Cashing In On Cash Back Credit Cards

I know, I know...

I told you credit card debt was bad. And it is. You don't want it if you can help it. And if you have it, you want to get rid of it as quickly as possible.

But...

What if you could use your credit card to make a little extra money each month and not rack up credit card debt? How cool would that be?

It is possible. But it takes the right kind of card, the right kind of purchases, and the will-power to not go deeper into debt.

First the card.

You'll need a credit card that pays you cash back on purchases. These are credit cards that pay you back cash - real dollars and cents - for making purchases with their card. Typically, you will earn between 1% to 6% of each transaction, depending on the card you use. Some cards pay a flat rate on every purchase. Others pay more for certain types of transactions (gas for example) and less for everything else.

Next the purchases.

You will need to know what types of transactions earn cash back. While many do give cash back on everything, others are more selective. The most common are groceries and gas. But I have seen cards give cash back on everything from transit costs to streaming. Others will give a low flat rate on any purchase and bonus rewards on other purchases such as restaurants. There are even cards that change the categories for cash back purchases periodically. So in January you might get cash rewards on gas and groceries and in April it's travel and dinner.

Now comes the will-power part.

Once you have your cash back credit card and you know which purchases qualify for cash rewards, you use the card to make those purchases. If it pays cash back on everything, you use it for everything. If it's groceries, you use it everything time you go to the grocery store. Then, and this is where the will-power comes in and it's important, you pay the entire credit card balance. Every month. Without fail. It doesn't do any good to earn 1% cash back if you're paying 18% interest on your balance. You absolutely MUST pay off the entire balance each and every month.

If you pay off the balance every month, you can collect the cash rewards without paying any interest on your purchases. And that adds up to money in the bank. Use that extra cash to add to your emergency savings. Or place it in your regular savings if you already have your rainy-day stash fully funded.