January 15, 2016

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How To Use Credit Cards To Make Money

The idea that you can use credit cards to make money may seem a little odd. Aren't credit cards dangerous things? Aren't credit cards the reason why many people find themselves deep in debt.

Well, yes it's true. Credit cards can be very dangerous. If you fail to pay your credit card bills, there is always a very possible danger that you will find yourself seriously deep into debt. Lives can be ruined by crippling credit card excess.

However, if you are super careful and always pay off the full balance of your credit card each month, your little plastic friends can actually end up making you money.

Delay Spending and Earn Interest on Your Cash

When you use a credit card to buy something, you can borrow the money without having to pay any interest for a certain length of time. If you choose to use your credit card to buy things that you would have already bought anyway, you can put the money you would have spent in a high-interest savings account.

When you later, pay off the credit card bill, you will have earned some interest from your money. To make sure that you get the most interest, you should time any larger transactions so that they are at the start of your credit card statement and you won't have to pay for them for a while.

Get Cash back on Credit Cards

Many credit cards offer cash back as an incentive. How it works is simple: every time you buy something with your card, you get some money back from that purchase.

You can get about 0.5%-1% cash back, although sometimes you can find introductory deals at a higher rate. The cash that you get is usually paid annually.

You must pay off your credit card bill in full month to make the most of cash back. If you don't, any gains you make will be cancelled out by interest.

Apply for Credit Cards and get Free Things

Credit card companies want your business so badly, that they will often offer free things to new customers. Things they use to entice new customers include flights and gift vouchers.

Some of these offers require you to make a purchase. Some don't. If you do have to spend something to get the free gift, make you sure you buy something you were going to buy anyway and try to spend as little as possible.

You should also be carefully about how frequently you apply for credit cards:
  • Don't Apply for Too Many Cards at Once. Applying for lots of credit cards in a short space in a time an have a negative impact on your credit rating. If you are going to apply for multiple cards, space out your applications.
  • Cancel Old, Unused Cards. Make sure you contact the credit card company to cancel any credit cards that you are not going to use an more. Having too many credit card accounts open can be bad for your credit rating.

Tips on Using Credit Cards to Make Money

  • Make sure that prompt payment means no interest. Always make sure that you choose credit cards that you don't start charging interest from the moment of purchase. Be sure to pick cards which mean that, if you pay the full balance every month, you won't have to pay any interest.
  • Use a credit card with no annual fee. You are trying to make money here. You don't want to be paying out extra. Sometimes it is still possible to make money if you are paying an annual fee, but only if the money you can earn is more than the annual fee.
  • Budget carefully and stick to your budget. Remember you need to be able to pay back the full balance on your credit card every month, so you need to be sure that you have enough money to do that. Make a household budget. Work out how much money you have coming in each month and then make a list of all your outgoings. The things you use your credit card should be things you would have used anyway. Those expenses should be included in your budget and you should not make sure that you do not go over budget.
  • Keep a record of your expenses. To ensure that you keep to budget, note down every purchase you make with your credit card. Maybe keep a little notebook with you, which you can use to jot to the amount. There are also apps available for this. Although you haven't actually spent for these purchases in reality, you should still consider the money spent.

Be Careful With Your Credit Card Use

Remember, it is always important to be very careful when using credit cards. You can make money with credits, but only if you make sure that pay off your balance in full every month. This way, you can avoid debt and stand a chance of enjoying some financial benefits.
If you stay organized, budget carefully and always pay your credit card bills fully every time, it really is possible for you to use credit cards to make money.

Picture: Sean MacEntee via Flickr, CC-BY-SA 2.0