How Cash Back Credit Cards PAY YOU CASH

I personally receive $1000 – $1200  a year from my cash back credit card.  No kidding, I promise. But before we begin to discuss the potentially slippery slope of profiting from credit cards, an important disclaimer must be made: THIS STRATEGY IS FOR THE DISCIPLINED ONLY.  ADVANCED FINANCIAL MANAGEMENT SKILLS ARE KEY.  Now that we’ve gotten that out of the way, let’s get to the fun part! So…credit cards can actually make you money ehh??? Yes they sure can.  Here’s how.  There are all sorts of credit cards out there, and your credit score has everything to do with which ones will actually get offered to you.  A low interest rate is just ONE of the things you should consider when shopping for a credit card.  Once you have stellar credit, you’ll have your pick of which credit card you want based on the point program it comes with. A point program is simply a system that converts your spent dollars to points, which you can accumulate and redeem for certain benefits.  For example, if you like to travel you may want a card that converts your dollars spent to redeemable air miles. Or, if your occupation requires a lot of driving you may take advantage of that by choosing a card that gives you triple points on dollars spent on gas.  My personal favorite is the card that gives you CASH BACK. Yes, CASH BACK.  For every dollar spent, a percentage is given back in either the form of a deposit to your checking account or a credit to your balance.

I own a credit card that gives me 3% Cash Back on all of my purchases and 4% on travel related purchases. That means for every dollar I spend, I get at least 3 cents cash back. Doesn’t sound like much?..Just wait.  In order to really profit from this, you have to spend quite often on the card, and at the same time pay the card off each month before interests charges kicks in.  Here’s exactly how I accomplish this using my cash back credit card:

  1. I made my husband an authorized user on the account. This way anything he spends also accumulates points.
  2. I wrote a list of everything we spend using cash on a monthly bases. In order to make the list it had to meet this test: NECESSARY, REOCCURING, AND/OR ALWAYS PAID CASH IN FULL at the time of purchase. This lists includes my utility bills, cell phone bills, grocery trips, any bill that allows me to pay with a credit card, gas, work/school lunches, kids clothing, barber/stylist appointments, dinners etc. Anything we normally spend cash on anyway.
  3. I TOTALED the dollar amount of the list. The expenses averaged $2500 a month. It’s VERY IMPORTANT to know an accurate total ahead of time so that you can budget.
  4. We both stopped using our checking account for the things on the list and began using the cash back credit card.
  5.  Every two weeks I make a payment of about $1200 (50% of the list total or balance)  on the credit card. Remember, this was money I would have spent anyway on a daily bases. This is where the DISCIPLINE comes in.  It will appear you have a lot of extra cash laying around, BUT YOU DON’T! I suggest making this payment on pay day.
  6. Next, I sit back and watch the points accumulate.  I can convert the points at anytime for a credit on my bill (as long as they don’t expire). I usually wait until I have a big purchase like a vacation.  I can purchase airline tickets, then immediately  redeem my cash back points and the tickets are free! And I still gain points from the purchase too. Win Win.

This strategy does require the discipline to pay the card off each month.  I prefer weekly or biweekly payments. If you’re at a point where you’ve already built your good credit and have a steady income, then this may be a great plan to try.  You can start small by just charging your gas and paying it off every week. You’d be surprised how it adds up at the end of the year.


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