How to Make Money on Credit Cards

The premise that you can make money by borrowing money is questionable and high risk as credit card companies are not in the business of making other people money. Furthermore, applying for a significant number of credit cards can have an adverse effect upon credit rating. However, with savvy financial planning there are ways to work the system in your favor. Cashing in on bonuses, taking advantage of low interest rates, and keeping an eye out for special sign up deals can result in you bringing in extra cash each year through responsible credit card use.

Method 1

Method 1 of 3:

Using a Cash Back Credit Card

1
Select the right credit card. In order to reap the benefits of a cash back credit card, and ultimately reduce the costs of your credit cards, you must consider a variety of factors when selecting your card.
- Ask yourself where and when you'll use your credit card. Know what habits or activities you spend the most money on and plan accordingly. Are you a big traveler? Look for credit cards that offer cash back rewards for airfare and hotel stays. Do you shop a lot? Make sure your card offers cash back for a variety of purchases and not just at specific locations.^{[1]XResearch source}
- Read the contract carefully. Some cards offer rewards for virtually every purchase while others have higher rewards for specific categories.^{[2]XResearch source}
- The most commonly accelerated cash back category is gas, followed closely by groceries, and then dining/restaurants. Accelerated categories offer higher cash back percentages than other purchases. If these are areas where you don't typically spend money you might want to look for a more specific cash back offer.^{[3]XResearch source}
2
Charge the right expenses to the card. While people are wary of going into credit card debt, you do have to rack up charges on your cash back cards to make money. The more you spend on the card, the more you're likely to make when you earn 1-3% cash back on purchases if you pay your monthly bills on time (and don't pay interest).
- Yet again, know where you're getting the most cash back. If your card is accelerated when it comes to gas, put your gas on your card whenever and wherever you can. If your card gives a great cash back percentage on travel, buy your airline tickets using your card.^{[4]XResearch source}
- Many times, you can set up automatic electronic payment on bills. If you're getting cash back for putting your gas or cable bill on your credit card, it might be worth setting up an automatic payment so you're consistently earning cash back each month.^{[5]XResearch source}
- While getting cash back can be addictive, be careful. Many of us are tempted to spend money with the goal of getting cash back, but this process is counter intuitive. If, for example, you charge $100 of merchandise you don't want to earn $30 cash back you're not really making a profit. Stick to purchases you need and would use cash or a debit card to buy if you did not have a cash back card.^{[6]XResearch source}
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3
Pay your entire balance each month. Do not let your balance roll over to the next month. This adds interest, meaning most of the cash back you earned, if not all of it, goes towards paying off your debt.
- Interests increases the longer it takes you to pay off a loan. If you earned roughly $5 of cash back by charging $500 to your card, and only pay off $100 of that in the first month, you'll end up paying over $5 in interest the next month.^{[7]XResearch source}
- Yet again, only charge items you would be willing to pay for up front to your cash back card. Buying things you cannot afford will only increase your interest and plummet you into debt, regardless of any cash back advantages.
- Credit card companies want to recruit responsible users. If you're not paying your balance on time, or only paying it in part, some companies may lessen or even take away cash back rewards. Depending on the details of your contract, this could the case for you.^{[8]XResearch source}
4
Stay on task. Points do expire and special offers do not last forever. Stay on task when managing your cash back to maximize the money you can make with your card.
- Make sure you know when your cards expire. Many people want to save their reward money for a big pay off in the future, but you don't want to let your opportunity to claim your rewards pass. Nearly a third of credit cards have an expiration point on cash back rewards.^{[9]XResearch source}
- You can make cash back redemption an annual event, something to do before your birthday or a big holiday. This will help you remember to cash in and grant you with extra money for a big event.^{[10]XResearch source}
- Many credit cards have rotating accelerated categories, that offer 3-5% cash back on certain purchases during certain time frames. For most of these offers, you must register for the special online. Make sure you know what promotions your credit card company offers and that you sign up on time and don't miss out great deals.^{[11]XResearch source}
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Method 2

Method 2 of 3:

Attempting Credit Card Arbitrage

1
Know what credit card arbitrage is. Credit card arbitrage is a way to manipulate the workings of low or zero interest credit cards to make a small amount of money.
- The process is relatively simple. You take out a low-interest loan from a credit card company, invest it in a savings account that promises a high yield, and then make the minimum payments on the cards while keeping the difference. However, experts warn that it is highly unlikely that a savings account will pay more than the interest charged by a credit card company, even as a promotion. Any potential profits could be minimal and hardly with the effort.^{[12]XResearch source}
- This is not a high-earning investment or a long term means to make an income.
2
Find a low or zero interest credit card. In order to make money with credit card arbitrage, you need to find a card that offers low or zero interest. Remember, you're only paying the minimum balance each month.
- Oftentimes, low interest rates are temporary. Credit card companies often use initial low rates to entice people to spend more, so make sure the low interest rate lasts at least six months.^{[13]XResearch source}
- Make a spreadsheet tracking payment due dates and when, if ever, interest rates will increase. You need to stay on task to make a profit with credit card arbitrage, so make sure you know all possible information going into the investment.^{[14]XResearch source}
3
Write a check to yourself. Once you've selected an offer, you need to take a loan out using your credit card.
- Decide how much money you can reasonably take out while still paying the minimum balance to avoid penalty fees. Write a check to yourself for that amount.^{[15]XResearch source}
- Deposit the money in a high-yielding savings account. Aim for an account that will earn 5% or more in interest.^{[16]XResearch source} Unfortunately, this will be nearly impossible to find in today's environment as the savings account rates have been lately been between .90% and 1.05%^{[17]XResearch source}.
4
Make all minimum monthly payments until the balance is paid in full. While you're waiting to withdraw your investment, make all minimum monthly payments on your card.
- Invest in paying via direct payment from your checking account. This way, you won't risk late fees and end up losing more money than you gain.^{[18]XResearch source}
- Once you pay off the entire balance, and make sure you do so before the interests go up, pocket the money you earned in your savings account via interest.^{[19]XResearch source}
5
Be aware of the risks. Credit card arbitrage is a risky investment in that it's easy to slip up and end up losing money in the process. Be aware of the risks going in and really take time to consider if this is the right path for you.
- If you're habitually late on bills, credit card arbitrage is probably not a great option. Slipping up on payments can lead to credit card companies canceling their low interest offers, which your profit depends on.^{[20]XResearch source}
- Maxing out credit cards can severely damage a credit score, which can take a great deal of time to repair. Unless you anticipate high financial return on the investment, if you already have a mediocre score this might not be the best route for you.^{[21]XResearch source}
- Credit card arbitrage is time-consuming and requires a lot of knowledge of finances, banks, and interest rates. Make sure you have the time and knowledge necessary for the task before attempting arbitrage.^{[22]XResearch source}
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Method 3

Method 3 of 3:

Making Money on Sign-Up Bonuses

1
Select the right offers. While many people are rightfully wary of signing up for more credit cards as a means to make money(since too many credit card applications can negatively impact your credit score), if you're savvy about selecting offers, it can be a valuable investment.
- How high of a bonus are you looking for? Is $50 enough to entice you to sign up or are you looking for something in the $100 to $150 range? Decide how much money is worth the risk of signing up, taking your credit history and financial situation into account.^{[23]XResearch source}
- Read the fine print. Some cards require you to spend a certain amount of money in a certain time frame to get the bonus. If you're not willing to charge $500 to a card to get a $100 bonus, don't bother signing up for that card.^{[24]XResearch source}
- What kind of reward do you want? Many people are looking for straight cash, but some cards instead offer frequent flyer miles or points that can be redeemed for certain purchases. If you're planning a trip or a big purchase, these kinds of rewards can help you earn money simply by not spending what you anticipated.^{[25]XResearch source}
2
Follow the offer's terms exactly. It's easy to get swindled by missing the fine print. Understand the terms of the offer going in and follow them exactly.
- Cards often require you to spend a certain amount the first month to reap the bonus. Make sure you make a spending schedule for yourself to stay on task if this is the case. Use the card for purchases you would have made anyway, like gas and groceries, and pay the balance in full each month.^{[26]XResearch source}
- Another point people often miss is added fees. Oftentimes, a fee is waived for the first 6 months or the first year. Know what fees there are, and when you can expect to be charged.^{[27]XResearch source}
3
Decide whether you want an easier bonus or a larger bonus. The old adage "high risk, high return" applies when trying to make money off credit cards. The easier the bonuses are to obtain, the smaller they are. If you want a higher bonus, you need to be willing to take a bigger risk.
- Many credit card companies require you to keep your contract and use your card for a certain time period to earn a sign up bonus. A $700 bonus might mean putting $5,000 on your card over a 3 or 4 month period, for example.^{[28]XResearch source}
- While taking risks can lead to a big pay-off, you should not overspend to earn the rewards. You're not really making money if you're spending money on items you do not need or want. You should only attempt to get a big bonus if you anticipate spending the money you would charge to the card anyway.^{[29]XResearch source}
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Tips

Always pay your balance. Not only does having a rolling balance cancel out any rewards you might have earned, it brings down your credit score and makes credit card companies less likely to increase your credit limit.
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Making money on credit cards is tricky and requires a great deal of attention and care. If you're habitually late on bills or have trouble with deadlines, this might not be the best option for you to earn extra cash.
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If you're unfamiliar with credit card contracts, have a third party look over your contract before signing.
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