Increase Your Income With Your Credit Card

May 24, 2010 at 5:00 am 14 comments

There are two ways to get rich(er): spend less money and earn more money. Both can be tough, but here’s an easy way to start earning more money immediately.

Credit cards are a real life game and depending on how you play, you can win or lose real money.

When you lose, your credit card issuer wins big. When you win, your card issuer still wins, just not as much as when you lose. So, if you’re going to use a credit card, then you better be winning.

Some people have lost and decided not to play the game anymore, they cut up their credit cards and swear off credit forever. Depending on your lifestyle this may or may not work. In many cases, you need a credit card to rent cars, reserve hotel rooms, book flights and buy online.

Credit card issuers make it easy for you to lose the game. When you apply for their card, they ask you what your income is. Once they know they can trust you, they increase your credit limit beyond what they know you can afford to pay back each month. If you take the bait, they start lining their pockets with your hard earned money. If you carry a balance, you instantly lose the game — if you want to be a winner, be sure you pay your bill in full every month.

That’s the first step to winning. The second step is to switch your card to a high dividend credit (or debit) card. Dividend cards pay you a cash reward for using your card, usually 2-5% of how much you spend. This might not sound like a lot, but many people can make over $1000 per year with this.

Your card issuer makes money in two major ways. Every time you use your card, they charge the retailer 2-5% on every transaction. Secondly, when people don’t pay their bill in full, they collect large finance fees.

With dividends, your credit card company rewards you for using your card because they’re betting that you’re not going to pay your bill in full every month. Even if you do, they still make 2-5% on everything you spend. They win either way, it’s just a matter of how much they get.

The secret is to get a good dividend card and use it for every single purchase you make. Stop using cash, no purchase is too small for your card. If you go to Starbucks, pay with your credit card. There is no reward for paying with cash. A good dividend credit card will pay a minimum of 2% cash back on everything along with up to 5% cash back on certain purchases. If you consider your income and take away how much you put away for savings, the rest is potential spending you can earn dividends on.

In this economy, you might be lucky if you get a 2% raise this year. Switch your credit card and get that raise right now.

If you want to reduce the risk of losing, have your card issuer lower your credit limit to half of your monthly income. Of, if you take some time to do the math, figure out exactly how much cash you need per month for the things you can’t buy with credit and reduce your credit limit by that amount. For example, you may have to pay your rent or mortgage by check or direct deposit. Deduct this amount from your monthly income and make your credit limit that number — a number you can definitely pay back in full each month.

Paying your rent or mortgage payment with credit cards could be a significant payoff in itself. Lets say your rent or mortgage is $1000/month. At the 2% minimum cash back, you will earn an extra $240/year just on rent alone.

Get out of credit card debt. Never carry a balance. Pay for everything with a dividend card. It’s easy money to earn, you just have to change the way you spend your other money.

Broken Secrets | By: Chad Upton

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14 Comments Add your own

  • 1. frank  |  May 24, 2010 at 9:29 am

    2%-5% cash back??? Bullcrap!!! I’ve NEVER seen a cash back dividend at 5%. Where are you finding these infamous cards???

    Reply
    • 2. Chad Upton  |  May 24, 2010 at 11:33 am

      Frank, good question. I don’t believe there is any dividend card that pays 5% on everything, but like I said, “A good dividend credit card will pay a minimum of 2% cash back on everything along with up to 5% cash back on certain purchases.”

      I just did a quick search and here is a site that has 11 cash back cards that pay 5% on certain purchases:
      http://www.creditcardguide.com/cashback.html

      Reply
  • 3. Robert the Skeptic  |  May 24, 2010 at 11:55 am

    We don’t get cash back on our credit card but we do earn “points” which can be redeemed for products or travel. We have used our accumulated points to fly free from the west coast USA to Florida, Washington DC, Hawaii… we have enough accumulated now to fly to Europe free.

    We did this by purchasing EVERYTHING we can with our credit card, medical bills, utilities, groceries. We write one check a month… to the credit card company. It’s money we were going to spend anyway, we just put it on the card. We have never paid a cent in interest in all the years we have had the card. We got ours through our local credit union.

    Reply
    • 4. Chad Upton  |  May 24, 2010 at 12:25 pm

      Robert. Yes, that’s exactly what we do too. Like you said, it’s money you were going to spend anyway, so you may as well get rewarded for spending it. Our cards work the same way, we earn points, which we can redeem for a number of things, including cash (well, they mail a check).

      Reply
  • 5. Michael  |  May 24, 2010 at 2:27 pm

    I’m pretty sure that checks you can get from your card issuer are almost universally handled as cash advances. Cash advances accrue interest immediately (often at a higher rate), and sometimes aren’t eligible for points or cash back either. One cash advance can probably blow your entire “earnings” for a month.

    Reply
  • 6. Elbyron  |  May 24, 2010 at 6:43 pm

    Watch out for cash-back cards that advertise “up to x%” cashback, as this usually means there’s a tiered system. For example, they might give you only 0.5% on the first $1000 you spend (a mere $5), then 1.0% on the next $3k and you don’t start getting x% until you’ve spent $5k or even $10k. This is common for cards with no annual fees, especially in Canada. Also watch out for limits on the max you can earn in a year.
    Not that these cards are bad, but just be aware of what the tiers are when you’re comparing various cards. If you travel at least once every few years, a travel points card might get you a better return. The best benefits for my situation is the Capital One Platinum Miles Plus mastercard: it has a $99/year fee (in Canada) but has a non-tiered non-limited 2% reward value that can be redeemed on ANY travel that I charge to the card.

    Reply
  • 7. Jason  |  May 25, 2010 at 8:21 am

    Interesting. We pay our balances off each month on two credit cards and average $6,000/month in credit card purchases…..could probably put monthly/periodic expenses on the credit card if we tried. Thanks!

    Reply
    • 8. Chad Upton  |  May 25, 2010 at 8:31 am

      You’re a perfect candidate… with a 2% dividend, you’re looking at $1440/year in your pocket. Enjoy the money.

      Reply
  • 9. danger  |  May 25, 2010 at 5:35 pm

    The image of people “cutting up”
    their credit cards is popular, but
    anyone who really wants to “swear off
    credit forever” should close the card accounts instead, which would prevent
    any use of the accounts – either by them
    or by identity thieves.

    Reply
    • 10. Chad Upton  |  May 25, 2010 at 5:57 pm

      Yes, definitely. Especially since some cards also charge you for NOT using your account (yes really). Cutting up the cards is a nice metaphor for closing the accounts.

      Reply
  • 11. Sofia  |  June 3, 2010 at 8:34 am

    CC companies really know how to “get the fees.” Case in point. My Mom lives overseas…and she gets dinged with a $1.50 international “surcharge fee” every time she uses her card which was issued in the US. Needless to say, she applied and received a card from a local bank in her home country.

    You really have to play the game to get it right!

    Reply
  • 12. neo  |  June 29, 2012 at 1:38 am

    One question – Does anyone know how to use their credit card to pay the mortgage? You can pay your taxes now with a card. Why not your mortgage? How about a car payment? Anyone know how this is done since most loaning institutions don’t offer that as an option.

    Reply
  • 13. Wally1  |  January 9, 2014 at 8:23 pm

    Sorry to burst your bubble, but what these credit card companies offer in a point system is not “CASH Back”. This is a simple marketing term used by CC companies. READ the fine print.
    So what is the down side? Your CC company does nothing without making money off you!. All your transactions are tracked and information is sold to other companies that target you. So some people say, having credit means I have a good credit score and therefore I am fiscally responsible, Not true. Having a good credit score does not indicate you are fiscally responsible.. read it again…it is only a rating of your history of repaying debt.
    What would actually be best is not to have a credit score period! Why? Because this means everything you purchase is a cash transaction, you own everything you have and you have a history of no debt. I’ll bank on that!
    What you save and deals made with real CASH far outweigh anything any credit card company can offer. Ask anyone who strictly deals in cash only, (if you can find them) they save thousands yearly not using credit.This is specially true for purchases of used vehicles, clothing, tools and other used products. And record keeping is even simplier than a monthly statement, you get a reciept and you own what ever you purchased. Period. It doesn’t get more simple than that.
    Face it, most people are lazy, most people don’t sit down every month and do a budget, so, without a budget, do you really know where your money is going.
    This is very true with most people that use CC cards for everything. This is what CC companies are banking on. The 85% who never sit down and check their finances.
    Show me someone who brags about their credit score and in most cases, I will show you someone who is in debt up their eye balls and living on borrowed time (pun intented).

    Reply
    • 14. Steve Johnston  |  January 19, 2014 at 12:03 pm

      If you’re responsible with money, you can easily use a credit card and pay it off every month… which means using the credit doesn’t cost you any money.

      The only advantage cash has is that it’s untraceable, so like you said: they can’t sell information about your purchases to a third party.

      I got $1800 in cash back from Bank of America last year. It is points like you said, but it can be redeemed for money at anytime… they just mail you a check.

      Just to recap, I paid no money to the credit card company but they paid me $1800 last year. Oh, and that also gives me automatic extended warranties on any products I purchased, and the ability to get my money back from Visa if a service provider didn’t deliver on a promise… you don’t get any of that with cash.

      Some people like anonymity (cash); other people like cash back, extended warranties and purchase protection.

      Reply

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