Make money while using your credit card

By Michael Lloyd

If you have a decent credit score, low levels of debt and the discipline to stay on top of several accounts, your credit card could be earning you some extra cash. Be warned though; if you mess things up, you could damage your credit worthiness or be left out of pocket.

Everyday spending
Find out how long you can keep a balance on your card before you start accruing interest; most issuers don't charge interest for up to 59 days. You can do all of your everyday spending on your credit card and keep your wages and other income in a high-interest, instant-access savings account until it's time to pay your balance. As long as you pay your balance in full before the interest kicks in, any interest you've earned on your savings account is profit for you.

To help prevent paying interest on your card purchases, set up a direct debit to ensure your balance is paid in full each month. And don't even consider trying this unless you can avoid temptation to pay just the minimum while you build up savings -- your card's interest will eventually overcome whatever your savings might be earning.make-money-with-card

Credit reward programmes
Upcoming EU rule changes that will cap how much card issuers can
charge vendors per transaction have been widely tipped to end many credit
card reward and cashback programmes, but there are still plenty of offers out there, if only for the time being.

A couple to consider: the American Express Platinum Cashback Everyday card, which. as of May 2015, offers 5% cash back on up to £2,000 in spending for the first three months, and between 0.5% and 1.25%
thereafter. Santander's 123 credit card offers between 1% and 3%
cashback on various types of purchases.

Again, these types of credit cards will only be worth your while if you can pay your balance off in full every month. If you can't, the amount of interest you'll pay will likely dwarf the value of your cashback, making the whole venture pointless. If you're going to carry a balance, look for a card that charges a low interest rate and forget about rewards.

As well as cards that pay direct cashback, you can find others that offer rewards such as frequent flier miles or points that can go toward supermarket purchases. Be quick though; some card issuers have already begun pulling reward programmes ahead of the EU rule change in October 2015.

"Stoozing"
Around a decade or so ago, a financial fad commonly dubbed "stoozing" became popular. This involved taking out 0% balance transfer offers and whacking the money you would normally have spent paying the debt into a high-interest savings account until the end of the fee-free period.

The financial crisis pretty much put an end to stoozing, as card issuers tightened lending criteria, cut 0% balance transfer offers and hiked transfer fees. And despite the improved economy and lenders being again keen to pull in new business, stoozing's glory days are unlikely to return anytime soon.

The only cards that currently allow borrowers to pay money directly into a savings account charge a transfer fee of around 4%, making it difficult to raise much of a profit without putting the cash into investment vehicles that are much riskier than high street savings accounts. Fortunately however, card issuers are more widely offering a perk that makes stoozing viable again.

Many lenders now issue cards that charge 0% promotional rates on all purchases. Taking out one of these and using it for your everyday spending until close to your limit, while putting the money you would have otherwise spent into a high-interest savings account will have much the same effect as the old-style stoozing. One drawback with 0% purchase rate offers is that they're typically shorter than balance transfer deals; on the upside, they don't carry a fee.

To make this work, however, you must clear at least your minimum payment each month. Failure to do so could result in a breach of contract and the withdrawal of your promotional interest-free offer, leaving you with the issuer's standard variable rate. If you've racked up a large balance on the card, those interest charges could be substantial. Be sure that you are absolutely clear on what the rules of the offer are before you try this.

This method comes with an additional risk: keeping a high balance on your card won't do your credit score any favours, Laura Barrett, a representative for Equifax's consumer affairs, said in an email.

"Maintaining high credit balances or utilising a high proportion of existing credit could indicate that an individual is at risk of becoming over-indebted, and this may impact future credit applications," Barrett said.

See related: Is this the end of credit card perks?, Make the most of balance transfer deals while they last

Published: 29 May 2015