By David
Everyone knows about credit cards. We have a basic understanding of how to use them and how they work. However what many people are not aware of is that you can use your credit cards to make you extra money.
The easiest way to do this is through the use of a cash rewards card. These cards typically have an interest rate around 15% and will offer you 2% to 3% back on certain items you buy, such as gasoline or groceries, and around 1% back on everything else. Now that doesn’t sound like a great deal, especially compared to a 15% APR, but there’s an easy way around that allowing you to collect 1%-3% cash back simply for spending money you would have spent anyway and allowing you to make money with credit cards!
As you’re probably aware credit cards have a “grace period.” This is a period of typically 30 days when a purchase you have made remains on your credit card interest free! This allows you to make purchases and pay them off within the grace period in order to build credit without incurring debt.
Now when you combine the cash back from a rewards card with the grace period mechanic you find that you’re able to make money with credit cards. Just put everything you’d normally pay with cash or a check on the credit card instead and pay it off in full within the grace period. This allows you to reap that 1% to 3% cash back without having to pay any interest on your purchases and builds your credit at the same time.
This strategy however is only viable if you have the discipline to follow a few simple rules:
- Never spend more than you have – while it is tempting to put huge purchases on these cards for the additional cash back, the inability to repay those purchases within the grace period invalidates this strategy. As a general rule of thumb, never spend more money than you actually have. This helps ensure that you can pay off the entire balance within the grace period.
- Make sure you pay the full balance within the grace period – It’s very important to make sure to get payments in before the end of the grace period, otherwise you’ll end up paying interest on your purchases. Since most credit cards have some means of paying online, I recommend sending payments weekly rather than monthly. This will ensure a speedy delivery and allows plenty of leeway to make sure you don’t miss that crucial grace period.
- Take advantage of extra perks – Some cards, especially those associated with a bank will offer a little bonus just for redeeming your rewards to a bank account you have with them. If you can take advantage of these kinds of bonuses without it costing anything extra, make sure you do.
Using these tricks and tips you can make money with your credit cards by simply spending the money that you’d normally spend anyway throughout the month.
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