Your credit card can earn you money
Your credit card can earn you money. Although the terms and rates below are Australia-specific, the basic principle holds. I’m gonna tell you how I do it but these are the prerequisites:
- Daily transaction account with ATM access
- Online savings account with high interest rate
- Credit card with low or no annual fees, and a lengthy interest-free period
Usually the features of a daily transaction account are convenience and the availability of your money where an ATM or EFTPOS is available. But the downside is low interest rates.
Online saving accounts these days pay high interest rates which are comparable to fixed-deposit rates. Two of the better deals in Australia are from CitiBank and ING Direct. Both allow unlimited transfer to and from your daily transaction account and do not require a minimum balance. CitiBank also offers a $5/month option to have unlimited ATM/EFTPOS access. ING Direct requires you to transfer the funds to your daily transaction account, which you then withdraw from an ATM.
Not all credit cards are the same – choose one with a very low or no annual fees, and has a lengthy interest-free period. I’m with Virgin and they have no annual fees and their interest-free days is 55. Which basically means I can spend the money now and have almost 2 months to pay the money back without incurring interest.
In the first month that you start this, the basic principle is as follows:
- Do all major purchases and bill-paying with *one* credit card.
- Transfer the bulk of your money into the high-interest online savings account. Leave approximately 2 months expenditure in your daily transaction account.
- When your credit card bill arrives, transfer the full amount due from the high-interest account into your daily account. *Pay on time* – otherwise you’d incur the penalty interest which is always higher than that of any savings account. To make this step easier, you can arrange for the credit card company to deduct the due amount automatically from your daily account.
And that’s it. Essentially you are earning about 2-months interest on money that you have to give up anyway. The interest that you earn will also gradually increase due to being compounded.
If you co-ordinate things correctly and discipline yourself, then the steps may eventually become this:
- Spend spend spend. Pay bills.
- Salary gets deposited into your account.
- Credit card bill arrives.
- Deduct from your salary the due amount, and the amount that you think you’d spend in the next month, and transfer the rest to the high-interest account.
- With a bit of control and discipline, the balance in the high-interest account should grow, increasing even more the interest that you’d gain by using this method.
The whole point is to not let money sitting around doing nothing, but to earn some interest instead. If you have a mortgage, then swap out the online savings account with your mortgage account in the steps above.
Have you got any similar tips to share? 
*no affiliation with any of the companies mentioned above*
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38 Responses to “Your credit card can earn you money”
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yep that is what I do as well. Therefore my RM1000 splurge on Shu Uemura is still unpaid for – I signed up for a new ccard before I went back and effectively have until December to pay it off (initial 6 months intrest-free); with minimal payments each month and no intrest charged until January.
Will be going for another ccard in Dec before heading towards OZ.Not sure if they have this sort of deal in other countries,but those with ££ should definately practice this.With control
I used to bank with Commonwealth, but i’ve since switched to Westpac. The Westpac Max-I account is similar to most Fixed Deposit accounts but it affords the additional flexibility since it’s interest is compounded daily.
Most other Fixed Ds Commonwealth one only compounds the interest based on the account balance at the end of the month. So let’s say i pay the rent at the end of the month, i would lose the accrued interest which i earned on the rent money earlier that month. In fact, there’s probably some provision which actually penalises u for withdrawing money from the fix D before maturity. Damn ma fan.
But of course, the downside to that is that the Max-i interest rates fluctuate (both ways), so it isn’t exactly a fixed-interest deposit per se. Even so, the interest is still pretty comparable to the other Fixed D rates.
Actually, having re-looked at the title of your post, i would say, the best tip is probably not to spend on credit, or at least not chalk up ridiculous amounts on your credit card, only having to service the even more ridiculous interest charges.
Barring the unattainable ‘credit gift points’ and mileages advertised, i personally think a debit card which debits your savings directly is a much better alternative to shop. Not only do u not pay interest, makes u feel the pinch when ever you read the bank statements which will probably deter you from overspending.
clever ££s : wahaha, 6 months interest free? Woohoo. You better have some good control and willpower there.
v.u.: I am not encouraging spending at all. With control, my method will earn you money in the long run. Provided that your spending pattern remains stable and you spend within your means.
dun ever fall for those balance transfer with 6 months interest free. think easy to repay, very hard lar..i’m excperiencing now!!!
the best way is used the card when needed, have a good memory, never overspent!!!
or, get a dividends card, earn discount and cash when using the card…citibank has it!
Well, note the last words on my comment
WITH CONTROL.
If as a grown up adult you have no willpower and cannot control your spending then you boh liao.I have had credit cards for 8 years – and am never late with my payments nor even have any outstanding payments by month end -always paid in full.Thus I know my will power is quite good.
(I have a RM 21,000 limit on my current 6 month interest free ccard by the way.If I cannot control then I must declare bankruptcy in Jan:))
yeahloh agree – CONTROL. If you can’t trust yourself with your spending then this method is not for you. You can try by paying only essential bills on the credit card first – that way you’d still earn interest off money that you were gonna have to pay anyway.
Oh and my current limit is AU$12,000.
Not many pple can master the art of crediting. If you are really that good, you can even earn money while you are in debt. (interest-included).
Anyway, currently, I still believe Cash is King.
For those in Perth, BankWest still offers the best interest rate for an online at-call savings account (6.6% for 12 months):
http://www.infochoice.com.au/banking/atcallsavings/compare/tables/online/NSW.asp?Sort=InterestLess_1000&Zero=True&Order=descending
personally I’d rather put it into manage fund. you need at least 1000 to start and put in 100 every month. I did that in uni and the return was way better than putting into FD or high intrest rate account. FD was 5% in 2001 and manage fund was 7 to 8%. Oh and it was tax free cause i was a student!
Lupin: my method is not that hard really.
anon: that deal is only available for businesses (requires an ABN).
https://applynow.bankwest.com.au/ACSnet/BusinessTeleNetSaver/Disclosure.aspx
Rodney: good alternative although a managed fund carries it own risks and the ROI is not guaranteed. When it’s good, it’s definitely higher than a normal savings account.
aiyaaa….now the secret is out…..
trying hard to limite my stash of credit cards to 2. I’ve been told if you have 4 or more then you’re dodgey
.
.
my tip. keep the plain vanilla edition credit card because it has lower fees. the platinum card may look flash and impress your mates but also makes you a target for credit card fraud when you go travelling. you can get the same credit limit on the commoner version card and you never use the extra services of the gold/platinum/Amex black anyway.
okay maybe an Amex Black card would be cool to have
Mate,
you gotta look at the rewards too. While Virgin CCs are decent, they got crap rewards. What you want is to gain Frequent Flyer points & ignore any other redemmable items. AMEX’s paid off for couple of my flights already. My suggestion, if you’re working or affliated with some society (i.e. Chartered Accountants), check with them as there’s always associated CCs already included the membership fees. If student, check the local banks, there’s always student option packs that include annual fee waiver.
On the interest note, it’s nice to earn all that money but don’t forget the Australian tax component to it especially if you’re working & you’re a non-resident. There are ways to workaround the system so be innovative !
[...] Your Credit Card Can Earn You Money by Mooiness [...]
ront: shhhh.
Rob: screw trying to be impressive. What’s more impressive is having the money instead of paying unnecessary fees to have one of those cards.
xiaoboy: rewards and such are better for the big spenders rather than others. And yes we do pay taxes on the interest earned, but extra money is still money. With my method, you don’t have to spend to save which is what most rewards system try to make you do.
[...] I submitted my previous post, “Your credit card can earn you money” to Darren Rowse’s latest group writing project over at Problogger.net. On the list of submissions there were also similar “ways-to-save-money” type of posts. Three of them are: [...]
Definitely more impressive to HAVE the money, LOL. Interesting idea, thanks! Our list is up if you’d like to look – http://lilduckduck.com/ducky-moments-in-time/240
Have a great day!
I’m at the point of limiting my cards. I went from many (big mistake) and am down to two major cards. Nice post.
MamaDuck: it’s true ain’t it? thanks for dropping by!
Jersey Girl: revolving credit ain’t never a good thing. thanks for the compliment!
Nadia: thanks for that bit of info! Bankwest’s site is a bit misleading then, they don’t explain it too well. But yes, getting interest on money that is going to be spent anyway is the whole idea.
I’m actually using the Bankwest Telenet Saver Account – it’s not just for businesses! The introductory offer is 6.6% interest for the first year, and 5.8% I think, thereafter. Last month alone, I earned 10 bucks in interest!! (yes I’m easily excitable)
It’s great because you get unlimited internet transactions on it, so every month, I transfer most of my salary into that account. Then only as and when I need it, I transfer the money into the spending account. That way, similar to what you’ve written, I earn daily interest on money which is going to be spent… before it’s spent. =)
beside citibank plus and ING, one should be mentioned here is BANKWEST TeleNet Saver, it give 6.60% for the first 12 months and 6.0% after.
http://www.abetterdeal.com.au
mooiness: it has been mentioned already. read above.
Interesting concept. Worth a try.
BTW, I love the graphic you’re using for the header of this blog. If you’re the artist, you should submit some of your work to my site. If not, pass the word on. I’m currently looking for artists.
Laurie: thanks! I’m not the artist of the banner but I shall let her know about your site.
[...] Your Credit Card Can Earn You Money – a great way to stretch that dollar [...]
Thanks for the tips mooiness!
We’re actually just in the process of refinancing our current mortgage and buying another block of land – and as part of the refinance we’re going for a mortgage offset and using the plan you’re talking about. I’m cool with it, but the partner is stressing about using credit.
Despite the fact that I’m trying to explain that it’s not REALLY credit, because we have the money sat there, but it’s just a different way of spending and trying to save. We’re offsetting against the loan for the block, so when we sell this house we’ll use the profits to offset against that mortgage while we’re building and pay tiny interest on the loan while we wait.
So clever!
But yes, you have to be controlled. We’ve been controlling our money for a few years now and doing quite well so I’m confident this method will work for us – it’ll just take a little getting used to.
michellesarah: excellent idea! If it helps any, you can explain to the hubby that a CC with a 30-55 interest free period is like a personal loan with no interest. And you then use that personal loan to gain a little interest off of it. In your case, you are using it to offset the mortgage.
And you are right – CONTROL is the key.
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[...] 223. Your Credit Card Can Earn You Money by Mooiness 224. 10 Ways to Immediately Start Saving Money by junger 225. The 10 Best Money Moves You Can Make by FMF 226. Five things I would do if I had $20,000 by Patrik 227. Your Very, Very Best Money Saving Tips by NCN 228. Why I Tithe by Nneka 229. 5 Simple Steps to Get the Most Revenue out of Ad Space by Markus 230. 5 Ways MyMoneyBlog Can Make You $100 by Jonathon 231. Fifteen easy ways to save fifteen bucks by John 232. 5 Advertising Programs that Have Earned Me at Least $1000 by Paul 233. 5 Secrets to Fabulous Financials by Single Ma 234. Four Kinds of Money Making Websites You can Start By Yourself by Peter 235. 7 Personal Finance Tips by Tim 236. Top 10+ ways to Save Money and Help the Environment by David 237. How to Organize Your Debts by Donna 238. Extended Car Warranty Do’s and Don’ts by Stuart 239. Five reasons why you should always buy in lots by Danielle 240. The 10 Things We did to Erase almost $9,000 in Credit Card Debt in Less than 6 Months by Tricia 241. List of Important Financial Documents by Jim 242. 3 Ways it costs more being a man by John 243. Three Reasons Why I Might Be Poor When I Retire by HART (1 800-HART) 244. Buying a Car the Right Way by Matt 245. Got a Dog? Here Are 5 Tips on Saving $$$ & Being a Responsible Owner by Financial Freedumb [...]
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Good post. Better opportunity exists to make the best use of reward cards. But of course, if you can stay away from paying interest, you already win the first battle.
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With the high price of gas, I recommend looking into gas rebate credit cards as seen here:
http://gascreditcards.wordpress.com/
They earn cash back everywhere and an even higher cash back percentage at gas stations.
[...] Your Credit Card Can Earn You Money by Mooiness [...]
[...] idea is an extension to another one which I’ve written earlier about how your credit card can earn you money. The gist of that post is: using a zero-fee credit card with a lengthy interest-free period, [...]
[...] Have only one credit card and pay it in full every month. It can even earn you extra if you do it well. [...]
[...] Your Credit Card Can Earn You Money by Mooiness [...]