Playing With Credit Cards
We can see that credit cards are just a curse for many who don't know how to handle them. It's too easy to buy on a whim with plastic, even when the money isn't there to pay. Credit cards raise the cost of everything bought by the amount of the interest that paid over the years, and create debt levels that prevent getting a mortgage to buy a house - and I could go on.
On the other hand, credit cards are a blessing for some. We can effectively carry large amounts of money safely and easily. Credit cards let us rent cars, make reservations for hotels over the phone, and buy things online without leaving home. And they make it possible to pay less for things, since we can pay later, after our money has earned additional interest.
If the first paragraph describes your experience more than the second, you might want to skip the rest of this. You need a good article on how to get out of debt. What I'm going to cover here will likely just get you into more trouble. However, if you're able to handle your finances you may appreciate the following ideas.
Credit Card Secrets
Do you have more than one credit card? If so, make a note of when the billing period ends for each card you have, and when you make a purchase, use the right card so you'll pay as late as possible. This way your money stays in your bank account earning interest for a longer time. For example, suppose you have two cards, with billing periods ending on the 12th and 26th of each month.
Now suppose you buy groceries on May 10. Which card should you use to pay? The one with the billing period ending on the 26th will go out two weeks later, and the other will be heading your way in a couple days, right? Then you should use the one with the billing period ending on the 26th. You get two weeks of extra interest on your money before you pay, assuming you pay your balance in full every month (you do, right?), and so never pay interest.
Let's suppose that on May 27th you buy a $500 television set, and use the card with the statement period ending on the 26th. It will be on the statement that ends on June 26, and you'll have 25 more days after that (the grace period) to pay the balance (although some have just a 20-day grace period). Let's assume you pay 21 days later. The $500 will have been in your account for 50 days earning interest.
With your money in a decent account yielding 4.5 % (INGDirect.com pays this as of mid-2007) you'll have made a little over $3 in interest. It isn't much, but it adds up over time, and all you had to do was use the right credit card instead of cash - and pay off those balances each month in full.
You can also take advantage of the no-fee, low interest cash advance checks that come in the mail almost every week for some of us. I once used a no-fee 4.5% cash advance check to get the money for a very safe loan of $6,000 at 9% interest for six months. I was paying down the balance on the credit card over the months, so I paid only $100 in interest, and collected $270 in interest.
$170 isn't much of a profit, but it didn't cost me an hour of work to make it, and it all adds up (especially back then when $170 meant more to me). If there is a fee, run the numbers. This will be 3% of the cash advance typically, but is sometimes limited to $50 or $75, so there could still be room for a profit, depending on the amount you borrow and loan.
What about other safe and profitable investments you can make with money borrowed on credit cards? I have bought and sold cars for $500 to $1,000 profits, and the interest and charges would have been less than $100 if I had used credit card cash advances. But that's a topic for another article, and at least you now know a few credit card secrets now.
