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How to Make Money Using a Credit Card

Updated on June 6, 2012

It has been over three years since I have used my debit card for anything other than withdrawing cash. I use my credit card for everything. In those three years I have MADE over $3,000. You may wonder how this is possible considering most people lose money using credit cards, what with interest and everything. Read on and I will tell you how I did it, and how you can do it too.

Will this work for you?

The first thing you have to know is that this only works for financially responsible people. If you are the kind of person who spends without thinking about it, frequently over drafting your accounts and buying more than you can afford, this way is not for you. In fact, this way will probably hurt you – a lot. Studies show that consumers with reward credit cards spend twice as much as those who don’t. This is probably because that person will say, “Well, at least I can get the points for it!” when they don’t need what they are buying. If you are, however, the kind of person who shops responsibly and can usually manage to pay your bills on time then this system will work wonderfully for you.

How this financial system works:

I did a lot of research on different credit card reward programs, and found the one that worked the best for me. Once the card arrived, I began using only that card and paid it off at regular intervals so that it never ever accrued interest. I got points that I could use for various things (like paying off my bill or getting a check) and I never paid the credit card company anything. It was extra money in my pocket every single month! The following are step-by-step instructions on how you can use credit cards to make money.

Step one: Review your needs

What kind of reward would be the most beneficial to you? If you don’t make much money and always find yourself broke (like I was when I was in single, working and in school) then rewards that you could cash out might be a welcomed option for you. If you travel a lot then airline miles would come in handy. If you enjoy taking a large vacation each year you might consider a Disney credit card that lets you earn points toward Disney vacations. If you have a long commute or take a lot of road trips, a credit card that offers a high reward on gas would probably be the most beneficial. Figure out where the highest benefit would be for you, and search for a card that meets those needs. Check out a list of Six Great Rewards Credit Cards to help you decide. Now, apply for that card and wait for it to arrive.

Step two: Use that card to pay your bills!

Now that your credit card has arrived and has been activated you have some work to do. Make a list of each of your bills. This should include (but be sure to add whatever else is not listed here):

1. Electric Company

2. Gas Company

3. Water/sewer company

4. Trash company

5. Cable television provider

6. Cell Phone provider

7. Home phone provider

8. Internet provider

9. Netflix

10.Any recurring charges to your bank account or debit card

11.Gym membership

12.Preferred payment method on Amazon, EBay, iTunes etc.

13.Car Insurance

Go down this list and change your preferred method of payment. This may mean signing up for online access if you regularly paid by mail each month. You will be surprised how many of them accept credit cards as payment. It is better to add your card to your online accounts now rather than wait until the bills need to be paid because you reduce the risk of forgetting come payday. You can also choose “automatic payments” if you like – this makes life a lot easier not having to remember to pay your bill each month.

If you don’t see a way to pay with a credit card, such as they only give you the option of entering a bank account, call them up and ask. Often companies don’t easily give the option because they get charged by the card company – but if you ask they can often set up the payments through your card, although they may then require automatic payments. Not all bills will allow you to do this, and some may charge an extra 3-5 dollars for using a card. If they charge, it is probably not worth it as the points will not be as much as the money you are spending. Do your math and figure out what is best.

Just doing this can create upwards of a thousand dollars onto your card each month. This is money you were spending anyhow, and now you are earning money just by paying your bills! Even if you are getting just the lowly 1% cash back on your purchases, that is still an extra $120 a year just for paying bills. If you have the Chase Freedom card, they often have utilities as a “bonus category” so for three months out of the year you are making 5%.

Step Three: Use that card when you shop!

Now that as many bills as possible are going onto your card, you need to use this card every time you pay for something. Take your debit card and other credit cards and put them in the back of your wallet. This new card will pay for everything. When I go to the grocery store, I use my rewards card. When I get gas, I use my card. When I buy shoes, or movie tickets, or a Gatorade at the convenience store, I use my card. I only pay in cash or with my debit card if they just don’t take credit cards. Yes, I have to show my ID every time and yea that’s a pain. But the money I have gotten is worth it and to be honest I don’t mind anymore. I keep them in the same pocket in my wallet and pull them out together making it easy.

Step four: Pay your card completely and regularly!

When I say pay it regularly, I don’t mean the minimum balance. Pay it in its entirety. Often. Set up a schedule that works for you. Here is the system that I have come up with that has worked well - I have never paid an interest charge or a late fee since I got my rewards card. Interest fees are high on reward cards so don’t get sucked into that cycle.

1. Set up a schedule to check on your balance. I check mine weekly, although I check it more often if I have been spending a lot recently. I don’t spend that much money on a regular basis but if you do, you may want to check it bi-weekly. I set an alarm on my phone to remind me when I first started out. Now I do it out of habit. Remember that credit card charges can take up to 3-5 business days (does not include weekends) to show up, meaning your most recent or pending charges might not appear in your balance.

2. Set a limit. I pay my card when it reaches $500 regardless if it is my scheduled time to pay it or not. This makes sure that my balance never gets out of control to where I cannot pay it off completely before it accrues interest.

3. Set a regular payoff schedule. Our paychecks come twice a month, on the first and the fifteenth. On these days I go online and pay my card off completely, even if there is only a $30 balance. This allows me a fresh start each pay period, which is another way of keeping the balance under control.

4. Remember when your automatic payments are charged to the card. If you look at your balance and you see only $65 on there you might get excited thinking you can still spend X amount of money. Be mindful of when those payments come through so you can add them mentally to your balance and know what you have to spend. I use Quicken now, but I used to post a list on the wall by my computer so I would always know.

Consider using a computer program to help you keep track of your finances

I use Quicken, although there are many other good programs out there including free, web-based ones. I enter in all of my bills and what account they are charged to. I have it automatically download my bank account balances and my credit card balance. This makes it easy to see how much I have spent versus how much I have in my bank account, plus what will be charged soon. Remember: Take your bank account balance and subtract your credit card balance, then subtract upcoming bills and that is how much you have to spend. Your spending limit is not your credit card limit!

Step five: Use those rewards!

According to a Harris poll, over 40% of rewards credit card users never redeem their rewards. If you don’t redeem your rewards you are giving away free money! Whether you redeem them monthly or save them for a special event like Christmas, don’t forget to use those rewards.

Now you have all the tools at hand to make money, using credit cards! Find one that fits your life, switch over all of your spending to it and reap those great rewards!

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    • Petra Vlah profile image

      Petra Vlah 4 years ago from Los Angeles

      I follow a very similar strategy, but when is time to redeem the accumulated points, the choices for a "gift card" are very limited (usually places where I don't want to shop in the first place).

      Redeeming miles is a nightmare since there are very few seats available on flights I actually want to take (no matter how much in advance I try to make reservations). I guess the only way to go is to opt for cash rewards and spend the money as I see fit at the moment

    • wowcreditcards profile image

      WOW! Credit Cards.com 4 years ago

      Great tips for using reward cards to your advantage! Unfortunately, most people aren't as savy (or disciplined) with their credit card accounts. If they were, credit card companies wouldn't be offering all these great incentives.

      But if you can be disciplined (and follow these suggestions), a reward card can be extremely beneficial. Just use extreme caution and don't start racking up your credit card balances you can't pay off right away. Otherwise, you'll end up like most consumers -- paying more in interest charges than what your rewards are worth...

    • seigfried23 profile image

      seigfried23 4 years ago

      Always nice to see people who recognize the potential benefits of using credit cards, instead of letting them use you lol. this is a most worthwhile read, and I wrote a comprehensive piece on it myself:

      http://credit-cards-pay.blogspot.com/2012/04/makin...

    • Colleen Fowler profile image
      Author

      Colleen Fowler 5 years ago from Mildenhall, England

      Wow, I wish they would offer deals like that now! 1.99% is nothing compared to most student loan rates. You got a great deal there - very smart investing as well.

      I used to use a store card like that as well - Smith's did the same thing with the gas. While I never bought gift cards with it (great idea by the way!) I did enjoy getting my credit card rewards on top of gas perks. I am all for doing something complicated to reap good rewards. I'll have to remember the gift card idea once we move back to the states!

      Mint.com is great! I used it during our overseas move because I wasn't sure I would have access to the same computer all the time. It's nice as well because then you could check your balances at work. I think they also have a calculator to help you pay off debt which is nice.

      Great comments, thanks!!

    • bankscottage profile image

      bankscottage 5 years ago from Pennsylvania

      Colleen, Great Hub and Strategy!. I have been using a less organized version for a few years and end up with a few hundred dollars cash back plus some free hotel rooms or an occasional free flight.

      On your other Hub, 6 Great Reward Credit Cards, I commented how I recently got 2.5 round trip airline tickets on Southwest for the $69 annual fee.

      My biggest long term reward came from taking a cash advance and it didn't even come from the credit card. About 10 years ago, my wife received and offer for a cash advance for $30,000, and 1.99% interest fixed until paid off (not just 6 to 12 months like now). We had 2 sons that were getting close to college and we knew we would have to borrow some money to pay for it. We thought, why not borrow it now at 1.99% rather than the higher student loan rate. Then, where do we put it for growth? We picked the Pennsylvania 529 Guaranteed Savings Plan. Basically prepaid college credits, that were guaranteed to go up in value the same amount as college tuition increased (and you know how much college tuition has gone up in the last 10 years). That $30,000 paid about $37,000 in tuition and we paid the cash advance off in less than 5 years. Yes, we paid some interest, but less than on a student or parent college loan.

      If you want a complicated strategy, our local grocery store lends itself to one. For every $50 in purchases you get $0.10 off per gallon (up to 30 gallons) of gas purchased at their gas station. Purchases also include gift card purchases for national brand stores. Sometimes they have a special and give $0.20 off per gallon for $50 purchases. I planned to buy a large screen tv from Best Buy. I went to the grocery store and purchased $1500 in Best Buy Gift cards using my rewards charge card. I got $1500 purchase on my rewards card ($15 at 1%) plus $3.00 off per gallon of gas up to 30 gallons of gas ($90 value), giving me $105 back on the purchase of the tv (not counting that the tv was on sale). I paid the charge card off with savings without paying interest.

      Another option to Quicken is Mint.com, an on-line budget and investment tracker. You can even see your net worth any time you want. It will send you e-mail warnings when bills are due.

      Voted up, useful and interesting