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Step 1
First, get online and do some research on credit cards. Look for credit cards that offer rewards, specifically cards that offer CASH rewards. Try to find a card that offers 1% cash back or more, and make sure there's no limit on how much cash you can earn in a year. Some cards will limit the cash rewards to $300 a year or less. You also want a card that gives cash back on all purchases, not just certain types of purchases like gas or groceries. Don't even consider credit cards that charge an annual fee. You can just do a search for credit cards and start browsing, or you can go to the web sites of some of the major banks like Chase, Capital One, Citi, and Bank of America to see what offers they have. Credit card offers change frequently, so you'll just need to see what's available right now. You may even get a good offer in the mail.
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Step 2
After you've found a credit card that offers cash back on every purchase with no annual limit, apply for that card.
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Step 3
Once you have the card, use it for every purchase you make if possible. You should only use cash or checks if you can't pay for something with your credit card. However, don't use it to purchase anything that you would not normally purchase without it. The credit card is only a substitute for other payment methods. It is not a tool that you can use to buy things you can't afford.
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Step 4
This is a very, very important step. Pay your credit card bill in full every month. Never, ever carry a balance. If you follow this rule, then you will simply be paying for most of your monthly expenses at one time with one check instead of paying for each expense separately.
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Step 5
Keep your credit card bills as a record of your expenses. Your credit card bill gives you a nice monthly detailed report of most of your expenses. This can help you identify those things that you can eliminate to save money.
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Step 6
Rewards credit cards typically give you points for all of your purchases and you can redeem those points for more material rewards, such as cash. Once you accumulate enough points to request a check, do it. The check you receive is then basically a rebate on all of the purchases you made with your credit card up to that point. So if your credit card offers 1% cash back, then you are essentially getting a 1% discount on every purchase you make with it. Over the course of a year this can add up to several hundred dollars.
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Step 7
In addition to your primary credit card, you can optionally apply for a credit card that gives you higher rewards for certain types of purchases, such as gas or groceries. If your primary card gives you 1% cash back, then you could get another card that gives you 5% back on gas and then just use that card for gas purchases. This can give you a little extra money throughout the year as long as you can remember to use the second card for those specific purchases.
Comments
BenignEconomics said
on 12/20/2008 An Economics professor at Haverford College once told me how to make money using a credit card. I have been following this strategy for over a decade and I found it works very well. You can read my full analysis at http://benigneconomics.blogspot.com/.
Clark111 said
on 9/28/2008 This is something my wife and I started doing about a year and a half ago with a CIBC Dividend card. They offer two; one is 1% with no annual fee and also 'no limit' to rewards whereas the other is 2% but is capped at ~$720 Can and also has an annual fee of $70 I think. You have to pay off your balance each month in full to not incur interest (which is actually quite high 19.5%) but we've never had to pay it because we pay the previous month in full always. You also have to remember that any 'money' transaction on your card is charged interest from the day you charge it and is not the same as all your other transactions in this way. So we don't ever take out cash from the credit card or any other transactions which are regarded as 'cash'.
I originally got the 1%/no fee card in July and the dividend is paid on the December statement. After seeing what we'd earned in that 6 months I
Clark111 said
on 9/28/2008 This is something my wife and I started doing about a year and a half ago with a CIBC Dividend card. They offer two; one is 1% with no annual fee and also 'no limit' to rewards whereas the other is 2% but is capped at ~$720 Can and also has an annual fee of $70 I think. You have to pay off your balance each month in full to not incur interest (which is actually quite high 19.5%) but we've never had to pay it because we pay the previous month in full always. You also have to remember that any 'money' transaction on your card is charged interest from the day you charge it and is not the same as all your other transactions in this way. So we don't ever take out cash from the credit card or any other transactions which are regarded as 'cash'.
I originally got the 1%/no fee card in July and the dividend is paid on the December statement. After seeing what we'd earned in that 6 months I
CCrock said
on 1/8/2008 This is great advice. My husband and I have been doing this, it makes it so much easier to keep track of our budget by using the credit card to pay for everything. But definantly pay the balance in full every month! Don't get ripped off!
reecepeanuts said
on 10/21/2007 Just one more thing ..
There's a couple other ways to make money from your credit card. You can sometimes get credit for trying to cancel your card. This article (and comments) has a few things to say about that - http://katiescredit.com/i-was-bribed-to-keep-my-credit-cards/
Another one is charging less than $2 to your unused credit cards (see article to see if your bank has this “feature”) and then your bank will credit it to you instead of sending you the statement - http://katiescredit.com/do-you-like-getting-free-money-what-about-tiny-amounts-of-free-money/
A threaded discussion of this is on fatwallet -
http://www.fatwallet.com/forums/textthread.php?catid=52&threadid=693038&print=1