How to earn money paying bills

March 15, 2007 9:23 PM
Bills, bills, bills

No, you did not read wrong. You can earn money paying your bills. You just need to know how to do it, along with a credit card and a high-interest online savings account.

The 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, you’d earn interest on money that you would have to give away anyway. How that works is that between the time you incurred the expense and the time the credit card bill arrives, you’d put that amount away in a high-interest online savings account. If you want a better idea about the technique, there are more details in that post.

The basic principle behind earning money by paying your bills is this: most companies allow a grace period before you attract a fine or they cut off your service. With a credit-card, you would use that grace period to your advantage. In a nutshell, what you are doing is pushing the limit. These limits are different for every service that you would use, so make sure you know them intimately first.

I will use my monthly Optus mobile phone bills as an example. Optus allows my bills to be overdue for two months before they’d cut the service, plus there’s no fines. It works like this:

  1. First bill arrives. You don’t pay it.
  2. Second bill arrives. You don’t pay it.
  3. Third bill arrives. Using your credit card, pay off only the overdue amounts from the first and second bills.
  4. Fourth bill arrives. You don’t pay it.
  5. Fifth bill arrives. Pay off the overdue amount from the third and fourth bills. And so on …
Credit card

And that’s it. Assuming your credit card gives you a 1-month interest-free period, and that your money is sitting in your online savings account until you pay the credit card bill, in the first cycle that you do this, you would be making three months’ interest on the amount from the first bill, and two months’ interest on the amount from the second bill.

Even if the grace period is say two weeks (eg. energy bills), the technique is still valid even if you don’t make as much. When you do this for *every bill* that you can use this technique on, as the cycle continues the interest starts to add up as it compounds on itself.

Needless to say, to make this technique worthwhile you must have the discipline to maintain a steady spending habit and you must live within your means. Most importantly, you must be able to pay off your credit card bill in full every time.

Having said all of the above, the best way to save money (and therefore “earn” money) is still by reducing your consumption and expenses. But if you feel you cannot change your lifestyle, then you can at least gain a little on the side using this technique. 🙂

[tags]budgeting, life tips[/tags]

5 thoughts on “How to earn money paying bills

  1. rah

    i actually set myself up with an ing direct account and a virgin credit card after reading your other post… i’m still adjusting to how organised i have to be to do this properly without having to pay the interest. don’t know if i’m advanced enough to put off the bills like that, yet!
    but at least i can get an idea on how to get one up on those bastards 🙂

  2. mooiness Post author

    shelly: they are not evil, if you know how to work the system. 😉

    rah: wow that’s good to hear. as I’ve said in the other post, in the beginning you’ll need about maybe two months’ expenditure in your daily transaction account as a buffer. Then the rest you transfer into ING. From then on keep your spending pattern steady but pay it all on the credit card.

    The key things to remember: you must pay off your CC bills in full every time, and for other bills with grace periods, make sure you don’t attract fines or worse – get cut off.


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