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THE GOODS : No Money Down : As Companies Heap on the Benefits, Credit Cards Are Replacing Currency--Even at the Supermarket


Barbara Toohey always picks up the check when she's out for dinner with friends. "And the bigger the better," she said. Why? Because, the Van Nuys publisher said, she pays for it with her MasterCard Continental frequent-flier card. Her friends reimburse her in cash and every dollar on the credit card means another free mile on Continental Airlines.

Toohey, who loves to travel, gets a couple of free trips to New York every year and recently used her miles to upgrade from economy to business class on a trip to Paris. And it's not just dining out that helps her rack up mileage.

For instance:

* She now uses the card for large purchases of equipment and software needed by her business, Prana Publications.

* She has power of attorney for her invalid mother and pays for both personal and medical expenses on the credit card.

* "And there are all the other things that can be paid by credit card now," Toohey added, "like charitable contributions, groceries and newspaper subscriptions. What I really like is the double hit when you buy an airline ticket on the credit card."

Toohey is in the vanguard of a savvy breed of consumer --informally dubbed "credit card sharks"--who have learned to make plastic pay. Taking advantage of the proliferation in credit card options, they choose a card that fits their personal needs, picking through a complex array of fee structures, interest obligations, cash rebates, discounts on everything from gas to new cars and higher credit limits.

The emergence of these eager megachargers, particularly at the supermarket, concerns those with public advocacy groups, who fear an epidemic of personal bankruptcy as shoppers overspend and backslide into the trap of minimum monthly payments.

Although personal bankruptcy filings are expected to rise only 2% this year (a nominal figure, compared with the late 1980s), analysts emphasize that such filings are a trailing indicator, reflecting what has already happened, and that repercussions from misused credit cards might lie a year or two ahead.

"I think it is totally inappropriate to use credit cards for food purchases any time," said Ken McEldowney, director of Consumer Action in San Francisco. "Cards should be saved for large-ticket items, and those with a long life span."

But the best of the credit card sharks know how to manage debt, and they follow two sacred guidelines. First, they buy everything possible with their cards. Without big-ticket purchases, the game doesn't pay.

"I used to pay cash for anything less than $30, but now I have lowered my threshold," said Steven Short of Lake Tahoe, business manager for author/lecturer Leo Buscaglia. "I am now using my card as currency."

And second, the new consumers always, always , pay their bills in full each month. Short said he even overpays a bit, to have a cushion in the account.

"If you don't pay it off, you'll be fiscally strung up by your thumbs," Toohey said. "The idea of 18% interest just makes my toes curl."


Steve Apesos, a spokesman for MasterCard, said the movement is fueled by both the increased willingness of merchants to accept cards (more than 65,000 new merchants were added last year) and the credit card industry's aggressive promotion of cards as smart money.

In fact, the two trends seem to be intertwined. Card issuers, having saturated their traditional markets, have been pushing plastic as never before in a fierce competition to create new categories.

"In the '80s we promoted the credit card as an aspirational thing, denoting glamour and status," Apesos said, "like using it if you lost your luggage in Paris." But today's ads are pushing cards for everyday use, he said. "They are about using the card for a haircut, going to the hardware store, not in the St. Moritz mountains."

Although only 15% of all payments in this country are made with credit cards, Apesos expects the figure to keep climbing. Card companies have exploded in variations of co-branding with companies like GM or American Airlines or Krogers, he said. "From the 'plain vanilla' MasterCard of a few years ago, a cardholder today has a choice of more than 4,000 types of affinity or co-branded cards like an airlines or a supermarket."

In addition to frequent flier miles, he said, niche shoppers can get cards that offer gas rebates, retail bargains, new computers and discounts on new telephone service. Those are just a few samples.

"GM is offering a 5% rebate toward a new car, Visa has just offered a Blockbuster discount card. We have one little bank in Iowa that offers rebates on Honda lawn and farm equipment."

The card companies now talk about cards as "plastic checks," he said, for doctors and dentists, the gas station, college tuition, fast-food restaurants and even the parking lot attendant.

"We had to find ways to capture more volume and people feel comfortable using it as part of everyday life now," he said.

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