Saturday, October 20, 2007

Make Some Extra Money Using Your Credit Cards

I am all about making the most money and making that money work for me and make me the most money. The less I have to do and the more my money can do for me the better. That is my approach to credit cardsCredit cards if used properly are a very useful, and sometimes, necessary part of life. Credit has become so easily attainable that it has become a large problem for a large amount of people, we are seeing the results of that in the mortgage market now. What do I mean by that?

Don't carry a balance! Unless there is a legit emergency you should never carry an interest accruing balance on your credit card. Don't throw money down the drain, which is essentially what you are doing if you are paying interest on your gas, food, gadgets, or whatever else you put on there. If you don't have the money don't charge it. If you must charge it don't charge so much that you can't pay it off. If you won't be able to pay it off don't buy it, again unless it is a legit emergency.

If you have a balance currently then take advantage of interest free credit cards and balance transfers. This allows you a bit of extra time to pay down a balance. Don't use the interest free rate and period as an excuse to charge more or to only pay the minimum. This only works against you. Pay as much as you can and eliminate the debt before the intro low rate expires.

If you are brave and disciplined enough you can leverage your credit as a money making tool instead of having it be a drain. I had a friend of mine that explained this practice to me and how he was making literally $1000's per year off of his credit cards. I started doing what he told me and now I am making $1000's extra per year off the credit card companies. Let me explain.

If you are like me you probably get tons of credit offers in the mail all with varying intro rates and periods. I only look at the interest free offers and ones that tend to be over 6 months work the best with 3 months really being the minimum. Okay here is the trick. You can leverage your credit line for the 0% period to earn you interest via some other medium. I don't recommend the stock market as this is a bit too much risk exposure. I recommend high interest, short term CD's, or high interest money markets(paypal actually is a pretty good choice). Okay here is an example. Say you have an offer for a 0% card. You apply and get approved for a $10,000 limit with a 12 month intro period. I would leverage $8000 of that available balance and place it into a 9 month CD or a money market earning say 5%. You would earn approximately $300 dollars. Do this each year with about $40 - $50,000(my friend does more) and earn usually no less than $2000 extra per year. All for doing pretty much nothing and all in essence free. You can leverage this even further if the card is a perks card.

Let your credit be a useful tool and not a burden. Don't spend and use credit where you can't afford to. Stop wasting money padding some companies bank account and let your credit work for you not against you. Credit cards when used properly are great useful and necessary tools. Well there you go that is what I think about credit cards.

later all and have a profitable and productive blogging day

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Anonymous said...

Wow! It's a good trick you share with us. Off course, the money should go to a safe or low risk investment. Thank you! Hope you will write more trick soon.

J.C. Carvill

Proletariatof1 said...

Yeah that is why I recommend only short term high yield CD's and reputable high yield money markets. If the rates are comparable I always go with money market funds so that I have more liquidity.

Anonymous said...

There's a problem with this in the UK, maybe you have a different system in the US. When a balance is transferred there is a 2% levy on the total. If you go for £3000 transfer it costs you £60! That would put some big hole in your profits. Read the small print.
Posted by Garth (I can't get through the blogger password for some reason so I had to click the anonymous box.) (I don't do anonymous)

Proletariatof1 said...

I guess the system is different. There are not set levies or penalties on balance transfers. Terms are set by the private bank issuing the line of credit. I never encounter a levy, fee, or penalty on my balance transfers. There are some credit cards that charge a fee for transfers but most do not. Of course I read the small print and I do not pay fees.

Keep in mind that this practice can have an impact on credit score. Although for me it hasn't been an issue.