Beat Credit Card Companies

Here's How You Can Beat Credit Card Companies at
Their Own Game!

The best way to beat credit card companies at their own game is to strategically use your credit cards to your advantage. Once you understand how the credit reporting system works, you can manage your credit card debt payments in a way to not only legally improve your credit scores, but actually earn money from your credit card companies at the same time.

Most credit card companies structure your credit card accounts in a manner designed for you to make only the minimum monthly payments on your credit card balances. However, by making only minimum payments each month, the credit card companies earn more interest. It could take you up to 30 years to pay off your credit card balances.

The credit card companies and banks that issue credit cards know that most consumers will simply continue to use their credit cards and carry large credit card balances each month. In so doing, the minimum payments represent a significant income stream for the credit card issuers.

However, you can beat credit card companies at their own game by turning the tables. Here's how you can beat credit card companies at their own game, avoid paying interest and actually turn your credit card account into a source of income instead of a liability.

How to beat credit card companies at their own game...

  1. Sign up for a credit card that has minimum annual fee, low interest rates and a cash rewards program for the purchase of gasoline and groceries. There are several such credit card programs available by credit card companies like Capital One Bank. Usually they will pay you a reward of 1% of your purchases for gasoline and groceries. You can elect to receive rewards in the form of a check mailed to you each quarter or have the rewards money posted to your account balance. Choose to have them mail you a check.

  2. Only use your credit card to purchase regularly budgeted monthly expenses like gasoline and groceries. Then, instead of using you cash to purchase gasoline and groceries, charge these expenses on your credit card and use your cash to pay the credit card company back. This way you won't accumulate debt that can incur significant monthly interest.

  3. Pay down your credit card balance to only 20% of your credit card limit each month. By only using your credit card for regularly budgeted monthly expenses, you can afford to pay the balance down each month and only incur a minimal interest amount on the 20% principal balance you carry each month. Also, by carrying a balance of 20% of your credit limit, your FICO credit scores will improve. Part of the FICO credit score formula rewards you for making timely monthly payments and also keeping a low account balance to credit limit ratio of about 20%. Actually paying off your credit card balance each month will not yield the same benefits to your efforts to increase your FICO credit scores.

  4. Contact your credit card company and notify them to send you a check each quarter for the earned cash rewards for your gasoline and grocery purchases. Depending upon how much you spend each month and the amount of the cash rewards you earn, you can offset any interest you pay on the low principal balance you carry each month. Also, the cash reward should be sufficient to cover the annual fee for your credit card account.

Beat credit card companies while earning Income

One of our clients uses a Capital One Bank Visa for most of her monthly budgeted expenses. The credit card she uses pays her 1% of the purchases she makes each month as part of the cash rewards program. It's not limited to just groceries and gasoline. Other purchases are included as part of their rewards program.

She spends approximately $3,000 each month on her credit card and pays the balance down to $600 each month using the cash she budgeted for her regular monthly expenses. She gets a check from Capital One Bank for about $90 each quarter. This is about $360 a year of income she receives from her credit card company. The annual fees and interest on the $600 balance she carries each month is less than the $360 she earns each year.

So she has managed to beat credit card companies at their own game, because she is actually using her credit card companies money each month for free. Also, by making timely payments each month and maintaining a credit card balance of no more than 20% of her credit limit, she is improving her FICO credit scores as well.

You can use this approach to beat credit card companies at their own game too.

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