Milking Credit Cards: An Unconventional Use to Maximize Your Credit Bonus
Written by Kristina Lee   


Bonuses are the name of the game when it comes to attracting customers. Most big banks offer some sort of promotion, such as bonus points towards rewards such as airline tickets or hotel stays. Here are a few of the prominent cards (available at the time this article is written) and their perks:

Bank & Card
 APR
 Points & Bonuses
 Reward Offered
Wells Fargo Rewards Card
 N/A 1 point per $1 spent Airfare, Cash Rebates, Gift Cards, Merchandise
Chase Freedom
0% for first 6 billing cycles
 5% cash back on popular categories, 1% cash back on everything else Cash Back
Chase slate
 0% for up to 12 months No Annual Fee None
Chase Sapphire
 About 12.24% 10,000 bonus points after first purchase;
2x points on airfare
1 point per $1 spent		 Travel, gift cards, merchandise, cash back
Citi Platinum AAdvantage About 15.24% 30,000 bonus points after $750 spent in first 4 months
1 point per $1 spent		 Airfare on American Airlines, American Eagle, and AmericanConnection
American Express Green Card
 None, but a 2.99% on any delinquent balance if not paid in full each month 1 point per $1 spent
2x points for AmEx Travel
3x points for selected retailers		 Shopping, dining, travel

Here are a few quick tips on maximizing your rewards:
  • Know your programs! Do your research, and make sure you understand exactly what the stipulations and limitations on each program are. This includes caps on how many points you may earn or redeem, when the points expire, how much you must spend before you start earning the advertised 5% cash back, and how the rules can change if you are late on a payment or spend over your credit limit.
     
  • Don’t settle! Find the card that offers double and triple points for every dollar spent on preferred categories like groceries, gas, airlines, and more. American Express usually has some great offers.
     
  • Check out the affiliates! These are the companies that are associated with the card, and will typically offer good promotions to get you to shop there with the card (anywhere from 5 to 20% cash back rewards) – find the card that is affiliated with your favorite stores!
     
  • Find the sign up bonuses! Lots of cards have application bonuses that you get just for signing up, such as cash back or extra points.
     
  • Save your points! The more points you have, the better the deals get. Make sure to explore your rewards options thoroughly before spending on smaller items.

An Unconventional Use

Traditionally, credit cards are used as a tool to borrow money for a short amount of time until you pay the bill later. However, the large amount of application bonuses that many credit card company offer, as well as the promotional rates for an initial period, lend themselves well to an unconventional use for credit cards: collecting a few extra bucks, and a few extra perks. BEWARE, however, of the dangers that come with trying to beat the system. But if you dare to try, here are just a few of the less-frequented uses for credit cards:


Bonus Collection

The offers are everywhere: free gift cards, free points, and free cash. These promotional bonuses are yours for the taking. Just follow these steps and start rolling in the dough!
  • Get a copy of your credit report from annualcreditreport.com to make sure your credit score is at least 700 or above.
     
  • Compile a list of all of the credit cards offering large application bonuses. Focus on large ones, as the credit score effects of small ones may outweigh their benefit.
     
  • Target the cards that have no interest introductory offers and sign up bonuses.
     
  • On a Tuesday, Wednesday, or Thursday, sit down and apply for ALL of the credit cards. Do so within a couple of hours to get all cards approved before your credit score drops too low. Submitting all applications at the same time is important to keep credit card issuers from seeing the negative impact of multiple credit pulls while they are evaluating your application.
     
  • After receiving your cards, use them sparingly. Collect the bonus, and then feel free to cancel any cards you do not need. Be aware, however, that having an excessive amount of unused cards, or a large amount of canceled cards, will cause a large drop in your credit score.

Here's the catch

Withdrawing cash from credit cards often incurs a hefty fee - make sure that the interest rate on your investment is high enough to cover the fee and leave you a good profit margin. For Chase, this fee is $10 or 5% of the amount of each transaction, whichever is greater, plus the interest rate on the withdrawn amount (which as stated above is 19.24% for Chase) starting immediately after the withdrawal. Thus, you either need to find a credit card with 0% APR for purchases and cash advances, or find an investment that returns greater than 20% to cover your loss.

Unless you have another $100,000 dollars lying around, make sure that you apply for the card, withdraw the money, and invest it in the CD all in the same day so that the investment matures on the day that the money is due back to the bank (before interest fees are assessed on your borrowed amount). This is crucial, since the interest assessed is usually much greater than what an investment returns. Of course, this is only applicable to those investments with a specific time period, such as CDs. Normal savings accounts can be withdrawn from at any time, but typically offer a much lower rate of return.

Bonuses are the name of the game when it comes to attracting customers. Most big banks offer some sort of promotion, such as bonus points towards rewards such as airline tickets or hotel stays. Here are a few of the prominent cards and their perks:

Credit card companies always pull your credit score when you apply for a new card, so get ready for your credit score to plummet. The effect of taking out so many cards at once will hurt your score, as each application will pull a credit report, which lowers your score a few points. Times multiple reports, this is a big deal. Also, when the year is over and you have no need for the card since it is no longer free, canceling the card will also affect your score again. Done year after year, your credit score could take a big hit. Do not attempt this unless you have absolutely no need for a loan of any sort. Depending on the damage, it may take over a year to build your credit back up.


Tips & Tricks
  • Apply for all cards at the same time, within a few hours, such as on a Tuesday to Thursday. Those are off-peak hours and the cards are more likely to go through without a hitch. Simultaneous approval is necessary to approve all cards before the multiple credit pulls damage your credit score.
     
  • Always be honest with your income and personal information when filling out the applications. If you are applying for a business card, you can use your Social Security Number as your business identification and your company as a sole-proprietorship.
Last Updated on Tuesday, 21 December 2010 05:17