Get paid to use your credit cards

Posted by Tad Johnson - Feb 9th, 2008 at 12:02

Credit cards can be a great financial tool or a terrible nightmare. Depending on how you use them, you can either pay 15-30% above your actual purchases or you can politely ask the credit companies to pay you. Which would you prefer? Sadly, you won’t get the same interest rates as the big guys. 1-5% is pretty easy to find, though some people push it further using complicated (and risky) APR arbitrage. But I digress.

credit-cards.jpgThe first step to establishing a profitable relationship with your credit card company is to pay off your balance. If you routinely carry a monthly balance, look at your budget (you do have a budget, right?) and figure out what spending you can cut to drive that balance to zero. Once you hit the magical number zero, you’re ready to start making money.

The next step is to find some good rebate cards. I personally use a rebate card from Citibank that gives me 1-2% cash back on all purchases and a BP Chase card that gives me 5% back on BP gasoline and 2% on food & travel. Since I don’t carry a monthly balance, this means that I’m earning a small return on each dollar I spend. Splendid!

Now for the caveats:

  • If you don’t have the income stability (or financial discipline) to pay off your balance in full each month, don’t bother with these rebate cards. They generally come with a higher APR than standard cards, so just one month of carrying a balance could cost you more than a year’s worth of rebates.
  • Read all the fine print for the card as well. Make sure that you’re getting the deal you want without any bogus strings or exceptions. The BP card advertises 10% cash back but reading the fine print reveals a 60 day bonus period after which the rate drops to 5%. Such marketing tactics are common among card offers.
  • Don’t bother with points–go for the green. Some cards offer points that can be redeemed for travel, prizes, or gift cards. Skip over these and go straight for the cash.

Final suggestion: try one of the new online financial management services like Yodlee or Mint that automatically import transactions from all your financial institutions and give you a daily snapshot of your balances. This makes it much easier to stay on top of your spending and prevent any unexpected bills.

4 Comments »

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  1. Some of you may realize this is a re-print from tadfad.

    Comment by tad — February 9, 2008 #

  2. Here is the concept sketched out with a diagram:
    http://newlycorporate.com/2007/09/26/make-money-on-your-cash-flow-automatically-free-diagram/

    Comment by Brandon H — February 11, 2008 #

  3. […] written before about the benefits of using credit cards, but that’s only after you’ve mastered the art […]

    Pingback by Try Using Cash Only (for a While) To Cut Your Spending : Brazen Careerist — April 22, 2008 #

  4. […] written before about the benefits of using credit cards, but that’s only after you’ve mastered […]

    Pingback by thevicenarian.com » Spending too much? Try cash — April 30, 2008 #

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