Playing With Your Credit Cards

Credit cards are just a curse for many people. They make it too easy to buy on a whim when the money isn't there to pay for the purchase. They raise the cost of everything bought by the amount of the interest that will paid over the years. They create debt levels that prevent getting a mortgage to buy a home. I could go on.

Credit cards are a blessing for many people. They make it possible to effectively carry large amounts of money safely and easily. They let you rent cars and make reservations for hotels over the phone. They let you buy things online, without ever having to leave the house. They even make it possible to pay less for things, because you can pay later, after your money has earned more interest.

Now, if you can relate to the first paragraph more than to the second, you might want to skip the rest of this article. What you probably need is a good article on how to get out of debt. The techniques I'm going to cover here will probably just get you into more trouble. If you are able to handle your finances, though, you may appreciate what follows.

Credit Card Secrets

First, if you have more than one credit card, make a note of when the billing period ends for each card. Then, when you make a purchase, use the right card so you'll pay as late as possible, so your money can stay in your bank account making interest longer. To understand this, suppose you have two cards, and their billing periods end on the 12th and 26th of each month.

Now, if you pay for your groceries on May 10, which card would you use? Well, the one that has the billing period ending on the 26th will go out two weeks later than the other. The other will be heading your way in a couple days, right? So use the one with the statement day on the 26th and you get two weeks of extra interest on your money before you have to pay. This assumes that you pay your balance in full every month (you do, right?), and so never pay interest on the cards.

Suppose you buy a $500 television on May 26. You use the card with the statement that ends on the 26th. It won't make it to your account until the following day, meaning it will be on the statement that ends on June 26, and then you have 25 more days to pay the balance (generally, although some have just a 20-day grace period now). If you pay 20 days later, that $500 will have been in your account for 50 days earning interest.

Now, if you keep your money in a decent account yielding 4.5 % (what INGDirect.com pays as of mid-2007) you will have made a little over $3 in interest. This isn't much, but it can add up over time. All you had to do was use a credit card instead of cash and pick the right card out of your wallet (and pay off those balances each month).

Another possibility is to take advantage of the no-fee, low interest cash advance checks we all get in the mail. I once made a very safe loan of $6,000 at 9% interest for six months, using a no-fee 4.5% cash advance check to get the money I loaned out. Since I was paying down the balance on the credit card over the months, I paid only $100 or so in interest, while collecting $270 in interest for the six months of the loan.

Again, a $170 profit isn't much, but it all adds up, and didn't cost me even an hour of time to make it. What if there is a fee? Run the numbers. Typically, the fee will be 3% of the cash advance, but is limited to $50 or $75, so there still might be room for a profit, depending on the amount you borrow to loan out.

Are there other safe and profitable investments that you can make with borrowed money? Possibly, but that's something you have to decide for yourself - and perhaps a topic for another article. But at least you now know a bit about playing with your credit cards.