Credit cards are usually seen in a negative light as people often end up acquiring a huge debt through them. But if you fully understand how credit card companies work and use a little ingenuity, you can actually earn money using your card.
Set up a small business
Creativity and initiative can take you a long way and significantly improve your financial situation and lifestyle. Thanks to the internet, there are many promising low cost business initiatives and you don’t have to take a lot of risk to start something on your own. If you have trouble raising adequate finances to start your small business or to fund the working capital, you can use your credit card to setup an online service through which you can earn a stable and recurring income.
It may sound like a high risk venture, especially since credit card companies charge exorbitant rates of interest when you revolve credit. But if you plan your business well, and make sure that your revenue can be used to pay off the debt before the due date, then there is no reason why this strategy will fail.
A word of caution – you can pull this off only if you have a good credit score and can get a card with a relatively lower interest rate. In addition, you should have a high credit limit on the card for this to work.
Credit card arbitrage
Another interesting investment strategy is credit card arbitrage. You can take advantage of the cost of taking a loan off your credit card and placing it in a high interest savings account. Since credit card companies are desperate for business, many of them launch introductory offers with a near 0% interest rate for a specific period. You can earn money by investing the amount in an interest bearing account.
This type of investment is not suitable if you have a tendency of making late payments or find it tempting to invest in stocks for quicker but much more uncertain returns. Since introductory offers are valid for a limited period, you should choose ones that run for at least a few months. Anything less than that may not be worth the hassle. You should also ensure that there are no hidden fees for transferring the balance.
Before you jump into any of these plans, carry out a feasibility analysis based on the terms and conditions of the card that you hold or plan to take. And never take more risk than you are comfortable with.