Use a Credit Card Cash Back to Make Money

Saturday, May 2, 2009

A credit card cash back arrangement could earn you hundreds of dollars a year. On the other hand, it could also cost you several hundred dollars a year and it's important to have a clear understanding of how these schemes work, and how to take advantage of them properly in order to make sure that you make money, rather than lose it.

Credit cards which offer a cash back scheme typically offer you between half a percent and three percent cash back on any purchase you make for normal things such as groceries and fuel. Think about how much you currently spend using your credit or debit cards, and then work out what one percent of that would be. Over a year, most people can see a few hundred dollars waiting to be picked up.

Now work out how much you spend in other ways, such as with cash, checks, direct debits and such like, and you can probably see that by using your cash back credit card for these purchases you are looking at a very significant sum of money that's simply yours for the taking.

But what's the catch? After all, credit card companies aren't out to give people money as though they were a charitable cause! The truth is that if you follow a few basic rules you can't go wrong, and most people will easily find that they are able to make several hundred dollars per year on top of what they are already earning - and the best bit is that this money is entirely tax-free!

1. Pay the Monthly Bill in Full

Make sure that you can pay off the credit card bill in full every month. If you don't think that you can manage to do this every month without fail, then you will be better with a low interest credit card rather than a credit card cash back scheme. The reason is that the interest rates on such cards are usually very high, and if you fail to pay off your balance at the end of the month, even just once, you could find the interest rates eating away at the money you have earned very quickly, and you could find yourself losing money rather than making it.

2. Watch Your Spending

Don't try to make money by spending it. Receiving free money just for spending money is a great scheme, but if you end up spending money just for the sake of it you might find you're not able to pay the full bill at the end of the month. Keep a close eye on what you spend and how much is on your card.

3. Never Withdraw Cash

Never use your credit card for cash withdrawals. Although you earn cash back for making purchases on your card, withdrawing cash does not earn you anything. In fact, quite the opposite - it is likely to cost you quite a lot. There are often very high fees attached to credit card cash back schemes should you use them for withdrawing cash.

Not only this, but you will probably find that from the day you withdraw the money, not only have you paid a fee for the withdrawal, but you are then paying interest on the cash amount as well. This could easily wipe any money earned that month, so never use a credit card for a cash withdrawal.

4. Time it Right

Consider the timing of your cash back credit card. If you are considering signing up for such a scheme, you might be best to wait a while. That is because many of the better cards have a three-month introductory period when the percentage of cash back earned is much higher. In some cases this can be as much as three times as much, with a standard one percent cash back arrangement being raised to a full three percent cash back on all purchases for the first three months.

The trick is to think about which are going to be your most expensive three months. Perhaps you are about to move house and you will need to pay for a good many interior decoration items, or you're planning on buying all of your Christmas presents shortly. By signing up for a credit card cash back scheme you can then take advantage of any bonus introductory offers or rates to earn more money by carrying out your big spend during this time.

By shopping around to look for the best long term rates and introductory offers, thinking carefully about your own spending habits and ability to clear your credit card bill each month, and following these four rules you will almost certainly find that a credit card cash back arrangement will see you earning hundreds of dollars of tax free money each year for doing nothing!


Get Cash Back said...

Definitely a good point raised about paying the balance in full. Sometimes this is the ony way to turn the tables around and make the card company make you money for a change. Only 1 simple missed payment can eat into your acrued cashback and put you in default.