Five ways to make money from credit cards

By being smart with your cards, you can make your plastic friend work for you!

There are several ways to make money from credit cards, besides the infamous 'stoozing' technique. Once you've paid off all your card debts (and only then) you should start using them to make money. Here are five ways to do so:

1. Earn interest on money you've already spent!

When you make a purchase using a credit card, you can borrow free of interest for 45 to 59 days, depending on the card. By choosing to make more purchases with your credit card, your money stays in your current account for longer, earning more interest. So you're earning interest on money you've already spent!

You could:

Put the weekly food and petrol bill on your credit card
Use your credit card for larger transactions
Time your larger transactions to hit the start of the statement, so that you earn interest on your spent money for longer.

To use this technique effectively, you must pay off the balance in full every month (or at least before the end of the 50-odd days interest-free period is up), or it'll cost you a lot more in debt interest.

2. Borrow money to make money

With the stoozing technique, you look for credit cards that not only have 0% balance-transfer deals, but which also allow you to pay off overdrafts.

Rachel Robson takes a look at why you might be better off using a low interest credit card.

But, of course, you don't have an overdraft! So when you pay it in to your current account, it puts you further into credit. You then transfer the money to a decent easy access savings account (which you had opened previously), to earn you some interest.

A month before the 0% deal expires, you transfer the money back to your current account and pay off the credit-card debt.

This technique is not as profitable as it used to be, because 0% balance-transfer deals now come with a 2-3% fee! To make this technique profitable, you must transfer the money as soon as the card account is opened.

3. Get paid cash by your lender!

Using cashback credit cards is a simple alternative to stoozing. By paying for goods on a cashback card, your card issuer pays you every time you make a purchase. Furthermore, as with point 1 above, the money you're spending stays in your current account for longer, earning you some interest.

Typically, cashback is paid once a year, although some cards pay every month.The best card around comes from American Express, which pays a whopping 5% cashback during the first three months, followed by tiered rates of up to 1.5% depending on how much you spend.

Again, you must pay off your card in full every month if you want this to work.

4. Make even more interest on money you've already spent!

Whenever you make a purchase, you could use a 0%-on-purchases credit card. Then you transfer the same amount from your bank account to a savings account, so that you save the money you've just spent, and don't spend it again. Before the 0% deal expires, you transfer the money back to your current account and use it to pay off your card.

5. Make money for worthy causes

With the right card your lender will donate to charity whenever you spend. This is a way to make money for good causes, but I don't approve. No, I'm not a miser, it's just that there are more efficient ways to do it.

Typically, these credit cards donate 0.25% to charity, although this can reach 1% on the odd occasion, or even higher if you borrow a lot on the card. Some of these credit cards donate, say, £5 to £15 after your first purchase as well.

The thing is, they simply don't beat top cashback credit cards. You would raise far more money for your charity by using a good cashback card and donating your annual reward, with Gift Aid, to your favourite cause. In fact, you could use any of the above methods to do so.

This is a lovemoney.com classic article, originally published in July 2007 and updated

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