How to Make Money With Your Credit Card
Credit cards are generally used by people for the purpose of borrowing money, but because individuals often abuse them, they have gotten a bad reputation.
If all you do with one is increase your debt load, you can create serious financial problems for yourself.
This is especially true if you only make partial repayment of your debt each month because doing this causes interest to accrue on your account.
Over time, you end up making payments on the increasing interest as well as the original debt you created in addition to any new debt that you create.
Since credit card interest rates are notoriously high, abusing one this way creates a downward financial spiral that places people on a merry-go-round of increasing debt that becomes almost impossible to eliminate.
Many people blame having credit cards for this problem, but in truth, the issues created by having them are the fault of those who obtain and use them for the wrong purposes.
The real reason for having credit cards is to use them as a tool over which you have total control that helps rather than harms you financially.
If you are interested in learning how to do this, read on.
Choose the Right Credit Card
Your first step in creating a money making credit card situation is to sign up for one that
- does not have an annual fee,
- pays cash back on purchases,
- does not charge interest until the month following the time period where you make purchases.
If you can find one that meets these criteria, pays higher cash back amounts than other cards and also charges less for interest and other fees than their competitors, all the better.
By doing this you give yourself a tool that you can use to borrow money interest and fee free for up to two months, costs you nothing to use and returns a percentage of the amount you spend every time you use it.
Never Borrow More Than You Can Repay
However, to take advantage of all of these goodies, you must make it a point to never borrow more than you can repay within the allotted time for debt repayment.
This is because this plan won’t work if you can’t repay the amount you borrowed by the end of the lending cycle.
Therefore it is important that you use restraint when making buying decisions.
You should view your credit card the same way you view cash because if you spend more than you have you will be creating financial problems for yourself.
Time Your Purchases
Depending on the day of the month when you borrow, you have the opportunity to use the bank’s money for up to two months for free!
For example, my monthly debts come due on my on card the 19th of each month.
If I use my card to make a purchase on the 20th of May, I do not have to pay that money back until the 19th of July because I don’t get the bill for that purchase until the 19th of June!
In short, the bank gives me a grace period that I can use to help me budget my expenses.
However, I always pay my card off well before the due date because I do not want to get hit with a late fee or interest if my payment doesn’t arrive on time.
If you follow the above advice, you will make money every month automatically because for every item you purchase, your credit card company will pay you a percentage of your purchase price.
This amount can vary depending on the credit card you have and even within the confines of the same credit card there often are deals that pay more.
For example, on the card I use, every three months I have the option of signing up for 5% rebates on certain items for that period of time. So, in once cycle I might get the deal for gasoline and department stores and on another for groceries and online purchases.
Each card company has its own rules, so you should make sure you understand them before you sign up to get the greatest cash back deals.
You can use the money you receive to help pay for your monthly bill, to take as cash or other uses depending on the company’s guidelines.
However, if you really want to make money with the proceeds, you can start investing and earning interest on it!
Why Invest Your Cashback Money?
At this point you may be thinking that if you wanted to invest, why would you use cash back money to do it?
The reason is that this is free money that you had already paid out for purchases. Why not use it to generate even more income?
Granted, it generally comes to you in small amounts, but over time they will add up and grow because you’ll be earning interest on them.
The amounts you receive will vary from month to month, but to show you how this would work, I’m going to assume that you have a credit card that provides 2% cash back and that you use the card to purchase $2,000 worth of goods and services each month.
If you invest this money in a simple savings account, right now and at the right bank, you can earn a 2% net annual percentage rate.
As the chart shows, the first month you’ll earn $40. However, if you invest that amount each month in the above noted savings account, at the end of year one you will have $536.48!
How to Earn Even More
The trick to earning even more money on your cashback bonuses is to use only one credit card buy everything you normally would purchase anyhow either for cash, by check, by using your debit card or some other way with that same card.
Remember, though, that this only will work if you make sure you are able to pay off the entire amount at the end of each billing cycle.
If you do this, your savings account will grow to the point where you will have enough to purchase an account that pays even more interest such as a CD or money market account.
Thus, if you use your card as often as possible you
- receive more cashback bonus money,
- have more to invest in a savings account,
- will be able to earn rewards faster and
- will then be able to invest the larger amount of money in an account that earns even more money for you.
How to Pump Up Your Rewards
While you’re not going to be able to pay the full amount for big ticket items such as cars or big dental bills, you can still use these types of purchases to increase your cashback rewards.
Many sellers and providers will allow you to put as much as $5,000 on a credit card to pay for such things. Each time you do this, you’re going to get $100 in rewards.
Let’s say you buy a car. You would charge $5,000 of the cost to your credit card and borrow the rest from a bank. That $5,000 can serve as your down payment. You repay the credit card loan at the end of your billing cycle, but you get $100 in cashback rewards that you can then add to your savings account!
As long as you are able to pay back the borrowed amount, you can continue to use this plan without having any problems.
Use Credit Cards with Care
Few people realize the tremendous earning benefits they can have by using credit cards as tools for earning.
No doubt, they are powerful, but for this reason, people should use them wisely.
The best way to do this is to have savings available that will help you to meet your monthly payments and to make sure that you don’t borrow more than you have.
My husband and I have been using our credit card for many years to earn extra cash and have never paid for it or been hit with late fees or penalties of any type because we are careful with our borrowing and make sure to pay our bill on time every time.
Do you think you could make this plan work for you?
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
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© 2019 Sondra Rochelle