This is a follow-up to an article I released called “Good Debt vs Bad Debt”. In the article I gave some examples of bad debt and how bad debt gets ugly by taking a precedent over your free-time. Now, I want to share an easy way you can leverage an example of good debt to make you hundreds of dollars each year and build credit.
Utilizing Short-Term Credit
If you do not have at least one credit card, than you are doing yourself a financial injustice because you could be making hundreds of dollars a year without changing any of your current expenditures. Most credit cards offer some sort of cash reward program. For this good debt method of making money, I do not want you to sweat the interest rate on the card because:
· #1 Rule for Using Credit Cards for Personal Expenses – You never hold debt for more than roughly 20-25days (depending on your card’s billing cycle), before paying total balance created for the month.
This means that you will not be paying any interest on the monthly debt you accrue. Now, you may have heard from friends or family that in order for you to build your credit up you should just make at least the minimum payment each month, to create a payment history. This is false. They don’t understand how the FICO score is calculated, but I’m sure the bankers aren’t worried about that.
Cashing In by Using Debt over Cash
So how do you make hundreds of dollars a year just by switching to using debt over cash? Get yourself a credit card that has a cash reward program. I am using Bank Americard Cash Rewards Credit Card in this example. Here is how the cashback rewards breakdown as of the date of this publication:
· 1% cashback on all general purchases
· 2% cashback on grocery purchases & 3% cashback on gasoline up to $1500 each quarter
· 10% if Cash is redeemed in Bank of America savings or checking
So let’s put this into perspective with a hypothetical scenario. Let’s say Billy’s monthly expense breakdown like this:
· $1000 general purchases
· $200/week Food
· $50/week Gas
A little quick math tells you that if Billy is all cash then his total yearly expenditure is $24000. If Billy was to leverage good debt by using his cash reward credit card then what that means is that he now uses his credit card for all the purchases he normally would use cash for each month, and pay the debt before the end of the billing cycle, at least a few days before interest rates are applied. Here are the results:
· $1000 general purchases * 1% cashback * 12 months = $120
· $1200 Food * 2% cashback * 4 quarters of the year = $96
· $300 Gas * 3% cashback * 4 quarters of the year = $36
· $252 cash reward redeemed in B.O.A. savings/checking + 10% = $277
The numbers don’t lie, by leveraging good debt Billy is not only is $277 trickling into Billy’s account each year (as a dollar saved is the same as a dollar earned), but he is also creating active credit activity that contributes to his FICO score and earns him credit. You could also see this method of leveraging good debt as a micro-hedge against yearly inflation, as well.
If you do not have at least one credit card, than you are doing yourself a financial injustice because you could be making hundreds of dollars a year without changing any of your current expenditures. Most credit cards offer some sort of cash reward program. For this good debt method of making money, I do not want you to sweat the interest rate on the card because:
· #1 Rule for Using Credit Cards for Personal Expenses – You never hold debt for more than roughly 20-25days (depending on your card’s billing cycle), before paying total balance created for the month.
This means that you will not be paying any interest on the monthly debt you accrue. Now, you may have heard from friends or family that in order for you to build your credit up you should just make at least the minimum payment each month, to create a payment history. This is false. They don’t understand how the FICO score is calculated, but I’m sure the bankers aren’t worried about that.
Cashing In by Using Debt over Cash
So how do you make hundreds of dollars a year just by switching to using debt over cash? Get yourself a credit card that has a cash reward program. I am using Bank Americard Cash Rewards Credit Card in this example. Here is how the cashback rewards breakdown as of the date of this publication:
· 1% cashback on all general purchases
· 2% cashback on grocery purchases & 3% cashback on gasoline up to $1500 each quarter
· 10% if Cash is redeemed in Bank of America savings or checking
So let’s put this into perspective with a hypothetical scenario. Let’s say Billy’s monthly expense breakdown like this:
· $1000 general purchases
· $200/week Food
· $50/week Gas
A little quick math tells you that if Billy is all cash then his total yearly expenditure is $24000. If Billy was to leverage good debt by using his cash reward credit card then what that means is that he now uses his credit card for all the purchases he normally would use cash for each month, and pay the debt before the end of the billing cycle, at least a few days before interest rates are applied. Here are the results:
· $1000 general purchases * 1% cashback * 12 months = $120
· $1200 Food * 2% cashback * 4 quarters of the year = $96
· $300 Gas * 3% cashback * 4 quarters of the year = $36
· $252 cash reward redeemed in B.O.A. savings/checking + 10% = $277
The numbers don’t lie, by leveraging good debt Billy is not only is $277 trickling into Billy’s account each year (as a dollar saved is the same as a dollar earned), but he is also creating active credit activity that contributes to his FICO score and earns him credit. You could also see this method of leveraging good debt as a micro-hedge against yearly inflation, as well.
