How to Earn Money from Credit Cards

Credit Cards are not for everyone. In fact the majority of money saving websites advises you to pay in cash instead of using credit cards. However, if you pay your balance in full every month, you can earn a lot of money from credit cards. Last year alone I earned over $700 cash back by purchasing items I would buy whether or not I had a credit card such as groceries and gas. I have used credit cards for 20 years and during this time, I never paid an interest or late payment. The key factor in earning money is to understand that credit cards are not “free money”. Here are some tips for earning money by using credit cards:

1. Know your Bank Account Balance: I check my bank account balance on a weekly if not daily basis. I never charge more money than I can afford. You also should consider having a budget in order know the amount you can afford to charge to your card. You can download a free budget worksheet here. Budget2008-Swapsavers.xls

2. Compare Rewards Programs: Finding the right credit card is similar to purchasing a car. You need to find a card that will offer you the most rewards based on your spending habits. There are hundreds of rewards programs to choose from.

3. Understand the Rewards Exchange Rate: Understanding rewards exchange rates can sometimes feel like understanding the currency exchange rate in different countries. A credit card may offer you 10 points for every dollar spent but when you try to redeem the points you may need 100,000 just to get a $5 gift card. In general most cards offer 1% back of your purchases. Some credit cards will offer as much as 5% back for certain purchases such as gas, grocery and drugstore.

4. Never Pay an Annual Fee: Most rewards cards do not charge an annual fee. In my opinion it is not worth it to pay an annual fee when you can chose from a variety of programs without paying a fee.

5. Never Pay Late or Interest Fees: In order to earn money from credit cards you need to pay your balance in full every month. The interest and late fees charged by credit cards are obscene. Paying your bills on time requires both money and organization. If you are even 1 day late with your payment you will be charged late and interest fees.

6. Reassess your Card: Even after you chose a credit card, you should continue to search for credit card reward programs. Credit cards are always changing their programs or offering new deals. You want to find the card that will offer you the maximum amount of rewards based on your purchases.

7. Charge Everything (again only what you can afford of course): I charge everything from $1 to $100 on my card. The way I view it is every dollar I charge I am earning money.

If you do use credit cards and end up charging more then you can afford, ask for help. Either contact the credit card to negotiate a new interest rate or consult with a financial advisor to figure out how to get out of debt.