In the last post, we explored how you can save and even earn some money by choosing who you bank with wisely.
I didn't go into too much detail about credit cards there because I wanted to do a separate post for them.
Why?
Because a strategy called credit card arbitrage or stoozing used to earn people thousands of dollars! Granted, that was when it peaked, somewhere around 2008. The interest rates were high back then but they are slowly climbing back up so this can be a very good strategy to earn and save some extra cash.
Who Can Earn and Save Money Using Credit Cards?
Obviously, not everyone will be able to do this. This is because your credit score will determine what type of a card you can apply for. If your credit score is great you will have access to pretty much every card from every credit card company. However, don’t get discouraged if your credit score isn’t what you would like it to be. You can still get approved for some cards, although at a slightly lower cash back rate perhaps.
Also, to pull this off you are going to have to be disciplined. If you can’t handle your finances as it is, don’t try any of the strategies described here, especially stoozing. Things can spiral out of control quickly and you might end up in debt.
Ways to Earn and Save Money with Credit Cards
There are several different ways to do this. Some give you back cash while others give you reward points you can use on your next purchases.
Here are the most popular ones:
Credit Card Cash Back – some credit cards offer cash back for certain purchases and categories. For example, some will offer 1 to 5 % back on gas, utilities, dining, clothes, or other expenses you make with the card. The categories often rotate on a quarterly basis and the cash back amount can be applied sometimes to charges up to $3000. At 5% cash back, that’s $150 you get back every three months. Some cards offer cash back on every purchase, regardless of the category – these are the ones you should be going after.
Reward Points – some credit card companies offer mileage bonuses that you can use to purchase airline tickets. The best way to rack up those bonuses is to use the card for everything you possibly can. Also, it’s worth checking if you can pay your rent with a credit card because that is a very substantial monthly amount.
Note – you can also sell your reward points to family and friends if you don’t fly often. There’s no sense in letting them go to waste. However, while most cards will allow you to purchase gifts for others with those points, it might be a good idea to check beforehand so you don’t end up breaching the terms of service.
Shop Online – a lot of credit card issuers have online shopping portals where you can log in and earn additional cash back on all your purchases. Discover, for example, has Discover deals and with them you also get additional cash back when shopping at Apple or Wal-Mart (online of course). You can double your cash back percentage and theoretically see a 10% return at the end of the quarter!
Credit Card Arbitrage – or stoozing, as it is called, is using credit card company’s money to earn interest and a bit of a profit at the end. Here’s how it works
Find the right card – the right card is the card that offers a 0% rate for as long as possible – 15 months would be ideal. You can check out credit card deals here.
Find the right bank account – one offering 1-3% in interest on savings would be ideal. Anything above that is unheard of since 2008 but very welcome. Find the best bank account here.
Spend – spend as you’re accustomed to but charge everything to your card. Don’t go crazy with the expenses.
Pay only the bare minimum every month – nothing more, nothing less, and never be late with payments.
Match your credit card spending with bank account deposits – whatever you charge every month on the card, make sure you match by putting money into the savings account.
Pay balance in full – once the 0% promotional offer ends pay everything in full. Use the money in your savings account. Everything that’s left over is your profit.
Recommended Resources
Credit Card and Accounts Reviews
Although it's pretty certain that cash back and stoozing won't make you a millionaire over night, that doesn't mean that they are not viable tactics of making some extra cash.
Don't get skinned by your credit card company - you milk them for a change!