Making Money by Charging EVERYTHING on the Right Credit Card

Last year I wrote how I made over $330 on my cash-back credit card (and saved a good bit using another one), but I'm an amateur compared to the people who charge everything detailed in this Money Central piece. Here are some of their earnings:

• One of Larien Koci's credit cards provided the Knoxville, Tenn., woman with $4,500 in free gas.

• Boston resident Alex Perri's card has bestowed six free business-class trips to Europe.

• Maury Malaise of Montgomery, Ill., saved $3,400 on the purchase of two cars with credit card rebates and has $1,300 banked for his next car.

• Johnna Frantz of Hillsboro, Kan., used credit card rewards to buy a refrigerator, pave a patio, update her husband's wardrobe and get presents for relatives. Her next bonus: a new dishwasher.

Wow! But how do they do this? It's simple -- they set up their accounts so almost EVERY bill they pay is on a credit card:

Fortunately, racking up rewards is getting easier as a growing array of businesses, utilities and government agencies accept plastic payments. Virtually all of my household and business bills are now charged automatically to credit cards, as are most of my other purchases.

They even have strategies to maximize their rewards:

• Sometimes that means switching cards based on the type of purchase. Michel Washington of Owings Mills, Md., divides her spending this way:

• Books, restaurant meals, music and movies go on a Citi mtvU Platinum Select Visa Card because it offers 5% back for those specific purchases.

• Certain other types of spending wind up on Washington's Discover Card, which offers 5% rebates on spending categories that change four times a year. In the fall, the cash-back bonus applied to apparel; starting in January, travel will earn the rebate.

Just about everything else goes on his Chase Cash Plus Rewards Visa card, which earns 5% rebates on gas and 1% on all other purchases.

We pay for as much as we can on credit (paying off the balance every month), but to earn even $1,000 at 3% (assuming you could charge enough in a right way to get this blended rate) means you'd have to charge $33,333 a year. I'm just shy of $20,000 a year, but "only" earn 1.68%. So I'd have to get both my spending up as well as my rate of return to really get some big bucks. All that would take a ton of time, effort, and management, something that would likely costs me more than what I'd earn. In addition, I don't have that many big bills to pay with credit. My biggest potential areas to generate extra charges are not really options for me: taxes (I don't think Uncle Sam allows me to pay by credit card without a fee), mortgage (I don't have one), and giving (it dings the charity, so I only use this option when it's a necessity.)

But there are downsides to this plan:

"I think having the cards probably makes me spend more money than I would otherwise," said Stephen Berenson of Vienna, W.Va. "Having the cards obviously makes spontaneous purchases easier, and the points probably do provide an incentive to spend more."

Yeah, if you spend more, it won't take much to wipe out any gains you may make. In addition, many of the items these people charge (like home remodeling) could likely be purchased at a cheaper price if they used cash instead of credit.

Comments

[Lord]

There are other reasons to use credit. Using it for home remodeling insures everyone gets paid instead of the contractor sticking his financial problems on you. It insures satisfaction with the product and avoidance of ripoffs.