$10k Challenge: Make Money with Credit Cards

As part of my challenge to earn an extra $10,000 in income then save it and become wealthy, I'm listing potential money making ideas to get myself (and as many of you who want to come along) to that goal this year. Today's idea is to make money with credit cards.

Let me start off with a caveat. Most of you know that I think you need to pay off your credit card every month. If you're not up to that point yet, then some of these strategies may either simply get you further in debt or cost you a ton in extra interest. Therefore, don't use them. These ideas are for people who have control of their debt and now want to focus on making extra money.

That said, there are actually several ways to make money with credit cards:

1. Use a cash back credit card to earn a few hundred dollars a year. Keys here are to select the right cash back card and then charge everything you can on it. I made $330 doing this in 2005 (FYI, my 2006 report should be in soon and I'll be over this.) My recommendation for a great cash back credit card: Blue Cash from American Express. I'll give the reasons I use/like it in another post, but for now just let me say it's been the best cash back card I've seen/used and I've been using it for 2-3 years now. Picking the "best" card for you depends on how you shop and what you buy. Some other examples of cash back card offers (valid on 1-24-07 -- I can't vouch for them after that):

• Discover Platinum American Flag Card -- 5% cash back bonus in specific categories, 1% on everything else (or pick sea life if you're not feeling patriotic)

• American Express SimplyCash Business Card - Earn 5% cash back on auto gas, office supplies, and wireless services, earn 1% cash back on virtually all other purchases.

• Chase PerfectCard MasterCard - Works well if you have a lot of gas purchases. Cash rebates are 6% rebates on ALL gas purchases at ANY gas station for the first 90 days, 3% rebates on ALL gas purchases at ANY gas station after the first 90 days, 1% rebates on ALL other purchases made anywhere else.

2. Save money with credit cards (and put the savings into your "extra income" fund.) I do this with my back up card and it's saved me a ton. I use the Subaru Platinum MasterCard from Chase.

3. Apply for cards to get the free incentives (cash), pocket the money, and don't use the card. The facts are that credit card companies spend tons of money to get new customers ($200 per account according to Money magazine) and they are willing to give some of that money back to you to entice you to sign up for cards.  They do this because they assume (based on past history) that you'll keep the card, spend a ton on it, and pay them a gazillion dollars in interest. But what if you instead simply take the reward and then don't use the card? Here's an example (valid on 1-24-07 -- I can't vouch for it after that):

• One from American Express -- Get $50 to jump-start your savings after your first purchase.

So, you take an hour (if that) to apply for the card and get $50. $50 an hour turns out to be a pretty good rate of income for a part-time income. (If you could do it for 40 hours a week all year, you'd earn $104,000. Not bad at all.)

Several years ago, I was part of a team at work that was tasked with finding the right company to offer our soon-to-be-announced retail credit card. As part of the process, I applied for five or six credit cards from various companies, used them, called their customer service, etc. to see how each did. In the process, I developed a mini-extra income for myself. Many of these card companies gave valuable incentives for me to sign up for their card. Why? Because they "knew" that I'd spend a ton on them and pay a lot in interest. Boy, were they disappointed. ;-) But I still made my money.

One caution: opening up a ton of credit card accounts can have a negative impact on your credit rating, so if you're looking at borrowing money for any reason (home purchase, car loan, etc.), you'll need to do some extra research to see what impact it will have on your credit rating. For me it was no big deal since I had an excellent credit rating and didn't plan on borrowing any money, but your situation may be different.

For sure I'll be doing #1 and #2 and I'll be combing through the best of the best cash-related credit card offers and taking up a few of those as well. As I find additional opportunities, I'll be sure and point them out to you.

Comments

[dianefromPA]

Hi,
I got a Sony card last month and got $150 card credit after the first charge and payment cycle. I was looking to see if they still offered it and found this $100 card credit offer.

https://www.sonycard.sony.com/sonygateway/gateway.asp?offerlink=thinkbigger&mkid=6VY5&MSC=Z0049325

Hope this helps you in your endeavors.
One thing I have never done is apply for a card in my name and than apply again in my husband's name, thus getting two cards and two rewards. I wonder if that would work or would they see what I was doing?

[Elizabeth]

Great post. I'd add that when looking at rewards cards you need remember to watch out for annual fees. Some "rewards" programs try to sneak in annual fees.
I've noticed that a great place to get a cash incentive (#3 above) is in Parade Magazine (or another weekly magazine that comes in your Sunday paper). Chase almost always advertises a $50 incentive on a rewards card.

[Elizabeth]

Note that the "One from American Express" card listed above with a $50 incentive has a $35 annual fee after the first year.

[Omar]

I've always wanted to do something like this but I wasn't sure what you do with the account after you've opened it and gotten the reward? Do you leave it open indefinitely? Do you close it right away? Are there usually any fees with closing an account? How long does it take to repair your credit score?

[FMF]

Omar --

Those are good questions. As I said, the credit score was never a big deal to me so I never paid attention to it -- you'll need to get some thoughts on that elsewhere.

As for how long to leave them open -- I usually closed mine in three months or so and never had a penalty of any kind. Some of them required a first purchase to get the reward and if you consider the timing needed to be awarded the card, get it, charge on it, get the first bill, then get the reward, three months is a reasonable length to get everything completed anyway.

[Dave M]

I earned a little over $500 in 2006 with the Citi Diamond Rewards card. It's great for the first year because they pay 5% for gas, grocery and drug store purchases. But after the first year, I think it reverts to 1% for everything. I guess I'll be shopping for a new rewards card soon! :-)

[MJ]

How about this for earning extra cash.... I travel a ton with my job. I always travel on southwest airlines. I basically earn a free flight every 8 weeks, sometimes faster. I make it known to all of my friends that I keep flights in the bank and that if they are looking to save on airfare on last minute flights or on vacation flights that they should give me a call. I always charge less than the posted airfare and usually make it worth their while.

I earned over $2000 last year. I am using the oney to help pay off debt. That is even better than the credit card that pays you money back. I am thinking of getting a southwest credit card to earn even more.

[jp]

Another way to earn a bit of cash by way of credit cards is via 0% balance transfers.

Most credit card companies will transfer the money to your personal bank account when you provide the account and rounting numbers. The best case scenerio is no transfer fees. This usually comes with new cards only. Right now I do not want to open new accounts so I use my current accounts and I have gotten 0% from cards I already have. I have even gotten .99% and 1.0% APR balance transfers from old accounts. Some have fees like 3% for the transfer fee. This is where you must be diligent. If there is a decent cap like $29, $75 or even $99 and the math works in your favor I say, "Go for it!" It all works out when the math is right.

Have the money deposited into a high yield interest rate account like Emigrant Direct (5.05%) or ING Direct (4.50%). The other thing you can do to take things a step further is to take most of the money, all that is not needed to pay the monthly minimum, and put that cash into a CD account. Timing is everything. You must be aware of when the 0% transfer rate ends and make sure your CD maturity date ends before that. Indymac has great CD rates. ING Direct now has interest bearing internet checking that offers free bill pay. I used it to pay the monthly credit card minimums in a timely, efficient manner. It's very easy. The interest rate is 4% to 5.30% depending on the balance.

All this money is taxable. I say if you have all that credit available to you, you may as well earn a bit of extra cash towards your goal if you are so inclined. I added over $700 net to my goal last year beginning in June and ending in December. I am doing it again this year and hope to add at least $950 net to the goal.

It may seem a bit complicated, but for those of you who like a bit of a challenge and like seeing the money come in rather effortlessly once things are set up, I say, "Welcome to the club and good luck."

[Jayden]

I think some cards allowe you cash like $500 a month, can you use that money and put it in a Money Market for two weeks? Don't know if that is legal or not.

[tylerparke]

There's more ways than that. 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/

One idea I'm not sure is legal or not is creating a fictional bank, and using something like Google Checkout (with no transaction fees this year) to charge your own credit card for $100,000,000. Then getting 1% cashback would make you a millionaire :-)

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.

[Steven M.]

As MJ said, I think balance transfers are the best way to make a profit with credit cards.

I ended up having about $150,000 in available credit that I was able to transfer interest free for a year. After that I just stuck it in a high interest bank and cleared about $7500 last year.

[Jesse]

@ tylerparke Bah!! You're post is the first I've heard about this, and it's January 27th.

Too late.

[mary jo]

Hi: Has anyone had luck charging money orders at a grocery store?