With some common sense precautions, you could earn a few extra bucks from your credit cards. Yes, the stack of plastic cards that you thought were money drainers could actually give you some extra cash every month, PROVIDED [caps intended] you approach the practice in a disciplined manner and exercise extreme due diligence all along. Done right, you could have some extra money every month but if you make mistakes you could end up losing a lot more money. Here are some ways your credit cards could make you extra money:
Interest rate differentials could earn you extra cash
If you have received an offer for a 0% APR credit card, that would be the perfect starting point. Generally, the way this process works is very simple. Let’s say you have a $5,000 credit line with 0% APR for six months. Some individuals deposit this money in an interest bearing account for the duration of six months and gain some additional cash due to the interest differential. Now, it is not as easy as it sounds.
First, you have to read your credit card provider’s terms and conditions and your state and local laws to see if the practice is prohibited. Second, getting the $5,000 into your account may cost you some money in the form of transaction costs so you will have to do the math if the overall transaction is beneficial or otherwise. Finally, the 0% APR may not be availed of for certain transactions.
You may want to read our article Credit Card Arbitrage Could Be Tricky for more details.
Cashback percentage, rewards, bonus points, miles, travel rewards, and others
Not much complexity here. In fact, this is very easy. Depending on the type of credit card you have signed up for, you could win various cashback incentives, rewards, and other bonuses. There is one catch, though, if you don’t repay your purchases in full (on time), you will incur the regular APR and that would nullify your earnings so the key is to repay in full whenever possible.
The 0% APR on purchases offer could be a money maker
If you have an introductory 0% APR on purchases credit card, it could be a source of additional income as well. Some individuals pay for their purchases using the credit card for the duration of the 0% APR offer and deposit a similar amount in their interest bearing account while repaying a minimum balance during the duration of the offer. Just before the expiration of the offer, they repay the entire amount in full to avoid incurring any interest rate charges.
Again, the same precautions apply. You need to calculate all transaction costs meticulously in order to avoid incurring unreasonable fees.
Note: If you do not adapt to the various parameters, you could end up losing much more money than you expect to make so be very careful. As always, you should seek the advice of an investment professional and an attorney.