Using credit cards to make money?

Money Spinner · #1 (**permalink**) 08-27-2006, 06:44 PM

I'm looking at reward options with using credit cards to get cash back on cash payments.

Right now I have an Emigrant Direct "American Dream Savings" account, which is (as far as I know) the highest APY you can get right now (5.15% at the time of this writing). This money is already earning for me, but they now also offer a Mastercard account, which is really just a vanilla Mastercard except that it gives you cash back. The amount of cash back you earn is based on your American Dream Savings account balance; if you have a balance of $10,000 or more you will get 1.5% cash back on all purchases, but if your balance is lower you will receive less. I am not certain what the math is to determine your cash back, but I'm sure it's stated somewhere in very small type.

American Express Blue is a "credit" card and so there is an interest rate and you can pay over time, but the reward is issued in the infamous American Express Points which can be redeemed for airline tickets or other of a myriad of products available through their Points Catalog. Correct me if I'm wrong here. The big pro of the Blue card is that there is no annual fee.

American Express Green is a "check" card, so there is an astronomical interest rate if you don't pay on time and you are expected to pay your balance within the current statement month. You get similar Points rewards from the Green card, but the Green card also carries a $90 annual fee, so you'd have to spend enough to earn adequate rewards to offset this fee (or use any of Green's other perks which include various automatic insurance and warranty policies for things you buy with it).

One of the most impressive perks with the Green card is, if you buy something with it and it doesn't have a manufacturer's warranty or if the store won't take it back (within some reasonable time frame that I don't specifically know), American Express will actually take the item back and reimburse you. That's just crazy.

So it seems to me that if you spend a lot of money on a debit or credit card on a monthly basis on things you do actually need (groceries and gas come to mind), it makes sense to have a credit card that will reward you for these purchases. Looking at it that way, it's like "free money," which of course doesn't exist, but you are able to earn the money because the credit card company collects so much interest from everyone who doesn't pay on time, which is regrettably most people.

I have also heard about cards that offer you as much as 5% cash back on gas and groceries and 1% back on everything else. This seems like the best deal, but I can't remember now where I heard it.

So, what do you reckon, is it really viable to let your money make money for you using credit cards so long as you manage them properly?

LilOne1989 · #2 (**permalink**) 08-29-2006, 09:53 PM

I have already been cautious about his type of payment. It seems like a way to make you spend more money just to get a tiny amount back. I'm not sure that it would be worth it.

OneofaKind · #3 (**permalink**) 09-05-2006, 02:23 PM

I agree that caution is required.

I would choose a credit card with a reward scheme as a prefered option over cards that don't offer rewards.

I would not, however, get such a card for any other reason.

palefrost · #4 (**permalink**) 09-05-2006, 03:11 PM

It does sound good on paper so to speak but to actually make sure to clear those cards each time and keep up on it is not something i would gamble on. Im not organized enough to do it myself. I bet they count on that lol.

parrotbay · #5 (**permalink**) 09-05-2006, 08:43 PM

Instead of trying to cas in on the rewards, can you try saving up yourself. Just make a committment to take three percent of every purchase and put it away for a week. At the end of the week put it into a seperate account at the bank. At the end of the year you may find that you'll have more money than you would have thought.

palefrost · #6 (**permalink**) 09-06-2006, 01:43 PM

I remember one year i wanted the amazon gift certificate you get if you use the card for over a certain amount. I got the gift certificate but it took me a year to clear that damn card lol.

DJDizzy1 · #7 (**permalink**) 09-06-2006, 06:13 PM

You could probably get more money back using a freebie or a savings progam like Upromise. My problem with credit card programs like this is how much you have to spend to get the rewards. Besides frequent flyer miles it just seems like a lot of hassle. Plus I would still have to pay on the huge balance!

palefrost · #8 (**permalink**) 09-07-2006, 11:55 AM

Quote:

Originally Posted by DJDizzy1

You could probably get more money back using a freebie or a savings progam like Upromise. My problem with credit card programs like this is how much you have to spend to get the rewards. Besides frequent flyer miles it just seems like a lot of hassle. Plus I would still have to pay on the huge balance!

Exactly what happen to me. I spent and put alot of money around xmas time on that card to get back a gift certificate. Meanwhile the finance charges were way higher then that gift certificate for the amount of time it took me to clear it. Ill never do that again!

triumph · #9 (**permalink**) 09-08-2006, 12:58 AM

Are you really "making money" or potentially just spending less money on charges and fees, when it is all said and done? The credit card companies are not in the habit of paying out more than customers pay in.

I prefer to go simple with the lowest rate and best terms. No fuss no muss. When I try to balance those other "perks" against rates and such, I don't usually like the balance.

Plumley · #10 (**permalink**) 10-04-2006, 04:05 PM

Quote:

Originally Posted by Money Spinner

So, what do you reckon, is it really viable to let your money make money for you using credit cards so long as you manage them properly?

Yes. You're not going to get rich but the little bit you get is money you didn't have before. As you say, the trick is to manage properly. If you're charging things like gas and groceries because of the convenience that's one thing. If you're charging them because you don't have the money to pay at the time, there's a problem. As long as you pay off the card every month, you're golden. If you start charging extras in order to get the cash back bonus, you'll run into problems. Manage wisely, though, and you'll be ahead.

burfi · #11 (**permalink**) 11-29-2006, 06:13 AM

I have one credit card which is virtually free. It needs a certain yearly expense which fall under my limits.

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