making money with a credit card

Perchtenlauf Klagenfurt


Credit cards are evil.
Credit card companies are predatory, aggressive entities who seek only to make money.  Poor consumers are victimized by high interest rates and ridiculous penalties.  Credit card companies are worse than baby kitten stompers, and we all know how evil THEY are.

Except, of course, they are no worse than any other type of corporation-for-profit. They do use aggressive, sneaky tactics to hide charges and interest rates from consumers – but they do disclose them when you get a card.  They make cute commercials (Credit One, I’m looking at you) but then again, so do the soda companies – and they are selling a product that rots your teeth and makes you fat.  They charge high interest rates, but would you be willing to lend a total stranger tons of money at 0% interest?  If so, head over to Lending Club – I’m sure you will be the most beloved lender in their history.

I get tired, from time to time, of the demonization of credit card debt. I understand some people weren’t as lucky as I was, to be raised in a home in which debt was frowned upon.  Lord Polonius’ words from Hamlet were uttered more than once in my family as I grew up:  “Neither a borrower nor a lender be.”  Those words made an impression on me, and other than one impulsive purchase of a car using a loan from GMAC, I have never entered into any non-mortgage debt.  But let’s face it – credit card debt is a debt, just like a mortgage or a loan to start a business or a student loan.  It’s just how the individual chooses to use it that causes a problem.

Our family has a credit card – and we use it for everything we can possibly use it for.  Buying something for $2 at the store?  I’ll use the card if they take Amex.  Phone, cell, satellite – all paid on the card.  I’d pay my mortgage with my Amex card if possible.  Why?  Because I made $640 with it last year. Blue Cash® from American Express pays some nice cash back bonuses.  Other cash back cards – Discover® Motiva Card, etc. – pay similar bonuses.  I used Amex’s Membership Rewards for years, and it paid for – among other things – a roundtrip business class pair of tickets to Europe for our honeymoon, hotels here and there through the years, even some gift certificates. Over the last year I have received a flat screen TV and a baby stroller – by redeeming credit card rewards points.

Every type of tool can be used for good or ill. I can use a shovel to prepare a garden for planting, or I can assault someone with it.  Credit card companies offer a product that many people have trouble using.  Yet at the same time, if you use the product they offer – easy and unsecured credit with “bonus” or “reward” programs – you can make a lot of money without incurring any risk at all.

photo credit: annia316

33 comments

  • Kevin @ The Money Hawk

    You mean, if I support the people who aim to screw me over by using their service I can make $640 a year!!!! A whopping 31 cents an hour???

    That's awesome.

    Actually, I think that's called a sell-out.

    And no, they aren't like any for-profit corporation. Sorry. Bad comparison.

    It's irresponsible for someone in your shoes to recommend that people use credit cards for everything to get the points. You know full and well most people are not going to use them properly, which makes your points argument way beyond obsolete.

    The credit card industry wil never change it's practices because people like you reward them for the way they do business for a measly .31 cents an hour. It's actually quite pathetic. The point system exists to get people like you to play it and talk about it. They can offer people loans at 0% because there are more than a few people (recommended by people like you) who carry high balances and 31.99% interest (which started at 12.99% but more than doubled because Discover felt they needed to buy a few more company cars).

    Shame on you.

    • @Kevin: You're entitled to your opinion, of course. But that's like saying I shouldn't offer bread to everyone, because some people are overweight and don't understand how carbs work. If you can't use a credit card without understanding that the credit card companies seek to make money off your bad behavior, then I agree – you shouldn't use a credit card.

      * In reality, most Americans owe nothing to credit card companies.
      * Most households that carry balances owe $2,000 or less.
      * Only about 1 in 20 American households owes $8,000 or more on credit cards.

      http://is.gd/zOKb

      Credit cards are simple: don't carry a balance. Done. If you don't have cash in the bank to pay for something, don't use your credit card. I can't be tricked by rate hikes and loans and so on because I don't carry a balance.

      People get defensive because they feel tricked, but there are a million companies looking to trick you into using their product inappropriately: food companies, alcohol, cigarette, cars, mortgages, etc. etc. etc. If you aren't a smart consumer – and by that I mean someone who educates themselves in how to be a smart consumer – then by all means, don't consume.

    • Kevin @ The Money Hawk

      Steve,

      Go find a health and fitness trainer that offers their students bread. That's my point. It's irresponsible in the position you're in.

      And your facts are wrong. The average American household carries $8,000 in credit card debt. That's based on government debt and census data.

      The data in your link is 8 years old.

      You can be tricked by rate hikes. Saying you can't shows your ignorance. Universal default allows them to change your rate for any reason they'd like, balance or no balance.

    • @Kevin – but Kevin, a health and fitness trainer is a certified, trained professional. I'm a guy offering my opinion. And the average American household has $8000 in debt doesn't mean much – if I have none and someone else has $16,000, the average is $8000. It's like saying everyone in America has 2.3 kids.

      And I'll have to offer again that I can't be tricked by rate hikes. I pay off my balance in full each month, so the rate hikes are irrelevant to me. Maybe they are wildly spiking rates around on me, but since I don't spend more than I earn, credit OR cash, it just doesn't matter.

      I'll have to disagree that I'm ignorant about this, though. I have a different opinion about how to use this service than you do, but that hardly qualifies as ignorance. I'd say my post clearly states that the companies are sneaky but if you follow one simple rule – don't spend more on your credit card than you have in the bank – you can benefit from using a card instead of cash.

    • Kevin, the problem with some people (and apparently you are one of them) is that they refuse to take responsibility for their own shortcomings. Some people can't handle credit and credit cards and instead of admitting that it's their own fault – they blame someone else. The credit card companies, evil bloggers like Steve – it's all their fault.

  • My credit card (that I never charged a single purchase on), paid me $25 to keep the card.

    Love it.

    My other credit card (go-to, super old, great for credit history), has given me about $800 worth of groceries in the past couple of years of using it to pay for everything.

  • I think credit cards can be used to your advantage, through cash back bonuses, airline miles, etc. It comes down to being responsible. People who can't handle alcohol shouldn't drink, just as people who can't control their spending shouldn't use credit cards. Find out what doesn't work for you, whether it's an addiction to alcohol or credit cards, and eliminate it.

  • You're right, Steve. I have never carried a credit card balance. And I like getting the miles 🙂 .

    • The rewards card “I never carry a balance” advocates and defenders also overlook the repeated studies that show that people who buy with plastic spend more (including on the same goods and services) than do people who use cash. (I wrote about the most recent of these studies not long ago.) Everyone says “not me” but those studies don't lie. The card companies know about them so if you think you are the winners and the card companies are the losers, you are fooling yourself.

      Let's be honest – lots of bloggers make lots of money pimping credit cards. As long as readers understand that, they can make their own decisions. It just so happens that most of those decisions are lousy ones.

    • I'm sorry, but I have to take strong issue with this. My husband and I have had credit cards for over 30 years, and we have NEVER carried a balance. We were “charter” Discover card members and have gotten cash back on that for many, many years. We got a VISA card when we didn't even know what VISA cards were, but we figured out very quickly how to “float” payments to our advantage, while fully paying off our balance every month. My Marriott Visa gives me points toward hotel stays. We fully fund our retirement, we have much more than adequate savings, a substantial portfolio of stocks (well, we did before last year!!!!), we have pensions, we own two homes, etc. etc. And no, we have never–NEVER– carried a balance, NEVER. And we don't overspend. We are parsimonious people. Just because it's an all-you-can-eat buffet doesn't mean you have to gorge yourself. Just because buying power is available, it doesn't mean you have to spend. This is what is wrong with America. YOU are responsible for what you do. The world has always been full of temptation, but it's up to YOU to resist temptation. Sorry, your “pimping” accusation is groundless. BripBlap is stating the facts: If you have self-control, you can make a little money with credit cards–not lots, but a little. Why not? Have some discipline! What you do is up to you and not to anybody else on earth. Stop blaming other people! And by the way, I'm 60 years old, and I've been resisting the temptation to spend all my life. Now I'm reaping the benefits–and with credit cards!

    • @Mr. TML: I'm afraid I have to disagree. Not me. I am a frugal guy. I shop for bargains. I have no cable/satellite, I live well below my means and I have no debt. I have a net worth which (until recently) clearly marked me as a PAW per Millionaire Next Door.

      And I have to disagree. The credit cards have profited off the merchants who accept my card. I have paid nothing for my credit cards. This year I paid $0 in fees. I paid $0 in interest. I received $640 cashback. How was I fooled?

      And sure, lots of bloggers make lots of money pimping a lot of things. Google Adsense – used by almost every blogger – routinely pimps “make $10K a day working from home” type sites. Check any site that uses Adsense. But saying a “lot of bloggers” make money pimping credit cards – even if you didn't mean me specifically – is offensive. Pimping implies that the blogger is forcing someone into an illegal act (like a pimp who “pimps” a prostitute to a john) which is a crap statement.

    • Steve – I was not pointing fingers at you or any blogger in particular but you can tell who they are when you see non-stop credit card reviews with affiliate links on their sites. Nor do I say that every cardholder is an overspender. But as a general rule people who use plastic – even if they do not carry a balance – spend more than people who don't. The studies have shown this repeatedly. Thus, if someone gets $640 cashback in a year but exceeded that amount by overpaying or impulse shopping (you know they are out there), then that person has not made money on that card. That's OK as long as you understand it and can afford it. So the argument that credit cards are a money-making tool for their users is an argument that has limited application to a very small group of people, probably including you and some of these other commenters who are now upset with me. BTW – my “pimp” comment was perhaps over the top but I like to throw words like that in now and then to keep the conversation going. No offense intended to you or any of your readers.

    • TML – you are comparing apples and oranges. I'm not surprised that people who use credit cards spend more but I'm not so sure about the reasons.

      Is it possible that some of the people who pay cash can't get credit or are maxed out? Is it not also possible that people who use cards a lot are in a completely different demographic than people who use cash and that explains the difference?

      And as for the apples and oranges comment – where does the rewards fit into your statement? Do people who use rewards cards spend more than those who use cards without rewards (assuming all other variables are equal).

      As far as pimping goes – I agree with Steve – Adsense is the worst thing going for shitty ads – check out the ads on some of your stimulus posts and you'll see what I mean. Of course everyone excuses themselves since bloggers “don't have any control over what shows up on Adsense”. But, if I sell sell one little payday loan ad in my footer then I guess I'm a pimp (or whatever).

    • Four Pillars: If you read the studies (as I have done) you will learn why many people spend more with plastic than they do with cash. I commented on the Rewards cards because so many people claim to make money using the rewards without considering that they might actually be better off not using a card at all. If you sell a payday loan in your footer, that's a choice you make. If you write a post promoting payday loans, that is a different choice. I choose not to do either but I understand that others make different choices. But that difference gives us something to talk about, does it not?

    • So you never shop online? I love shopping online for convenience, buying bulk items like formula, paper towels and such… I know that you can pay with PayPal but some sites don't offer that and they sure don't give you cash-back.

  • The key to using a credit card is self control. My wife and I use it sparingly because there will come a time when we will need it. When an emergency comes you want to have all the resources you can get.

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  • Cashback credit cards are definitely the way to go.
    Just don't let your spending get out of hand.

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  • You also push up the prices on products because the store must pay 2.5% or more of the sales prices to Visa, Mastercard, or American Express. American Express, in fact, charges merchants the highest fees of the three. Why should we continue to let there be another middleman taking 2.5% from every purchase? Sure, it's nice to get back a few percent in the short term but in reality we are wasting our money by using the cards. Credit cards can be useful in certain situations because they can increase short-term liquidity and provide additional protections on purchases. When everyone purchases everything on them though, it's like we're all paying 2.5% on all of our purchases so that we don't have to pay them for 30 days.

    • While theoretically true, in practice this proves to be false.

      Let me explain.

      Yes they do charge merchants 2.5-3% to accept the card. But there was a great discussion over on my blog (not trying to plug my site or anything, but you can see the info here http://www.nodebtplan.net/2009/03/08/reader-com…).

      Plus you ignore the added benefit to businesses from accepting cards: higher number of transactions (more customers), and if the “surveys” are to be deemed true, then each transaction is larger on average than it would be otherwise. This would be good for the merchant.

      Imagine if the companies dropped all of their fees and saved the businesses 2-3%. Do you think we would see a price drop? No, they would absorb the profit… just like us reward card members are happy to do.

    • Matthew,

      Great insight…so totally true!!!

    • That's a valid point, Matthew, but the alternative is what – pay for online purchases with PayPal? And I'd argue that you're still paying that 2.5% markup whether or not you use a credit card. Merchants obviously aren't marking up credit card purchases differently than cash purchases, so even if everyone stopped using credit cards except a few people, the markup would remain built in.

    • But keep in mind, we're ALREADY charged that extra 2.5% cause its been done so often…. so in today's market, even with cash, that 2.5% was already built in.

      Lets not forget this, however — even if we pay ZERO in interest and get cash back, the credit cards still win. They sell our purchasing history and demographics to companies out there… they're not losing money. They're collecting very valuable consumer demographics that other companies simply could not ever with as much accuracy… (Granted, their not *making* money either… but the credit card company isn't getting hurt)

  • This is an epic post… as you can tell by the comments.

    Some can control their spending, others cannot. Debit, credit, cash, it doesn't matter.

    Some say studies show you spend more with plastic. That's odd… I have a budget. How many of those people were living on a budget?

    Being stupid is not an excuse for you to burn any company at the stake.

    The soda company comparison is fantastic — inspiring me to write something about it for tomorrow.

  • Wow Steve, Sorry for being late but I just read your post (and the comments). Thanks for this post as I agree with you 100%. To me credit cards have added simplicity and rewards to my life in exchange for buying stuff I would normally buy (food, gas, etc). To me this works well.

  • thanks for the info. i know Credit cards are evil. i take it 🙂

  • The point system exists to get people like you to play it and talk about it.

  • credit cards are definitely the way to go.
    Just don't let your spending get out of hand.

  • i know Credit cards are evil. i take it 🙂

  • its very good 🙂