Last Updated on Apr 15, 2020 by James W

It probably sounds too good to be true, but by choosing the right deal and with careful management of your finances, you could indeed make money out of using your credit cards. There are a variety of reward schemes available that give you either cash back or points which you can then exchange for products, air miles and experiences. You need to compare the costs and benefits of prospective cards to see which is the best fit for you and avoid falling into the trap of missing repayments or overspending on things you don’t need just to get your points up.

Cashback cards

These cards give you a percentage of all your spending back, usually between one and five percent. The rate can drop after the introductory period so make sure you’re aware of any rate changes before you sign up. The reason card companies offer these schemes is so they can profit from the interest you would pay if you don’t clear the card every month. If you want to earn from these cards, it’s essential to pay them off in full every month. Otherwise, the money you make will be swallowed up by interest charges. The best way of ensuring this is to set up a direct debit that pays the card in full each month without you having to remember to do it. To maximize your returns, use the cashback card to cover as much of your normal spending as possible, but don’t spend for the sake of it, as the rewards won’t match the costs of over-reaching yourself.

Reward cards

Reward cards such as the Chase Sapphire card offer points for every dollar you spend which, when accumulated, can be exchanged for vouchers for days out, entries to attractions, plane tickets, holidays, money off your groceries and more. The value of the points is key to making the best returns, as cards can offer anywhere from fractions of a cent to several cents per dollar spent. Some cards only offer vouchers or products from specific stores, so check what the limitations are.

If you would spend at these stores anyway, then the points will save you cash, but if any purchases would be on top of your normal spend, you won’t be any better off. Also, check to see how many points you need to accumulate to get the rewards you would like. For large goods and experiences this can run into thousands, so you would need to be sure you would be spending the amount of cash you need to get the points over the course of a year without spending extra, or again you won’t be any better off.

If you can clear your debt each month and avoid the overspending trap, you can earn hundreds of dollars a year from these schemes just for doing your normal weekly spending. If, on the other hand, you might struggle to clear the debt in full every month, you’d be better off finding a card with the lowest rate of interest, because you will save more by keeping your debt costs low.

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