The Jesse Mecham Show

Gaming the Credit Card System... Maybe

Mar 25, 2024

Exploring leveraging credit card float for financial gain and the influence of credit card rewards on spending behavior. Financial institutions have incentives to encourage spending, and using credit cards may lead to impulse spending. Jesse shares his experience with ditching credit cards and how it has made him less likely to impulse spend.

05:16

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Quick takeaways

Strategically maintaining extra funds in checking accounts to leverage credit cards for extended payment timelines is a form of 'gaming the system' in cash flow management.

Credit card companies employ rewards programs to incentivize higher spending, subtly encouraging customers to spend more for increased profits.

Deep dives

Credit Card Float Game

Some individuals strategically keep extra funds in their checking accounts to utilize credit cards, allowing them to extend their payment timelines, essentially leveraging the bank's money for an additional 30 to 45 days before settling the balance. By maintaining a surplus in their checking accounts, they engage in a form of 'gaming the system,' which grants them an advantage in managing their cash flow.

Exploring the Strategy of Leveraging Credit Card Float for Financial Gain

2min

Exploring the Influence of Credit Card Rewards on Spending Behavior

3min

Jesse answers a question from a listener who argues that becuase he carries enough cash to cover his credit card spending at all times, he is not riding the float and therefore is gaming the credit card companies. Jesse quotes Charlie Munger -- "show me the incentive, and I'll show you the outcome" (he actually said outcome not behavior) -- and observes that financial institutions have big incentives to encourage more spending, because spending increases their fees. So where there's an incentive, there's a behavior they want to encourage, and using credit cards is it. In Jesse's experience, ditching the credit card has made him less likely to impulse spend, and that experience is likely what financial institutions have figured out!

Got a question for Jesse? Send him an email:

askjesse@ynab.com

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