Nov 03
Guide to Credit Cards: The 3 Ways You Can Make Money From Credit Cards
There are 3 ways that you can make money from credit cards:
- Rewards. Credit cards offer great rewards for spending money that you would have spent anyway. Rewards are generally tied to how much money you charge to your credit card. Some credit cards offer air miles, other cards offer cash refunds. Some high-end credit cards provide their users with hard to find seats to sports and entertainment events. If you would have purchased air tickets or other rewards anyway, these credit cards save you money. And cash back cards pay you money.
- A free loan every month. Credit cards effectively let you borrow money for free, from the moment you make a purchase using the card until the due date for sending in your payment. There are two components here: the billing period and the grace period. The billing period is the time between your purchase and when your monthly bill is sent out to you. The grace period is the time the credit card company gives you from the moment when you receive your credit card statement to the payment due date. The billing period will depend on when you made the purchase and when you receive your bill during the month. The grace period is typically 20 to 30 days. Add the two together, and you can easily find that you have 30 to 50 days between making a purchase and having to pay for it. During that time, you are effectively borrowing money from the credit card company for free. If you keep the funds in an interest-bearing checking or savings account, you are earning interest on it. The higher interest rates go, the more you'll earn each month.
- Purchase protection. Credit card purchases are protected under the Fair Credit Billing Act. This law gives the consumer the right to withold payment for damaged or poor-quality goods purchased with the card. The consumer must attempt to resolve the disagreement with the merchant before asking the credit card company to withold payment. According to the law, purchases must be over $50 and made within the customer's home state or within 100 miles of the customer's home; but most credit card companies ignore these two requirements.
Now that we've seen how credit card companies make money, and how you can make money from credit cards, we'll look at what the card companies do to swing the odds in their favor.
Comments
I hate credit cards