Wait, did you read that right? I can make money from the credit card companies?
Yep. Once you have paid off your debt, and built your emergency fund, it’s time to learn one of the tricks for making more free money, and that is through credit cards.
You’ve probably seen credit cards that offer rewards, maybe you even have one yourself. Many of these cards give points for travel, or gift cards for stores, or other random trinkets that are not cash.
I am not a fan of any of these types of cards. I want cash. Cash is nice, because you can buy whatever you want with cash. Like to travel? Use cash. Unless you are really into “travel hacking”, getting frequent flyer points is usually not as good as the cash equivalent. Plus, it forces you to use it for travel, which costs even more money.
So, once you find a credit card that pays cash rewards (I use the Costco American Express), the key is learning how to deal with this cash flow, and this can be a serious problem for many people. Right now, you are probably used to using your debit card, and any purchases you make are immediately reflected in your checking account, so a quick glance at your checking tells you how much you have left to spend. But if you start using a rewards card for all purchases, your cash flow will be delayed.
This makes budgeting ALL THE MORE IMPORTANT! When you get started using credit cards to make you money, keep in mind, the key is to pay off the credit card in full every month. Even a single month of interest charges is probably enough to ruin any benefit you’ve gained. So track your purchases with your credit card on your budget, just as if it came out of your checking account (this is one reason why I believe budgeting and cash flow are completely separate things). Now, whenever you make a purchase, you’ll use your rewards card, and then pay it off in full each month.
I recommend starting off slowly with this technique. Get some practice charging a few things, and then paying the bill in full. Increase the amount you do until you are fully comfortable with the cash flow situation. If you ever end up with a bill that is more then your monthly income, you’ll need to hit your savings and that should be a sign you need to reign in your spending.
Is it worth this extra effort? I personally get around $600-700 in cash each year by doing this. That’s $700 of free money! To put that in perspective, at current high interest savings rates (1%), you would need to have $70,000 in savings to make the same amount. And I paid the credit card companies $0! Also to reiterate, I do not recommend doing this until you have paid off all credit debt AND built an emergency fund.
What are your thoughts on using credit cards for good?
