Make Money With Your Credit Card

Financial planners and consultants may tell you it is best to cut up all but one of your credit cards, and to hide that one card somewhere fairly inaccessible and use it only for emergencies.

This approach may be the only option for those who can't discipline themselves enough to be financially responsible. But for those who have a great amount of will power, credit cards can earn money for them!

Sure, there are those "cash back" cards, offering you a percentage of pennies for what you charge on your card, such as the Discover Card program. There are also cards that give you "free" gasoline, groceries, frequent flier miles or "points" toward a new vehicle when you use the credit card... But that's not what I mean when I say a credit card helps to earn the holder money.

Here's the secret to responsible credit card use: Use it as a charge card, not as a credit card.. What does that mean, exactly?

If you're buying on "credit" it means you are using money you really do not have -- someone else's money; like a loan -- and if you don't pay it all back ASAP, you begin to accumulate interest owed, which costs you more money.

A good example of buying on "credit" (not credit cards, mind you), is a home loan. A $100,000 loan (30-years, 8-percent interest) will actually cost the borrower about $262,000 by the time they pay off the mortgage because of all the interest. The interest is the cost the borrower incurs for the use of the mortgage company's money.

Credit cards work the same way. If you buy "on credit", and then you don't pay off the balance in total, you lose money. Lots of it. You must pay the credit card company for the use of their money, and they charge you a lot in interest, late fees and annual fees.

Responsible credit card use means using your one card as a charge card. How does that work?

Let us say the credit card period starts on the first of the month. So the first of the month, I buy $100 worth of groceries and pay using my Visa. So... that $100 is paid to the grocery store by Visa... and my $100 sits in my credit union account ... earning me interest.

My money sits in my account until I get the Visa bill about a month later. At that time, I write one check to pay the entire balance on my one credit card. My money sits in my account for up to 45 more days because I used my credit card instead of my cash. Using a credit card as a charge card means you do not spend money you do not already have. Logic should tell you if you don't have the money to buy something, you shouldn't be buying it!

It's really quite simple. Here's what you do:

1. Have one credit card. One that gives you "points" toward something or "free" gasoline or groceries is a good idea. And fight them about an annual fee -- if you threaten not to use their card, they'll usually waive it for you.
   
   
2. Use your credit card for nearly everything, instead of writing checks, instead of using cash. And above all, instead of using your ATM/debit card.
   
   
3. Keep your money in an account that earns you interest. A credit union account is best because most do not charge the multiple fees regular banks slap on to accounts.
   
   
4. When you get your credit card bill, pay it in full and on time. The idea is to never pay any interest or late fee!

This approach, while difficult for some to master because of advertising pressure, will not only keep those who use it out of debt, but it will earn money as well!

Wendy Lomano is the web editor of The Stay-At-Home Parents Page www.geocities.com/sahmlomano/index2.html

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