What credit cards do you use?

AmEx Blue Cash
No annual fee
0.5% on every purchase before spending $6500 (year period)
1.0% on every purchase after $6500
1.25% on gas, groceries, drugstores before $6500
5% on gas, groceries, drugstore after $6500

$6500 counts as total of all cards in a household.

Very few stores don't accept AmEx. Customer service is rated #1 (I agree) - you deal directly while in case of Visa you deal with a bank that represents Visa (two layers). AmEx is worldwide while banks might be local or different in spite of the same name. Citibank in Poland, for instance, is different from Citibank in US - same name and logo but no support.

"other perks that might justify its higher up-front cost."

What costs? My AmEx Blue Cash has no annual fee, brings me a lot of cash back every year and offers all the perks.

"use of CC will only get more and more expensive."

Only if you keep balance, otherwise you gain money - cash back plus delay between purchase and CC due date. In addition you have CC protection that you won't have paying cash or by check. It is like any other tool - there are right and wrong ways of using it.

What do you mean by "built in" and "prepaid". My card costs me nothing while it gives me back about $1000 a year.

Debit card is not useful to me since it doesn't offer same protection credit card does (fraudulent use, identity theft etc.). I'm not afraid to use credit card over internet but I would not use debit card.

Any dispute, I might have with a store that sold me defective item or refused return is arbitrated by credit card company that applies back-charges first and then store has to prove the right to get my money. No such luck with debit card (same as cash), cash, check etc.

"Most likely they are charging you in fees and then giving a small rebate to make you feel good about spending money you don't have"

What do you mean by "most likely"? I know EXACTLY that they don't charge me a penny for many years while I'm getting almost $1k back every year. I addition I'm getting protection and a lot of other benefits. It would be silly for me to use debit card or cash instead.

"I'll say it again, nothing is free"

Right you are, you pay for it. As T_Bone explained CC company charges store few percent to give me cash back (few percent) plus delay on payment and all other perks. Store has to raise the price by few percent but it is for everybody. Cashback I receive is possible because you pay few percent more in store getting nothing in return. Thank you.