The financial dangers of credit card use are well known, with risks like missed payments dinging your credit score, over-limit fees draining your wallet and high interest rates piling up month after month. Those dangers are all too real, and the irresponsible use of credit cards has snared many an unwary consumer.
All that is true, but there is another side to the credit card picture, one that is much brighter for the financially responsible. If you have the discipline and the wherewithal to pay your entire bill in full and on time, you can actually get the credit cards in your wallet to pay you back, and here are four simple ways to get started.
1. Sign Up Bonuses
Only a fool would turn down free money, and you are anything but foolish. So why not scour the online world for free sign up bonuses, extra cash you can use for anything you like?
Competition among credit cards has never been more intense, and you can turn that to your advantage with sign-up bonuses and other special offers. These bonuses do come with strings attached, including minimum purchase requirements and time constraints, but if you are willing to play the game you could make some serious cash.
2. Points and Cash Back
If you have a credit card that gives you cash back, points, miles and other bonuses (and why would you not?), you could save hundreds of dollars a year just by spending on the items you would have purchased anyway. As the points and other bonuses accumulate, you can cash them in for gift cards, free airline tickets and extra money in your wallet.
You can maximize the amount you get from your credit cards by watching for special bonus offers and extra cash back. Many credit card issuers give extra points for spending in certain categories, from grocery stores to restaurants, from online purchases to office supplies. If you are willing to do the work, this game of credit card roulette could net you even more points, gift cards and cash back.
3. Interest Rate Arbitrage
This does not work as well in a low interest environment, but when rates are higher, credit card arbitrage can be a lucrative opportunity. No matter how much you charge on your credit cards or how many monthly bills you pay that way, you can avoid all interest charges and nuisance fees by simply paying your balance in full.
As long as you pay your balance in full each month, you are essentially getting a free loan from the credit card company. That gives you the chance to keep your money in the bank, and earning interest, until the last possible moment when the bill comes due.
4. Buy Discounted Gift Cards
Whether you are shopping online, buying essential items locally or purchasing presents for the holiday season, gift cards are always in style. You can get even more bang for your buck by using your credit cards to purchase gift cards at a discount, using the extra cash to beef up your bank account and save even more.
There are a number of websites and online retailers that specialize in buying and selling gift cards, and the discounts can be quite steep. Even if you save only 10%, that is an extra $10 on a $100 gift card purchase. And as long as you pay your credit card bill in full each month, getting that extra cash will cost you absolutely nothing.
The irresponsible use of credit cards can be a real danger to your financial future, but that does not mean there is no room for plastic in your life – or your wallet. With a little bit of planning and some discipline, you can turn the tables on the credit card companies and get them to pay you hundreds of dollars a year in the process. The four ideas listed above can help you get started, so you can start earning those free perks right away.