next, it allows at least the act of borrowing at a very low rate if not actually at zero cost. I personally have not been brave enough to do surfing, as it seems they should be able to figure out how to stop that sort of thing, and I don't want the trouble. Plus I just wonder what it looks like on your credit record.

I am interested to hear from anyone who can tell me they feel surfing has worked out pretty good for them, that the hassle is worth it.

I do note a slight element of disapproval in some of the replies in this thread, and I was expecting that as I have noticed it before when discussing this with someone! It seems to me that managing one's credit is an area that people are touchy about; certainly I can appreciate that one should be leery of seedy suggestions of how to do so, so I won't be critical. But I have also noted that I am practically alone in one practice that, if I were the Wizard of Credit Cards, I would suggest everyone do. I feel I should wait to see if someone suggests it before revealing it.

BTW I would hardly be up to such a title!

I haven't set this up yet, but with nearly all banks allowing automated transactions, it makes sense that one would pay 100% of all his bill, expenses, mortage payments, car payments, etc with a credit card that offers cashback. Then, set up single monthly payment (for the LAST day of the grace period, to take advantage of the time-value of money) from a checking account (into which goes 100% of your income) to the credit card.

All of this could be automated and the advantages would be:

1) Free money. Every month.
2) Maximizing use of the grace period, which is valuable over time.
3) Never missing a credit card payment

I plan to implement this plan soon. comments?

Quote: Jumboshrimps

I haven't set this up yet, but with nearly all banks allowing automated transactions, it makes sense that one would pay 100% of all his bill, expenses, mortage payments, car payments, etc with a credit card that offers cashback. Then, set up single monthly payment (for the LAST day of the grace period, to take advantage of the time-value of money) from a checking account (into which goes 100% of your income) to the credit card.

All of this could be automated and the advantages would be:

1) Free money. Every month.
2) Maximizing use of the grace period, which is valuable over time.
3) Never missing a credit card payment

I plan to implement this plan soon. comments?

good strategy.

Quote: Jumboshrimps

...it makes sense that one would pay 100% of all his bill, expenses, mortage payments, car payments, etc with a credit card that offers cashback.

Many such billing accounts will add on a service charge for debiting your payment to a credit card, even though they will do it for free on a bank checking or savings account. This is because of the fee they must pay to the credit card company, just like a retailer. I would particularly expect this for a mortgage payment, automobile loan, or most any retail loan. Many utilities and tax agents also add a fee for credit cards (but often not for debit cards).

I have a few things direct billed to my AMEX card and draw bonus benefits there, but everything else is directly debited from a checking account, including the credit card bill. This gives your advantages #2 and #3 but little of #1.

Quote: Jumboshrimps

I haven't set this up yet, but with nearly all banks allowing automated transactions, it makes sense that one would pay 100% of all his bill, expenses, mortage payments, car payments, etc with a credit card that offers cashback. Then, set up single monthly payment (for the LAST day of the grace period, to take advantage of the time-value of money) from a checking account (into which goes 100% of your income) to the credit card.

All of this could be automated and the advantages would be:

1) Free money. Every month.
2) Maximizing use of the grace period, which is valuable over time.
3) Never missing a credit card payment

I plan to implement this plan soon. comments?

Doc makes a good point about charges. I have not experienced this with small bills like utilities but my tuition payment would have a charge tacked on if I used my credit card. You can't make payments on installment loans (mortgage, auto) with a credit card; banks just don't let people transfer debt in that manner. Maybe there is an exception to the rule out there but I doubt it. Otherwise, your approach is right for maximizing flexibility and taking advantage of cash back or other rewards but I don't know that can create any meaningful wealth playing the float because the rate of any rewards will be based on short-term interest rates and any investing you do will be at similar short-term rates. Unless of course you are able to leverage your cash flow into longer term investments but that will get you into trouble fast; similar to what blew up the saving and loan business in the 80's. Plus, don't forget about the cost of your time in managing such a process.

Quote: odiousgambit

Sometimes called "surfing", going from one deal to the next, it allows at least the act of borrowing at a very low rate if not actually at zero cost. I personally have not been brave enough to do surfing, as it seems they should be able to figure out how to stop that sort of thing, and I don't want the trouble. Plus I just wonder what it looks like on your credit record.

I am interested to hear from anyone who can tell me they feel surfing has worked out pretty good for them, that the hassle is worth it.

I do note a slight element of disapproval in some of the replies in this thread, and I was expecting that as I have noticed it before when discussing this with someone! It seems to me that managing one's credit is an area that people are touchy about; certainly I can appreciate that one should be leery of seedy suggestions of how to do so, so I won't be critical. But I have also noted that I am practically alone in one practice that, if I were the Wizard of Credit Cards, I would suggest everyone do. I feel I should wait to see if someone suggests it before revealing it.

BTW I would hardly be up to such a title!

"Surfing" is a bad practice in my opinion but more power to people if they can find a way to make it work given their situation. Reasons it is bad:

1. There are fees charged with transfers. They used to be fairly nominal before the recent economic downturn but now are much higher in many cases. Even when they were nominal, you would have to be moving a lot of money to derive any value because the fees inflate the effective rate you are actually paying for credit. Think of it in terms of how a commission on a bet impacts house advantage.

2. This hurts your credit score quantitatively in two areas: number of credit inquiries and length of credit history. Qualitatively, a lot of transfer activity will raise a red flag with a potential lender examining your credit history. Ultimately, this affects the probability at which one can secure a loan and the rate of the loan.

Not trying to come of as disapproving in case you think that; just trying to state some of the realities in the credit world. This is a good topic of conversation because I think most people don't take the time to study all of the implications of credit utilization. This has a lot to do with where our economy is right now. And I am not just talking individuals; companies and countries have made big credit mistakes as well.

A lot of good input, thanks!

It seems "surfing" should be approached with care at best, so my feelings on that havent changed.

Cash back obviously is nice to incorporate. Some time searching for the best deal is worthwhile here. Pay no fees if possible, and certainly pay off the card each month so you pay no interest! Yes, the merchant is the one who pays the first month's interest so shed no tears for the card company.

As far as paying bills that you can with credit cards, with places that accept such activity without a fee, is a pretty good idea. We pay for some things with automatic deductions from our checking account in this household, and in some cases I think that could be a credit card instead and would be smarter especially if care for the below is taken.

No one has mentioned the following practice, which has worked well for me. I noticed that sometimes I would only have a couple of weeks to pay for some purchases, so when I had more than one card I started to be a little more careful about making sure the billing wasn't almost due on a certain card when I used it. This evolved to noticing that when I got the bill in the mail, that this was a signal that it was the best time to use that card. Soon enough I started marking on a calender when the account statement was due, and either calling the number on the back of the card or going online to confirm it, and switching even before the statement got mailed in. You want the cards to have different dates for when the statement comes out, by two weeks. This means I now frequently get 6 weeks to pay and seldom as little as 4 weeks. This is enormously beneficial for large purchases, as it is actually enough time that you get some income from your job or whatever to help pay for large purchases in the meantime. Theoretically, there would be benefit due to interest earned on the float, but these days rates are so low, not so much. Cash back cards make it even nicer, but has really nothing to do with the float time.

Well that's how I "game the system". You could go a little more crazy and game it with three cards that have statement dates 10 days apart, but I havent quite gone that crazy yet [g].

I'll start by saying I don't do this, because I just don't think it's worth it:

There's a credit card - I think by Chase, where you get 10 points per transaction plus a point per dollar (A point being worth a penny). You could just fill up $1 (or .01) if you really wanted to with gas, as many times as you wanted. If you filled up $1 at a time, you'd be getting an 11% rebate. If you filled up .10 at a time, you'd be making 1% on each 10 cents you spent on gas.

It really comes down to a time value of money. I have a gas station right next to my house, and I suppose I could go there and fill up about $3 - $5 a day to keep my tank full at all times. But when you think that it's really only saving me a dollar per week at most, it's not really worth it.

I've gotten a lot of points by buying tickets with my credit card and selling them. I thought I would make a lot on the Mayweather/Mosley fight, turns out I only made $20, but I also made about $7 in points.

I think credit card rewards are a lot like slot club rewards, if you use them right, they become a positive EV, but it takes a lot of work - probably too much work.

I also use an American Express for certain types of purchases, which earn extra points for Hotel stays at the Hilton chain (including Hamptons, which usually have much lower point redemptions per night than other Hiltons).

Extra points are earned for purchases at the grocery store. And our grocery store has a huge variety of Gift Cards for sale, including Southwest Airlines and Home Depot. And on top of that, for every $ 50 spent at this grocery store, you "earn" a 20 cent per gallon discount on gasoline. It works out pretty well.

In Las Vegas in the casinos is it allowed to use VISA card to purchase chips for playing?

No. Some casinos will allow you take a cash advance on your credit card to get cash at the cage, though. They usually have a machine for this. Sometimes it requires a PIN for your credit card, sometimes not.

(BTW, don't do this).

Quote: Wizard

I use the Costco American Express, which gives me some percentage rebate on everything I purchase. The rebate has to be used at Costco. I forgot what the percentage is, but every year I get a voucher for about $400. I also have a policy to not make credit card purchases under $300 or so. I figure there is some small probability with every transaction that my information will fall in the wrong hands, and that person will use it to steal my identity or make false charges.

I knew somebody who used to transfer balances between credit cards with a teaser period of 0% interest. He did that to earn interest on the money elsewhere. However, with savings rates now close to 0%, why bother?

Yeah a few years ago I also had a friend who did this. She had something like $75k or $80k in CC "debt" but it was on 0% cash advances. She managed to find the deals where she'd get the cash advance checks that had no fees (those rarely exist anymore). She had all the money in high yield online savings accounts ~ 4-5%. She made enough on those to buy a new car every few years.

Like all the 0% deal she had to really keep an eye on them and make sure there were no late payments at all. Usually a late payment - even 1 day - will cancel the zero percent deal.

Alas, those days are now gone. You can't earn anything on savings (though I still get 3% on my checking), and the zero percent checks almost always charge a 3-4% fee upfront.

Quote: ruascott

She had something like $75k or $80k in CC "debt" but it was on 0% cash advances.

now that's gaming the system!

anytime I've looked into this, seemed like there were fees and dense legal gobbledygook. As much as I take pleasure in gaming this system I've steered clear.

Quote: teddys

No. Some casinos will allow you take a cash advance on your credit card to get cash at the cage, though. They usually have a machine for this. Sometimes it requires a PIN for your credit card, sometimes not.

(BTW, don't do this).

If the fees weren't so rediculous there would be nothing wrong with this, assuming you are responsible with what you are taking out and not actually borrowing money you don't have to gamble. I asked about this recently at a casino because the ATM daily limit on my debit card was lower than what I wanted to take out. But the fee the cage wanted to charge was so astrinomical I said forget it. I think it was something like 7% or 8%. I went back to the ATM and got my $400 or whatever it was and paid $0 in ATM fees (gotta love credit unions).

Quote: odiousgambit

now that's gaming the system!

anytime I've looked into this, seemed like there were fees and dense legal gobbledygook. As much as I take pleasure in gaming this system I've steered clear.

Yeah, like another poster mentioned I wondered the impact on the credit score from constantly opening so many new lines. I asked her and she literally pulled out a copy she was so proud. It was like an 802 or something crazy. Obviously taking out and then paying back large amounts of debt actually helps more than hurts.

I've had perfect credit forever and can't get above 750-760, so I was damn impressed.

Quote: ruascott

.

I've had perfect credit forever and can't get above 750-760, so I was damn impressed.

then you've never had perfect credit

Quote: iamthepush

then you've never had perfect credit

Appearantly not. Guess I need to borrow more and more money so I can be considered a good risk. After all, thats the only way you can "build" your credit score. Lets be honest, credit scores are really a joke. Their entire algorithm is based upon how much debt you carry. For someone that carries very little, you'll never get above about 750.

Thanks.
Strange, because I used my VISA card to purchase chips in more casinos in different countries.
Even in online casinos you can use.
Why it is not possible in Las Vegas or in the USA?

Quote: ruascott

Appearantly not. Guess I need to borrow more and more money so I can be considered a good risk. After all, thats the only way you can "build" your credit score. Lets be honest, credit scores are really a joke. Their entire algorithm is based upon how much debt you carry. For someone that carries very little, you'll never get above about 750.

If you demonstrate that you are willing to pay interest, that is what they are looking for I don't doubt. It is certainly a good way to establish credit. So to some degree a good score comes from whether you are a good prospect for their services [?]

Quote: Jumboshrimps

I haven't set this up yet, but with nearly all banks allowing automated transactions, it makes sense that one would pay 100% of all his bill, expenses, mortage payments, car payments, etc with a credit card that offers cashback. Then, set up single monthly payment (for the LAST day of the grace period, to take advantage of the time-value of money) from a checking account (into which goes 100% of your income) to the credit card.

All of this could be automated and the advantages would be:

1) Free money. Every month.
2) Maximizing use of the grace period, which is valuable over time.
3) Never missing a credit card payment

I plan to implement this plan soon. comments?

Double check that all of your bank's bill paying is done electronically. I found out last year that my former bank simply printed checks and mailed them via an automated bulk mailer system. Payments I thought were being transferred on a Monday were not actually being received until Wednesday or Thursday!

How do you get the due dates & grace periods to all sync up? I can't see that happening with dozens of bills to pay.

Quote: ruascott

Lets be honest, credit scores are really a joke. Their entire algorithm is based upon how much debt you carry. For someone that carries very little, you'll never get above about 750.

Not true. I rarely charge over $500 a month and always pay it off right away. The limits on my cards keep getting raised, the total is in the high 5 figures now. When I refinanced my mortgage awhile back, the bank ran my credit (getting the rating scores that only banks can get) and my scores were over 800. Without even trying. I have since paid off the mortgage... I wonder how that has affected my scores. I should check.

The main benefit to me of high scores, is that I can get any promotional credit card I want. I usually get one or two a year, and have never been turned down.

Quote: Toes14

How do you get the due dates & grace periods to all sync up? I can't see that happening with dozens of bills to pay.

I never could, but it doesn't hurt to figure out what due date you'd like to have on your bills, call the originators of your bills, and ask them if they would move the due date.

The way I work things: All income (personal, not business) goes into a high-yield investment account. All bills are paid with a cash-back credit card. (I pay the bills online at the respective bills websites, so I'm not automated on the bill paying yet, and I can just pay on their individual due dates.) At the end of the month, I transfer money from the investment account into a checking account, and send the payment to the credit card from the checking account.

Quote:

The main benefit to me of high scores, is that I can get any promotional credit card I want. I usually get one or two a year, and have never been turned down.

I had just the opposite problem. I have a score in the 800s, but was recently turned down for a new card. It featured a 60-day promotional window during which I'd receive a 10% discount on a particular brand of gasoline. I applied just prior to a cross-country driving trip.

The rejection letter said given my credit habits, it would not have been profitable for the card issuer to give me the card!

Quote: Jumboshrimps

I haven't set this up yet, but with nearly all banks allowing automated transactions, it makes sense that one would pay 100% of all his bill, expenses, mortage payments, car payments, etc with a credit card that offers cashback. Then, set up single monthly payment (for the LAST day of the grace period, to take advantage of the time-value of money) from a checking account (into which goes 100% of your income) to the credit card.

All of this could be automated and the advantages would be:

1) Free money. Every month.
2) Maximizing use of the grace period, which is valuable over time.
3) Never missing a credit card payment

I plan to implement this plan soon. comments?

I wouldn't trust grace periods, I don't even hear much about them anymore.

More valuable to me is using the card immediately after the statement comes out, preferably even before you get it in the mail. Just as important, discontinuing the use of any other card once this other card has just issued a statement. You get about 6 weeks to pay a charge if you make it immediately after the statement comes out. This I guess is of little interest to someone who doesnt pay off the card in full every month. That for me is by the due date, but just the day before.

Quote: Calder

I had just the opposite problem. I have a score in the 800s, but was recently turned down for a new card. It featured a 60-day promotional window during which I'd receive a 10% discount on a particular brand of gasoline. I applied just prior to a cross-country driving trip.

The rejection letter said given my credit habits, it would not have been profitable for the card issuer to give me the card!

Was it the Chase BP card? I got rejected from the same card for the same reason.