RPT-Plastic Posse: Credit card winners and cards they love

(Repeats to additional subscribers)

* Credit card solicitations are making a comeback

* New offers aim cash rewards at best customers

* Strategic consumers are cashing in big

By Linda Stern

WASHINGTON, Dec 27 (BestGrowthStock) – John Clarke, of Arroyo
Grande, California, is a credit card cowboy. He and his wife,
Karan, have three different rewards cards — each one pegged to
a different closing date, 10 days apart.

Clarke uses each card for 10 days, beginning on the day
after its billing period closes. That means he gets roughly 50
days of free float before he has to pay any bill and he gets at
least $1 cash (and often more) thrown back at him in rewards
for each $100 he spends.

“It’s like a business,” he says. “Why in the hell would I
want to pay cash for anything?”

Clarke is one of the few consumers who make the credit card
game pay off for them. They never pay interest. They rarely pay
annual fees, and then, only small ones. They collect hundreds,
if not thousands, of dollars of rewards every year. And they
spend most of every month living off OPM — other people’s
money.

That’s getting easier to do again, as credit card issuers
have returned to aggressive marketing and focused more than
ever before on the good-credit-score-toting top of the market.

U.S. consumers received approximately 1.2 billion direct
mail offers for new credit cards in the third quarter of 2010,
a sharp increase from the 391 million received in Q3 2009,
according to data from Mintel Comperemedia. Roughly 84 percent
of those offers were aimed at folks with FICO credit scores
topping 700, reported research firm Synovate. And 41 percent of
those pitches — as compared with 28 percent a year ago — were
cash-back rewards programs.

“They aren’t scaling back any more, they are getting more
aggressive,” observed Curtis Arnold, publisher of the
card-comparison website, CardRatings.com.

That provides new opportunities for the Clarkes of the
credit card world. They tend to always be in the market for new
card offers, and have little loyalty to one card if another one
presents a better deal.

Winning card users do tend to concentrate on the same
handful of cards that come up over and over again in
conversations about generous rewards programs. Here’s a look at
some of those most popular and highly rated rewards cards and
the people who are squeezing them for all they are worth.

The Fidelity Investment Rewards American Express Co. (AXP.N: )
Card

Investors like Los Angeles photographer and video artist
Robert Nock are building portfolios with this card. It pays 2
percent back on all purchases, delivered directly into a
Fidelity investment account. (A similar card links to Fidelity
529 plans.) There’s no cap on rewards for the year and no
annual fee. “A flat 2 percent back is pretty spectacular,” says
Arnold, who calls the card “the best of breed.”

Nock, a graduate student, puts his whole tuition bill on the
card, as well as his photography equipment and other everyday
charges. As a result, he’s charging between $25,000 and $50,000
a year, an amount approximating his annual income.

If he’s charging $4,000 a month, he’ll get $960 a year in
cash rewards, which he’ll send to his Roth IRA and brokerage
accounts. If he does that every year, and earns 7 percent
annually on his invested rewards, he’ll build a $13,574 balance
in 10 years.

Blue Cash from American Express

Big spenders can do very well with this program, which has
no annual limits. They earn 1 percent cash back on everyday
purchases, such as gasoline, groceries and drugstore items, and
0.5 percent back on everything else, until they spend $6,500 in
a year. Then their rewards get supercharged: They earn 5
percent back on everyday purchases, and 1.25 percent back on
everything else.

The blue cash Amex is actually Arnold’s personal favorite
card. “With six kids, plus an exchange student, we charge more
than the average family,” he said. “But we’re getting well over
$1,000 in rewards this year.”

The trick to this card and others is that if you fail to pay
your bill on time, you forfeit your cash rewards.

That’s not a problem at all for Ben and Carrie Edwards, in
Kansas City, who have already earned $550 in the first six
months of their rewards year this year, by putting a houseful
of new furniture and materials for a remodeling project on
their card. (The rewards “year” starts on the cardholder’s
anniversary date.)

Ben, a financial hobbyist, blogs about his finances on
MoneySmartLife.com, and watches all the angles. He and Carrie
have set up an automatic bill payment for the card, so that it
is always paid in full a few days before its due date.

The Capital One Financial Corp (COF.N: ) Venture Rewards Card

This mileage card is popular with travelers like Melissa and
Dave Forburger of Bethesda, Maryland. The couple and their
three children are taking a family trip to Phoenix, with all
but one of the five tickets paid for using miles they
accumulated with this card in about a year.

The Venture rewards card pays two miles per dollar spent,
but offers another benefit that is rare in travel cards. There
are no blackout dates, and no proprietary portal through which
you have to purchase tickets or hotel rooms.

“I like it because I can go to Expedia, Southwest, a travel
agent, a hotel, anywhere, and then get the cash later from
Capital One,” says Melissa. “We put everything on it, and I
mean everything: the groceries, the day-care bill, co-pays at
the doctor.”

THE STRATEGIES THAT WORK BEST

Putting everything on the rewards card is a go-to strategy
for the rewards-focused. Here’s how to follow their lead:

* Pick one big-rewards card and use it for everything.
Everything!

* But, remain open to specialized offers, too. CardRatings’
Arnold likes the Pentagon Federal Visa Platinum Cashback
Rewards Card, because this credit union card pays a flat 5
percent back on all gasoline purchases. If you drive a guzzler
or travel many miles in a week, it can be worth supplementing
your “everything” card with a special choice like this. “If
you’re spending $200 a month on gas, it wouldn’t be a bad
strategy just to use this card for the pump,” he says.

* Be on the lookout for new cards. With all the new offers
clogging consumer mailboxes, issuers are again piling on
special rewards in order to win new account holders, and it’s
only going to get more generous in the first quarter of next
year, says Arnold.

He’s noticing some fat new signing bonuses: The Chase
Freedom card is offering $100 cash back if you spend $800 in
the first three months. Discover is offering $100 back as soon
as you make a $500 purchase. “That’s not a big hurdle,” says
Arnold. “Any way you slice it, that’s very aggressive.”

* Use your credit card like it’s a debit card. Jim Brown of
Milwaukee, Wisconsin, recently retired from his post as
director of the Center for Consumer Affairs at the University
of Wisconsin at Milwaukee. That’s where he calculated the
effectiveness of a strategy like the one also used by the
Clarkes. “If I pay my credit card bill off in full every month,
it effectively becomes part of my checking account.”

Brown also timed his rewards card billing cycles for maximum
float and so that the bills would fall due shortly after he
received his paycheck.

“The effect to me was exactly the same as a debit card. But
the money would sit in my bank account until the issuer pulled
it out, so I got the benefit of float. I also got superior
legal rights (concerning consumer disputes) as well as frequent
flyer miles. The way I figured it, conservatively, the banks
were paying me around $40 a month just to use their money.”

How’s that for sweet rewards?
(editing by Gunna Dickson)

RPT-Plastic Posse: Credit card winners and cards they love