Saturday, April 19, 2008

Make Credit Card Companies Work for You!

Today I thought I'd share with you one of the many ways I am building my net worth - I make credit card companies work for me. No, I’m not an investor in credit cards companies or even own stock in credit card companies I make them work for me by using them to their full advantage.

I use a credit card for every purchase I make, buying a $2 half gallon of milk – goes on the credit card, buying a $2000 sofa – goes on the credit card. I even pay a lot of my bills like Cell Phone, Power, Water etc with my credit card. I do this because I’m going to have to pay for these items one way or another and using my credit card is as easy as using my debit card or a check since at the end of each month I pay my credit card balance in full.

There’s a couple of ways that I make the Credit Card Companies work for me:

1. 30 Day Interest Free Loan - Provided you pay your balance in full each month, credit card companies provide interest free loans for 30 days to their customers. Not too many other financial institutes offer interest free loans. By taking advantage of the interest free loan you make money by keeping your income and net worth earning interest for you. Plus if you purchase something and then return it never costs you a penny of interest.

2. Cash Back Rewards - Who doesn’t like getting something for doing something you already do? (Okay you English majors that was probably a really bad sentence but you know what I’m saying). I typically earn about $150 a year in cash rewards. No strings, no need to mail in rebates, no need to anything but sit back because on the anniversary of my card I automatically get credited the cash back. My personal preference of rewards is a cash back card because its much easier to redeem and its something I will always need.

Credit Card Companies work really cheap for me – with the interest and cash back I probably make between $200 and $250 a year from them, but its $200 or $250 that I didn’t have already and required no effort from me. I only have two credit cards, I use my main card for every purchase unless I’m in some place that doesn’t accept American Express then I use my visa that I’ve had since I turned 18 – I get no rewards from the Visa but I still get an interest free loan for the month.

I prefer the Amex Blue as my main card because there’s no annual fee and the reward is cash back. It might not be best for everyone out there and since there’s a ton of cards available there’s bound to be one that works for you. To help decide which card works best for you, credit has an interactive questionnaire that will lead to you several credit cards that might work for you.

I do want do say - don’t mistake my advice, I’m not advocating you go out and get 10 credit cards that each offer different rewards because 1 – your FICO score will decrease and 2 – you can’t maximize rewards because your spending is not concentrated. I’m also not advocating using a credit card if you wouldn’t pay them off in full each moth or if you would loose touch with the value of money and not use a credit card as if you were paying cash for it.

What I am advocating is if you can use a credit card responsibility then take advantage of what credit cards and help increase your net worth by making credit cards work for you.

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