(This article is only for your information and should not be taken as financial advice. Do due diligence before using any of the methods mentioned here) The idea of making money by means of credit cards is widely discussed in the media and in personal finance weblogs. There are numbers of methods described, all of them having advantages and disadvantages. Making money with credit cards has attracted financial analysts’ attention and it is evaluated as an important financial phenomenon. Let’s look at the most popular methods of increasing capital from playing cards right. Is this really a right game?
The method called ‘stoozing’ (after the blogger who was the first to describe and promote this technique) is based on precalculated use of 0% APR credit cards. It is as simple as this. You apply for a credit card that has a good grace period and 0% intro APR.
After maxing the card out, you place the money lent onto a savings account or make some other investment providing 100% safe and sure interest. After the grace period ends, you can either pay off the debt (the interest earned on the savings account will be your profit) or transfer the balance onto a credit card with 0% on balance transfers, thus making your money go on working where you invested in to. Perfectly splendid? It would be, but there are some ‘buts’.
To make this method work, one should be prudent, as it’s obligatory to make monthly minimal payments and avoid making purchases with the card in work - otherwise there will be interest rate and fees to pay.
Besides, you are supposed to spend hours and hours searching for a worthy investment and a credit card with the best terms. A great disadvantage of the technique is that you can lower your credit score immensely, applying for new credit cards and transferring your balances so often. Good memory is also required - you will have to keep in mind the due dates to make necessary transactions.
The attractive features of good credit cards (rewards, low rates), if used wisely, can also help you raise your capital. By increasing expenses on your cash back credit card (if you start making gasoline or food purchases with the card) you can earn more rewards.
The latter can be invested in the stock market or you can transfer it to the savings account. Other rewards, such as airline miles, membership bonuses, free tickets and the like can undoubtedly be considered as a way to earn. Sometimes those items are not available for money or they are very expensive.
In some cases, purchase protection serve as a means to return the money you’ve spent on damaged or poor quality merchandise. The law enables consumer to withhold payment for such goods, provided that you have an agreement with the merchant. But in this case you just spend less instead of earning.
Having said that, some credit card issuers have now cottoned on to the fact that holders have become debt management savvy and are transferring their balances around several difference providers to maximise their 0% interest period and have introduced certain counter measures; some of which include:
The Balance Transfer Fee
This is imposed if you transfer your credit card balance to another issuer. Currently balance transfer rates can be as high as 2% of the transfer balance, with a minimum fee of five pounds and a maximum fee of fifty pounds. So, although you won’t pay interest for the introductory period, you’ll have to pay a rather high fee (comparable to the interest you could have been charged) if you then try and transfer to another issuer. As such, watch out for this one before you agree to transfer your balance.
The 0% Offer
Credit card issuers are now murkying the water as to what the 0% applies to. With some card issuers the 0% applies to the balance transfer, but if you use your new card to purchase anything you’ll be charged the standard interest rate on that purchase from Day 1; others charge the standard interest rate from Day 1 on the balance transfer, but 0% on any new purchases during the promotional period; and still others will charge you 0% from Day 1 on both the balance transfer and new purchases made during the promotional period.
Obviously, if possible, you really only want to be interested in the third type of promotion if you are serious about making money with credit cards due to your astute balance transfers!
Late Payment
The small print of a number of card issuers now states that if you miss a payment or make a late payment on your credit card you automatically forfeit your promotional rights! So, to make money with credit cards - balance transfers must be timely and to friendly issuers. Lastly, keep an eye on your balance and repayment dates and if you have not yet managed to repay the balance in full, give yourself a month to get ready from your next 0% interest rate jump!
