Today, I’d like to talk about one simple technique, that’ll allow you to make money with a credit card.
More precisely, I will suggest a simple procedure to use a credit card to your advantage to maximize the amount of interest you can receive on your high yielding savings account.
There’s no mind-blowing trick here. If you employ this simple strategy you’ll be making extra free money every day, guaranteed. There are no risky investments to undertake or upfront expenditures to sustain to get started. The only requirement is that you possess a credit card, a savings account, and that you are diligent and persistent in using this strategy.
Now, depending on your specific situation, this concept can earn you varying amounts but it’s in its long term potential that lays its true strength. This is a strategy that if applied relentlessly over the years can easily make you thousands if not tens of thousands of extra dollars on your savings account.
Let’t get into it then.
How to make money with a credit card
In a nutshell, the general principle is to leverage the full interest-free period that comes with your credit card to its maximum and leave your earnings and savings in the savings account for as long as possible to maximize the effect of compound interests.
In practice, you try to pay every ongoing expense using the credit card instead of using cash or a debit card that draws upon a cash account. I am talking about groceries, rent, medicine, entertainment, you name it. Literally everything you can think of as much as you possibly can.
At the same time, you diligently keep every single dollar from your salary in high-yield savings account for as long as possible and replenish the credit card balance once a month on the due date drawing directly from your savings account.
By operating this way your cash ends up spending more time into your savings account than it would otherwise, therefore, netting you higher interests particularly over medium to long periods of time.
I have run a simple simulation to show what i mean:
I have imagined two families, the Reds, and Blues, both earning the same amount monthly, and both spending on average the same. They both have saving accounts yielding a 5% annual return with interests calculated on a daily basis and they both have invested around 10000$ into a savings account to start with.
The Blues use the credit card for their ongoing expenses, they diligently refill the credit card account with their earnings every month so they do not incur in debt or late fees.
The Reds, on the contrary, keep their salary in a cash account which they use to draw upon to pay for expenses. At the end of the month, they invest whatever’s left in the cash account into the savings account.
This belows shows what happens over a course of roughly three months. As you can see from the first graph the Blues consistently keep their savings account at a higher level than the Reds therefore earning more than twice the amount of interest from the saving account! In this particular instance the overall difference is about 70$ earned by the Blues more than the Reds.
This simple strategy really leverages the power of compounding interests over time and the power of using someone else’s money to pay for expenditures in advance while keeping your money to work and growing overtime via interests.
That’s it! There is not much more to it but you would be amazed at the number of people who have no knowledge of this or its potential effectiveness, particularly over the long haul.
Obviously, scenarios can vary quite widely from person to person and there are even more effective ways of applying this strategy for even bigger returns. However, these additional strategies tend to be quite more convoluted and require more attention and babying in general.
The one presented here on the contrary is the granddaddy of them all. Just remember to spend using the credit card and instead keep your cash piling up into a savings account for as long as possible.