First, I would like to start by making sure everyone knows the rules of making money with credit cards.
1. ALWAYS, ALWAYS, ALWAYS pay your balance off in full!!!!
I cannot stress this enough. If you are not going to do this, then skip this method now. I don't want you even reading my advice. You will not make money, but simply lose far more than anticipated. The interest rates on credit cards are too high for you skip even one full payment. Don't do it! Always pay it off!
2. Reevaluate your credit cards each year and their benefits.
Many times, the original offer you go for with free incentives and money back is only good for 6 months to a year. Once these incentives run out, it is time to move on.
3. Pay everything you can with your cards!
$1.50 charge for candy at Walgreens? Yes, absolutely. $40 fill up at the gas station? You had better have charged that! EVERYTHING! It all adds up.
4. Do not overbuy because you have a credit card.
So, many places I have read or seen on the news that families spend more when they have a credit card vs. cash in their pocket. I do believe this is probably true, if you are not frugal minded. But, if you are someone who has been reading my blog long enough, working a budget and know how much you can spend for each part of your budget, it is much easier to not overspend.
If it helps, do the envelope system ( if you have ever used the cash envelope method ) and put your budget on the outside. Everytime you buy something, stick the recipe in that envelope and mark it off your total...so you know how much left you have to spend. It is a nice workaround, but you can earn money now!
Or, you can keep a check book register just like you would do with your checking account. Simply enter every purchase, just like you would if it was a check you wrote, in your check register.
4. Do NOT apply or own a credit card that charges a fee every year.
Unless the value of the rewards are so "worth" this annual fee, there should be no reason to pay a fee. Most reward cards do not have them. There are a few that I may mention on my blog, but when I do, you will see the rewards are worth the annual fee. But, in general, no...don't pay fees.
To start, why do I love credit cards so much? Well, they give you cash back or other incentives. And, as we can all tell from this website, I like to save and earn money for my family. So, I am not one to look a gift horse in the mouth, that is for sure. But, beyond getting money back, I also like the safety of using a credit card.
With a credit card, if someone steals my card or my number or any charge appears that is not valid, I don't have to pay it. Yes, that is right. I call my credit card company and they work it out with the provider or the issue if it is stolen. Money will NEVER immediately be taken from my checking account. What a great safety net!! Of course, if it is found out that the charge was valid, you will be required to pay it later.
With debit cards, even if the bank will eventually refund your money if someone steals your card or number, you are still out the money until they do work it out. What if you don't have alot extra for bills, etc? Now, checks can be bouncing, etc. And, believe me, this has happened to someone close to me, so I know. And, when checks bounce, you often get charged from your bank AND the retailer. What a waste of money!
Finally, if you use a credit card, you are paying your bills a month in arrears. This means, your money sits in your checking account a month longer earning interest ( you do have a High Interest Checking account, right? ). This adds up to even more money in your pocket.
Now, how do you keep your credit cards straight with the rewards? For example, I have many. Some pay higher on gas, some on groceries, etc. The ones in my wallet ( and my husbands ) might get confusing. So, I bought small labels, and printed on them what they were for and then, I stuck it to the face of the card. So, now when my husband is at the gas station, he looks at his credit cards and pulls out the one that says, " gas". It doesn't get much easier than that.
You may be concerned about having a lot of credit cards and that it will play havoc on your credit score. But, you should be fine, if you understand the basics. First, having credit cards is actually good for your credit score, IF you aren't overspending to your limit, are paying regularly( which you better be ) and you show that you have good purchasing control. This means, simply put, that if you have a limit of $10,000 between 2 credit cards, and you are only spending $1,500, it shows you have self control. If you have $10,000 available and you are spending $9,500, it could raise a flag that you are in trouble.
If interested in how credit scores are calculated, click here for a great article. But, you do want to watch and decide up front which cards you want. Everytime you do a hard inquiry ( meaning you apply for credit ), it stays on your credit report for a year to two years! So, don't apply for more cards then you need. Figure out upfront which cards are the best match for you!
SOOOO...what is my favorite card right now? Well, with this crazy economy and market, the credit card offers don't seem to be as great as they were a year ago. But, I do still have a few I like.
But, please read the terms/conditions. How it works is that you get up to 5% of a $100 back a month. After you have bought $100 of gas in a month, you then only get 1% back. So, in total, you can get 5% on $1,200 a year.
What is a possible work around? Open an account for yourself and have your spouse also open one. Now, you both have up to 5% of $2,400.
Why else do I like Discover? They allow you to cash out and relatively low balances. In the past, I was always able to cash out at $20. I would have it applied directly to my statement and short pay my next payment that amount. And, you will still get paid at 1% on other purchases.
