Who said debt was always a bad thing?
If you are reading this post, chances are you are middle class American, and therefore chances are you have debt. Here's how you can work this fact of life to your advantage. All you need is a steady paycheck, discipline ... and a cash-back card in your wallet. Getting several hundred dollars by following a few simple steps really is easy money, so read on.
Pamper your credit score, or else...
It's all about the way you manage the debt you put on plastic. Here's the worst case scenario, illustrated by the lousy player that ignores the rules of the credit card game. That individual cannot balance expenses versus income, and ends up negative every month with a credit card bill he can't pay. The creditor will charge him extra money in the form of (high) interests. If he keeps on delaying the full payment, the interests on the debt compound and over time this will lead to abysmal losses, sleepless nights, and a poor credit score. That one will never know what it feels like to be paid for handling debts the right way.
... you'll be missing out on hundreds of easy dollars
At the other end of the spectrum lies the disciplined, money-savvy Middle Class Crunch reader. Now this individual may be a plastic freak too, like our lousy player distant cousin. But he makes sure his expenses never exceed his income; he pays in full, in time when the credit card bills arrive at the end of the grace period. As the months go by, his credit score skyrockets, because all the credit institutions he is borrowing from have no choice but report to the credit bureaus how impeccable a checkbook manager he is. Next thing he knows, an offer comes in the mail for one of these magical cash-back cards. He signs up and receives the card a week later. He keeps doing things like he always did, now putting his everyday expenses on his brand new card. He makes sure his balance is cleared out at the end of every grace period; as a result, cash-back interests are compounding on his debt and over time this will lead to a nice clean check worth sometimes several hundred dollars. What a nice feeling to get paid interests on a debt you actually never have to carry!
Spend, and get paid automatically!
Here is the secret: be like our disciplined friend, steer clear of accumulated debt and pamper your credit score. Check out your credit score once a year if your bank does not offer you a free credit report (Tip: do not consult it too often. Asking for it every other week will penalize you and lower your score... yes, the credit bureaus can be mischievous like that sometimes). Then consult the cash back section of www.creditcards.com to see what you can be eligible for and apply for your favorite card. Chances are you'll get one if your credit score is anything north of 650.
When you finally get to slide one of these into your wallet, use it as much as possible everyday, and target your expenses on the type of goods that reward the most. Many cards, like Blue Cash from American Express, reward groceries, drugstore and gas purchases the most. Track your total cumulative expenditure (total of what you charged on the card since the beginning) so eventually you reach a higher limit of reward. Blue cash, for example, kicks in a whopping 5% interests on your balance (for eligible purchases), after your cumulative bill exceeds $6,500. If you run a household, you know that's not a hard total to reach within a year.
Yes, the rewards can exceed those of a CD (Certificate of Deposit)
Simply put, you get paid to spend money, up to several points of interest! Sounds great doesn't it? It is, as long as you pay the bill in full every month. Beware: an incomplete or missing payment will take a big toll on your final cash back reward. I myself have accumulated a little over 200 dollars in 11 months of spending on my Blue Cash Amex. The check is coming soon, after a full year of use of the card. Now that's sweet, because this is just what I would get after investing and locking $5,000 of my own savings on a 4% CD for a full year. Except here, I get just as much without the 5 grands and by simply paying for food and gas like we all do everyday.
One last thing worth keeping in mind is the cash-back interest rate in your favor is fixed, unlike the one on your CD or savings account that fluctuates according to the trend the Fed decides to follow. And if you are a disciplined saver you know how frustrating it can be to see savings interests drop. Since I got the card early in 2007 the cash-back yield rate has never changed.
More Crunch To Munch On:
Middle Class Crunch's favorites:
Blue Cash from American Express.
More form Discover.
Freedom from Chase.
You can see more cash-back offers on this site.
