I thought I was fairly deft at handling money. But that was before I met the maestros of money management.
We're talking here about the legions of Americans who manipulate their monthly cash flow like chess masters, along the way snagging frequent-flier miles, cash rewards and interest income.
Behind all this lies that unquenchable human desire to beat the system, score a bargain and turn a buck. In my book, those are admirable qualities. But you've got to wonder: Is it worth it?
Reaping Rewards
To make it as a money maestro, you need the right combination of bank accounts and credit cards -- and a certain financial fanaticism.
Consider Dan Goldzband, a cost accountant in San Diego. He has his paycheck deposited directly into a high-yield savings account, where the money sits until he transfers it to his checking account to pay bills. His reward: $35 to $85 in interest each month.
"My checking-account balance rarely exceeds $100," Mr. Goldzband says. "If it does for more than a couple of days, I am doing something wrong. Of course, only a compulsive like me could make this work. But the general idea, less rigorously applied, would still work for many people."
Don't have much money in your savings account? No problem. Maestros will borrow from credit cards with 0 percent introductory rates and then use the money to earn a little interest, often stashing the cash at EmigrantDirect, HSBC Direct or one of the other banks with high-yield online savings accounts.
"One year, I took $62,000 in cash advances on four cards with 0 percent rates and put it in a money-market account," chortles Scott Bilker, founder of DebtSmart.com, who has 80 credit cards to his name. "I made $1,800 in interest."
When the maestros aren't gaming those 0 percent offers, they're hunting for the credit cards with the best rewards. Thanks to this strategy, Mr. Bilker says he hasn't paid to take his family to the movies for two years. He's also got $500 in convenience-store gift cards, and he garnered a $1,700 discount by charging $17,000 in kitchen remodeling expenses.
For many cardholders, the prize is frequent-flier miles. Bob Smith, a retiree in rural Michigan, has 30 credit cards. He charges everything, from groceries to utility bills, to whichever card is currently paying the highest reward. He figures he and his wife have collected more than 100,000 frequent-flier miles over the past year.
"We've been to Finland," Mr. Smith says. "We've been to Lake Tahoe. And we've got enough points so we can go to Europe again."
Going Easy
Add it all up and the savings can clearly be significant. But there are also risks involved. Bounce a check or miss a credit-card payment, and you could get whacked with hefty fees and a black mark on your credit report.
Sound too risky -- and too much like hard work? Forget shuffling back and forth between your checking account, your savings account and the latest, greatest credit-card offer. Instead, go for the easy money.
Pile your expenses onto a good rewards card and be sure to pay off the balance every month. Let's say you charge $1,000 a month to a credit card that earns frequent-flier miles. That should give you enough points every two years to get a domestic round-trip ticket worth perhaps $400 -- and maybe two or three tickets if the card pays double miles and gives you a sign-up bonus.
Meanwhile, if your checking account is on the plump side, keep enough there to avoid triggering fees and move the rest into a high-yield savings account or a money-market fund. If you shift $5,000 into an account paying 5 percent, you will pick up $250 in interest over the next 12 months.
Most important, focus first on your portfolio rather than your monthly cash flow. Suppose you revamp your $300,000 mutual-fund portfolio, cutting your annual fund expenses by half a percentage point. That would save you $1,500 a year -- without the ongoing hassles that come with juggling credit cards and bank accounts.
