Winning at Cards

Some Spenders Think They Have the Discipline to Play the Risky Rewards Game

Nicole and Michael Cheng each have four credit cards in their wallets, but a total of 20 cards that are rotated into use, depending on card company promotions. (By Kevin Clark -- The Washington Post)

Michael Cheng and his wife, Nicole, each have four credit cards in their wallets. A Post-it note on the top left corner of each card lets them know which one to use for what.

The Chase rewards card is for groceries, gasoline and drugstore purchases. The Chase business card is for gas stations, home improvement and office-supply stores and restaurants. The Discover card is for restaurants and movies. The Farm Bureau Bank card is for everything else.

In return for their purchases, they get checks or gift cards: 5 percent cash back from the Chase rewards card, 3 percent from Chase business, 5 percent from Discover and an amount equal to 1 percent from the Farm Bureau.

The Chengs, who have a stack of other cards, keep track of the cash rewards on a spreadsheet: They made $1,121 in 2006 and $1,093 so far this year. They don't pay interest on their purchases because they immediately pay off their balances. They pay no annual fees.

"We get the sense that we figured out how to play the game and we're playing it our way," said Nicole Cheng, 43, of Centreville.

That game is played by so many that there are numerous Web sites such as CardWeb.com, Credit-reviews.com and Creditcardgoodies.com that rate the programs and provide venues for cardholders to seek and give counsel. Some of the most avid users are those who get cash back, a segment of the industry that has grown rapidly in recent years.

If you're going to play the rewards game, beware: The credit card issuers are certainly up to the challenge, several consumer advocates said.

"There's a small number of people who can game the system, but for every consumer who games the system there's probably 25 consumers who are ratcheting up credit card debt and never are redeeming the rewards," said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group.

Be prepared to spend a lot to make a lot -- or a little. So far this year, the Chengs have spent $47,800 to get $1,093 in rebates. "Mind-boggling," Michael Cheng, 42, admits.

The only way to make the rewards cards rewarding is to be disciplined. Card issuers divide their clients into two categories. Transactors pay off their balance each month; revolvers carry balances.

If you're a revolver, don't bother with a rewards card. Whatever you earn is not going to make up for what you pay in interest. The cards with the best rewards tend to have higher rates.

"If you carry a balance on your credit card, a 1 percent reward does not in any way offset a 15 to 25 percent APR," Mierzwinski said. "For consumers who carry balances, they rationalize that at least the reward is cutting it a bit, but you're much better off getting the best rate you can."