As a consumer advocate, I write a lot about tricks and traps that credit card companies and banks use to trip up customers and get them to pay all manner of penalties and fees. These techniques have enriched banks to the tune of many billions of dollars, and too often lower income Americans are paying fees they can ill afford.
But the flip-side of the banks’ clever machinations are consumers who figure out how to make the most of free mileage and gifts available by opening cards and getting mileage automatically, or by charging large enough amounts on their cards to earn mega-points. Brad Larney from San Diego, CA took a trip with his wife to Cape Town first class from the United States for $2,000—usually a $30,000 trip—on miles that he earned by buying coins from the Mint, charging the cost to his credit card, and paying the bill with the value of those coins. He was featured in a recent Wall Street Journal article, along with Rick Draper from Canton, MI, who has racked up hundreds of thousands of miles and bonuses, and carries five cards in his wallet and has 30-40 more at home.
I’m of two minds on this practice. On the one hand, I like that clever consumers have figured out how to outsmart those evil geniuses who draft the fine print on 30-page credit card contracts. And what they are doing is totally legal.
On the other hand, this business isn’t for amateurs. You can get into real trouble by charging up cards and then losing track of who you owe money to. You’ll pay through the teeth in fines, penalties, and interest often compounded and set at least 18 percent. Moreover, holding this many cards can mess with your credit score, making it hard for you to buy a house or take out a loan. So this is truly for those who have perfected the art of tracking their credit cards, paying them off each month or—better yet—knowing when deals like just signing up for a card can earn you 75,000 miles, an offer Capital One Bank announced recently. Those seem pretty safe, as long as you don’t start charging up these accounts. But still, this business can be treacherous so consumers, if you decide to get into applying for multiple credit cards or charging on a card to rack up points, proceed with caution!