Credit Cards .. The PRETTY Side

We have all heard the ugly side of credit cards; interest, debt, and hidden fees. After all, it is a service provided by a for-profit business called a Bank. No one will want to lend you money for free.

Or will they?

In this blog post I will show you how I MAKE money with credit cards! Yep, you read that right.

No, I will not charge you a penny for this information. It is not some marketing scheme, there is no catch, and it is all perfectly legal.

DISCLAIMER: I am not a banker, nor a financial consultant. All advice given here is from a savvy consumer perspective.

Let’s start by explaining how credit cards work: Credit cards give you INSTANT access to money you DO NOT have in return of high interest rates.

In order to understand how to optimize the system to YOUR benefit, instead of the bank’s benefit, you need to keep these points in mind:

1- Most credit cards will only start charging you interest around one month AFTER the purchase. In other words: If you buy something with your credit card today, and pay back the money in two weeks, you will likely NOT be charged any extra; you will be paying back the amount as is.

2- Most credit cards have reward programs, including points, air-miles, and cashback. You are eligible for these points right after you perform each transaction.

3- Some credit cards have less known benefits, the most useful ones being: insurance, access to VIP airport lounges, and discounts.

4- Credit cards may or may NOT have an annual flat fee. This is a fixed fee that you pay annually to hold the card. Think of it as a membership fee.

5- Some banks offer tailor made credit cards with certain features that benefit certain customers, such as frequent travelers, employees or customers of certain companies, or even students of certain universities.

So, how can you save or even MAKE money with credit cards?

Given the above facts, below are some ways to optimize your credit card experience. They are all pretty simple, however some of them require a great level of financial discipline and awareness.

First you need to do a decent amount of “shopping” around to find the credit card that suits your needs. Loot at the benefits, as well as the loyalty rewards mechanism. Below are the most common:

CashbackI love credit cards that offer “cashback” as opposed to points that are later redeemable for certain rewards. Cashback credit cards basically give you a certain percentage of the money you spend back into your credit card. You are eligible for this cashback the moment you perform the transaction. Combine that with paying off your full debt on a monthly basis, you basically end up making money instead of paying interest.

I make it a point to make ALL my payments though my credit card, even if I have the cash on hand. This way I collect the most cashback I can. But at the same time, I am very strict about paying off the full amount to the bank within the same month .

Needless to say, banks do not like this type of client, they even have a word for that; “deadbeat”, but it is totally legal, and the bank can’t do much about it.

Travel milesMost banks offer credit cards that help you collect air-miles that can later be redeemed for airline tickets. This could be useful if you are a frequent traveler.

Reward pointsMy least favorite loyalty system because it limits you to a certain selection of rewards. The bank here offers you points for your purchases, you then get to redeem these points from a defined catalog of rewards including gift cards, electronics, furniture, airline tickets, and more.

Here are other ways you can use credit cards to your benefit:

Buying long term membershipsSometimes, buying a long term membership, to a gym for example, saves you a decent amount of money. Let’s say a month is for $100, but a year is for $700 (that is $58/month). Many people opt to pay monthly because they are unable to afford $700 at once. A credit card will allow you to borrow the annual rate and benefit from the extreme savings, and then paying that on a monthly basis to your bank. Needless to say, you need to factor in the interest rate to make sure that you are actually saving money.

Buying things at discount seasonsSometimes, you NEED something that happens to be on discount, but you do not have the cash to buy it. Using a credit card in this scenario could be to your benefit, assuming that you do not hold on that debt for too long, negating any discounts you got.

Understand the benefits of your credit card

Banks often fail to highlight the added benefits of the credit cards, make sure to understand those and make a wise decision whether you can benefit from these benefits. You do not want to end up with a credit card with benefits that do not matter to you.

Common benefits include:

Travel insurance on tickets bought with your credit card. This protects you in the case of accidental injury or flight cancellation.

Theft/damage insurance on items bought with the credit card. (You buy a laptop, it gets stolen, you are covered).

Access to VIP airport lounges. This is useful if you travel a lot. There are two methods, one with allows you access at a discounted rate, and one that allows you access for FREE. So this benefit matters to you, make sure to understand the terms.

Discounts. Some credit cards offer you discounts at certain retailers, restaurants, hotels, airlines. HOWEVER, most of the time the discount doesn't apply automatically. You need to be aware of it, and request it when making your purchase. Inconvenient, I know.

Final tips

• Never use your credit card for long term debt.
• Always ask about all the fees involved. Banks are SO DAMN GOOD at hiding fees.
• Always monitor your monthly statement. I’ve met people who have NEVER looked at it! It is super easy, as most banks allow you to access an up-to-date statement online. This will help you uncover any hidden fees, and fraudulent activity.
• Avoid using your credit cards to pull out money from ATMs. While this is allowed, it usually comes with high INSTANT interest, the no interest days do not apply.

Credit Cards .. The PRETTY Side was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.