Does Your Credit Card Pay Its Way?

By Author: Michael Strauss
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Credit cards are regarded by many people to be something of a double edged sword, being both a potential friend and a foe to be wary of. While they offer great benefits in terms of convenience (online shopping, widespread acceptance, and the security of not having to carry bundles of cash around if you want to make a substantial purchase) they can also land the cardholder in significant trouble financially.

For many of us there is a disconnect between what we spend on plastic and the effect our spending has on our real world finances - it's all too easy to spend our way into significant debt, with all the problems associated with that unhappy situation.

Of course, credit cards do not automatically lead to debt problems, and with responsible and disciplined use you can enjoy the conveniences and benefits without the dangers. There are many ways of staying out of credit card debt, most of them complete common sense, but what many people don't realise is that using a credit card can actually make you money, and not just in the ways you might think of first.

The most obvious way that you can earn off your card ...
... is by signing up for one which offers a cash back scheme. Under this, a very small percentage of your spending is either credited back to your account directly, or sent to you in the form of an annual check. The typical rate of cashback is a seemingly miserly 1%, although more generous introductory deals of up to 5% for a limited period are available.

The key thing to remember with cash back cards is that any earnings you make would be completely drowned out by interest charges if you carried a balance on the card, so ensure that you only use it as a way of spending and not borrowing, and pay your balance off in full each month. In this way you'll avoid being charged any interest, yet still receive the cash back.

You can also earn money on purchases in a more indirect way. If you move all your day to day spending on to a credit card, paying the balance in full each month, you can transfer the money you'd normally be spending into a high interest savings account, letting it earn you interest for a few weeks before paying off the credit card balance in time to avoid interest. This might seem like a lot of trouble for little reward, but if you add up how much you spend in a month on essentials such as groceries, fuel, energy bills and parking costs etc, then you'll see that earning even a month's worth of interest on this figure could add up to a welcome bonus over the course of a year.

Couple this technique with a cash back facility, and you're winning on two fronts, and so long as you are disciplined enough to pay off your balance during the grace period before interest is charged, then it really is a case of the more money you spend, the more money you'll make!

About the author: Michael writes for http://www.cardsense.co.uk/ your source for credit card information and advice. Visit http://www.cardsense.co.uk/cashback.html to compare cash back credit cards and get a great deal.