Profit From Your Credit Card

The majority of us have credit cards. Unfortunately the majority of that majority are losing lots of money on high interest because they don't pay off their full balance at the end of the month. There is a way though to actually profit from your credit card.

The first step to profiting from your credit card is to get the right kind of card. After making sure there is no annual fee you just need to focus on the rewards that you can get for spending. Many card rewards come in different forms. There is straight cash, point systems, and specific rewards like airline miles. I don't trust the point systems as much as straight cash rewards because they are counting on you to not figure out their value. You may get 1000 points for spending 10 dollars so it feels like you got a lot, but when you take a look at what you can buy with that it will be nothing. You'd probably need 100,000 points to get a $10 gift card. So that's about 1% reward. You may need even more points to trade in for straight cash of the same value. You can do better than this most likely. The gift specific rewards like airline miles may be worth it if you use that reward often. For example, a frequent flier may benefit from tons of free miles. But you also have to figure that you are also must stick to that reward. I recommend going for cash rewards. Also when choosing a card, you won't need to put too much emphasis on the interest rate since you will be paying it off in full every month. Of course a lower interest rate doesn't hurt and could come in to play if you have a freak emergency, so don't ignore it completely.

Personally, I use a Discover More card. This card gives cash back bonuses of 1% to 5% based on the type of purchase. You can also sign up every year to get 5% back on certain types of throughout the year. My favorite is 5% back on gas purchases during the summer months. So when gas prices are highest, you are getting the most money back. There are also 5% back promotional periods for hotels, groceries, travel, movie theaters, and much more. There are deals with leading brands to get more deals from 5% to 20% cash back at any time. The only drawback from the Discover card is that it is not as readily accepted as Visa and Mastercard are. So be sure to carry a backup card with another rewards system. My backup is a Visa that is on the points system.

Now that you know how to get a good credit card, the second step is to use your credit card for all of your purchases and use all the reward maximizing offers that you can. Grocery shopping, clothes shopping, gas purchases, and everything else should be charged as long as it fits on your card. If the option is available, set up automatic payments using your credit card for all of your recurring monthly bills. Things like your cell phone bill, mortgage, car loan, and utility bills could all be automatically paid by credit card. This will certainly raise your credit card bill, but will also raise your rewards. Another perk is that you won't have to keep track of so many bills to pay every month. You just need to make sure you keep track of how much you charged on the card and how much money you have so you don't fall behind and leave any balance carrying over. If you have trouble handling credit card spending I would refer you to my blog entry on the benefits of cash spending.

The only other warning I have about this strategy is that your card might get canceled eventually because the credit card company will realize that you are losing them money. It's no big deal though. There will always be another credit card company that will give you a card and you can take joy in the fact that you beat the credit card company at their own game. I've been going strong for three years with no account closures so far. Give it a try and get some cash back.