How To Make Extra Cash With Credit Cards

About four years ago I embarked on journey of trying to build my credit. I got my first credit card. At the time I didn’t realize the potential benefits of having a credit card, especially the points.

It seems like the media has popularized credit cards as being a bad thing. Growing up my mom would tell me not to get a credit card in college because I would just run up a bunch of debt. So I was hesitant to ever consider getting one.

Being the nerd that I am I end up listening to a lot of smart people talk about personal finance. I often hear them say to pay for everything with cash. It is true that if you do pay for everything with cold hard cash you will be more aware of how much you’re really spending.

But if you’re smart about using a credit card and you pay off your balance every month there are a bunch of benefits.

1% On Everything

If you’re like my mom you tend to think of credit cards in terms of interest rate. How much will they charge me when I eventually have to pay this money back? Interest rates are irrelevant to me because I never have to pay them. I pay my bill off every month.

Instead, I look at how much I can earn. Just about every credit card these days offers at least 1% back on everything you spend. So, if I were to spend $500 a month and I paid my bill off every month, at the end of the year I would have $60.

Obviously $60 isn’t anything to write home about. Especially in our society where people can throw away that amount on a tee shirt. When I began on my credit card journey I realized that as time went on I could get cards with better benefits. The better your credit the more likely you are to be approved for cards that offer more cash back.

Categories

As I discussed above, almost every credit card you find these days offers some small amount of cash back. Beyond that, a lot of credit cards will offer more cash back on certain categories.

The credit card I use for everything is called the BankAmericard Cash Rewards Platinum Plus Visa. Say that 10 times fast! Anyway, the card offers 3% back on gas, 2% on groceries, and 1% on everything. Most of what I buy is gas and groceries so instead of that pathetic $60 a year Im making more like $250 a year on that same $500 worth of spending.

Other cards may offer rotating categories. So, instead of getting 3% on gas always I might earn 5% on gas for three months out of the year, but only 1% the rest of the year. Chase Freedom® is a good example of this. Other rotating categories might be grocery stores or restaurants so this kind of card makes sense for you if you buy a lot of things from those sorts of categories.

If you’re like me, it gets confusing trying to figure out what the high paying category is at any one time and it’s difficult to somehow spend more in one category just because you get 5% back. In fact, you’re probably more likely to spend needlessly because of the categories. However for some people these cards work so they are an option.

Sign On Bonuses

Over the last few years I’ve applied for a lot of credit cards. I have one card that I use for almost everything and i’m very content with that. The reason I apply for other cards is to get the sign on bonus.

A sign on bonus usually says that if you spend a certain amount on a particular card in a specified amount of time you will get extra points. For example, the Chase Sapphire Preferred® Card will earn you 50,000 bonus points if you spend $4,000 in the first three months.

To a lowly college student like myself $4,000 is a lot of freaking money. Luckily there are all different levels of cards. You can find sign on bonuses that amount to $100 for only spending $500 on some cards.

My strategy is to use the new credit card for everything until I hit the sign on bonus. Once that amount is met I stop using the card. Generally the bonus can be redeemed for cash so I simply redeem my points and put the money in the bank. After that, I never use the card.

I’d like to note that you shouldn’t do this too often. If you are applying for a new credit card every month it looks to a creditor like you’re needing new cards because you’re running up credit bills. For this reason, getting lots of new credit cards in a short period of time will hurt your credit.

Combining Offers

Just like a lot of the money saving techniques I use, using credit cards to make extra cash is about combining offers.

For people who do a lot of travel there are wonderful cards out there that offer more back on airline travel or hotels. You can also get a credit card affiliated with your favorite airline or hotel and combine the rewards you get through loyalty programs with the credit card rewards.

In 2013 I decided to get the Total Rewards® Visa® Card. This card is special because it offers 5% back on money spent at Caesars Entertainment properties. It also offered a hefty sign on bonus and free tickets to one of the attractions in Vegas. I must admit I love vegas and I spend a lot of money on hotels. I redeem my credit card points for casino credits and in addition I earn loyalty points at the casino by gambling.

This is just one example of combining rewards. Many thousands of words could be written about how to combine deals. As far as credit cards go, if you’re creative you can find some awesome rewards. You just have to do a little research. I recommend visiting nerdwallet.com they have a lot of articles that will compare and rank credit cards for you.

Avoid Annual Fees

I’d like to end this blog post on a cautionary note. The one thing that can make or break your ability to make money with credit cards is an annual fee. That’s the amount of money you have to pay a year to have a credit card even if you never use it. Every card you own should have a $0 annual fee.

Some cards will have no annual fee for the first year. Thats just a gimmick to make you sign up. Take my word for it: avoid annual fee cards. There are so many great cards out there and in my opinion it never pays to have an annual fee.

I have heard people say that there are cards whose benefits outweigh an annual fee. In my opinion there is no credit card in existence that’s worth paying money just to have it. If you stop using the card for some reason that money is wasted.

I believe there are some financial topics that aren’t talked about enough and this is definitely one of them. If you’re financially responsible and can pay your bill every month this is a no-brainer way to passively earn money. The truth is, people who are money smart have been using this method for years. People who are constantly in debt or just trying to stay current on bills don’t think about this sort of stuff. I encourage everyone to get smart about their credit cards today.



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