Some consumers are resolute in their belief that with a little bit of careful planning and forethought they can use their credit cards sensibly and safely to profit from reward programs. Here is how this might well be possible if you’re a smart and savvy finance expert and make a profit off your credit cards.
Make A Profit Off Your Credit Cards With Manufactured Spending?
Firstly, we need to explain what manufactured spending is. This is the idea that you can use a credit card without incurring new charges. This is how it might work:
- Use a credit card to by a reload card
- Use that reload card to put funds onto a debit card
- Then pay off your credit card debts with the funds from the debit card
Or you could:
- Use a credit card to buy a gift card
- Then use the gift card as if you would use cash to make purchases.
The advantage here is that the consumer then earns reward points on the initial purchase, even though they only really initially bought the card to pay off a bill.
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There are many other variations of manufactured spending to make a profit off your credit cards and you’ll probably find a lot of discussion about them on internet forums. One of the best examples of these is a shopper who used a low cost Visa card to buy gift cards from Staples, the stationary store. The card offered reward points on purchases and he got additional points through using a different shopping portal. Even with the cost of the gift card factored in, the shopper still claimed he made a profit.
The Caveat
Many credit card operators are now getting savvy to this and are making it more difficult to get deals and thus make a profit off your credit card.
Credit Card Churning
This is the practice of continually opening new credit card accounts in order to take advantage of sign up offers and bonuses. Once a spending threshold has been reached, the card is usually cancelled and the process will start again.
To do this a shopper must:
- Know how hard inquiries affect credit card scores
- Have an excellent credit rating
- Be eligible to sign up for an offer
- Be able to meet the spending threshold in the allotted time period
- Be able to pay off their balances each month
- They must fully understand how the credit card works, the annual fee structure and how the bonuses operate
Who Does This Work For And Can You Really Make A Profit Off Your Credit Cards?
This can make a profitable little hobby for anyone who enjoys maximising reward points for as little cost as possible. If you look online there are whole websites devoted to this kind of practice and one of the most popular topics is trying to get reward points to earn free luxury travel – or even better than that, free travel, period, whether it’s free flights or train/coach journeys or even points towards getting good accommodation at your chosen destination.
This sort of thing is a great deal to try for if you’ve got superb organisational skills, free time and an excellent credit score.
Is There Anyone Who Can’t Make A Profit Off Their Credit Cards?
Yes! If you’re not good at organising your money, if you’re someone who gets into debt easily or who can’t really be trusted with a credit card then this is probably something you should steer very clear of. At the current moment, around half of all USA households have some form of debt and for those this kind of system would be totally unworkable.
If you have bad or poor credit ratings then you should also avoid getting into this sort of situation too. Anything in which you could be lured further into spending more money that you can ill afford should be avoided and advised against. If you’ve already got a poor credit rating, then continually opening new card accounts will eventually count against you and have a further negative impact on your credit rating. Credit card churning can also affect your ability to keep up with repayments which can then mean that your score can become even poorer in the long run.
The bottom line is that only people who know they can be sensible with money, and that have an excellent credit rating already in place should attempt to try and make a profit from their credit cards. Whilst the lure might seem very tempting, the reality is that for those who aren’t quite so financially savvy – it can lead to more financial problems rather than actively solving them. Always be aware and know your own limits.