Make Money With Credit Cards

(Read Part 2 of the series right here: Part 2: My Favorite Cards)

Up till now I've written posts about just saving money and I haven't written any about making money.  Well there's two reasons for that, there aren't as many easy ways to make money plus I feel that saving money is making money anyway.  But here's one that you actually gain money.  This is not for the faint of heart though.

The key for a really easy way to make money is . . . credit cards.  Don't gasp like I just said Voldemort or something.  Credit cards get a bad rap because of all the stories of people going into debt because of misuse.  It is not the credit card's fault that they are in debt, it is their own fault.  All it requires is self control.  If you don't think you can handle that, then by all means do not open up a credit card.

How to Not Go Into Debt with Credit:

1.)  As I said, the key to not going into debt is self control.  Do not think of it as being able to buy anything you want on credit, think of it just the same as your debit card, i.e. you have to have the money to buy it.  Generally I like to keep the rule that it already has to be in my account, like I could pay for it with cash right now, but if you know you will have enough money in your account by the time you have to pay your bill then that's okay too.  But I don't recommend living paycheck to paycheck like that if you can help it.

2.)  The second reason people go into debt over credit cards is because they don't pay their bill IN FULL each month.  If you've followed the rule above, you will have enough money in your account to pay the full amount.  DO THAT.  If you do not, the interest charged on what you have not paid will end up being way more than you should ever pay for the stuff you bought.  Just don't do it.  If you happened to have an emergency or something that prevented you from paying your bill in full one month, that's understandable, pay as much as you can, not just the minimum.  And then make sure you pay it off as soon as possible.  Oh and make sure you pay on time.


And that's it!  If you keep your spending limit within your means, that means only buying what you can actually pay for, and if you pay your bill in full on time, you will never pay credit cards any extra money (as long as you get a card with no annual fee but more on that next) and you won't go into debt.


Things to Look For When Choosing a Card:

1.)  NO ANNUAL FEE!!!!!!  This is super important.  Really the only fine print you have to look for as long as you follow the above two rules, is no annual fee.  Why should you have to pay a fee to pay for thins?  You shouldn't and that's why you won't.  There are plenty of cards out there to choose from that fit your style that don't have one.

2.)  Rewards.  Here comes the fun part and a little bit of the money making.  The reason why credit cards are so nice (not because of the credit because we don't use it based on credit we used it based on the knowledge that we have the money for it) is because you get rewarded for your purchases.

The way you get rewarded varies greatly per card.  Most are either based on points or a percentage.  Generally points give you less value per dollar spent, but that's not always the case.  It's also just easier with a percentage to know how much you are gaining back.

What you are rewarded for.  Here's where choosing a card that is tailored to your specific buying habits is key to getting the most out of your rewards.  I'm not going to go into great detail because there are hundreds of sites devoted to devouring every bit of every credit card offered out there.  Just do your research to find one that benefits you most.

Redeeming rewards is probably the most fun.  Generally the rewards options come in the forms of actual objects, gift cards, statement credit, or cash.  While it may be fun to build up the rewards to get that fancy TV on the list, you usually get more value out of getting either statement credit or cash (don't worry it usually comes in a check or direct deposit not actual cash).  Why, you ask?  Because the amount you get back in cash is usually more than what you would actually spend on whatever item you are looking at.  Say you've saved up 100,000 points.  That TV you were looking at is valued at 100,000 points.  But 100,000 points equals $500 cash back.  Look up the value of the TV (they're not gonna let you know it's not worth all those points) and you'll see that it would only cost you $350 to buy.  The value of that TV is $150 less than you would get in cash.  So get the cash, then ask yourself if you really need that TV or if the cash can go to something more useful.


Now that's all cool, you get free rewards for spending money.  But that's not the only way, and certainly not the most prosperous way, to make money off credit cards.  Here's a way to make a lot of money, quickly, without going over your budget.


BONUS REWARDS

Bonus rewards are offers for when you first open up a credit card.  As long as you spend a certain amount in a certain time period (generally 3 months) you get the bonus reward.  These rewards start at $100 and can go up to $500!  Or if you're into travel, enough miles for a plane ticket anywhere in the world.

Now be careful.  Remember to still check to make sure there's no annual fee.  Also make sure the amount you need to spend to get the reward is doable, within your normal spending amount.  The ones that offer the larger amounts, usually either have an annual fee or it's a really high amount you have to spend to get the reward.


And those are the keys to making money off credit cards while not spending any extra yourself.

Sometimes I open a credit card just to get the bonus reward.  That's fine.  Just make sure you don't start using too many different cards at the same time.  Find one that really suits your style: rewards you the most for your normal spending habits and has rewards you like, and use only that one.  Obviously you need to switch to the new one for those three months or however long it takes you to get the bonus reward.  Then when you are done with getting the reward, switch back to the old one.

If you build up a pile of cards, you can even just cut up the cards you don't use anymore and throw those away.  But don't close the account, that will kill your credit score.  Even though you may have accounts you don't use at all, it still builds up positive credit because you are "paying it off" every month.  It's strange, but it's true.  So actually having multiple accounts helps your credit score as long as you are paying everything off.

Also make sure you don't open too many new cards within a short amount of time.  This can also kill your credit score.  It looks like you're in a desperate need to borrow money.  I like to only open 2 or 3 new cards a year.

It think that covers all the essentials.  If you have any questions, feel free to ask.


*A note about travel cards, i.e. cards that give you miles towards plane tickets.  I didn't really cover these kinds of cards in my post because I don't have experience with them.  I've looked into them, but found that just like the product in catalogs for rewards, the miles you have to build up to get a good plane ticket are more than you would get back in cash.  BUT there may be some really good ones out there that I'm missing out on.  Let me know if there's one you really like.

 
Read Part 2 of the series right here: Part 2: My Favorite Cards