How to Achieve Financial Freedom Using… Credit Cards!

Majority of people would laugh if you told them that credit cards are the key to financial freedom. After all, how does having credit that could potentially blow up in your face anytime be the answer to your financial problems? Contrary to popular belief, however, a credit card can indeed provide the leverage you need to achieve financial independence, given you are able to wield it responsibly.

1. Make money off the bonuses. Banks want you to sign up for a credit line under their business. Long-term, this is how they make money, or at least one of the ways they do. Choose the best sign-up bonus by comparing banks. Only then can you decide which one best fits the bill. Ask important questions like what bonus amount is sufficient or if you care for bonuses in the form of frequent flyer miles.

2. Purchase grocery store gift cards. Use a credit card to prepay for the next few months’ worth of food, toiletries, and supplies by buying gift cards for the stores you purchase most of your items. To avoid going beyond your budget when buying gift cards, use the envelope technique. For example, if you normally shell out $100 per month on groceries, buy $1,200 worth of gift cards and separate them into 12 envelopes. Take one envelope every month and leave the rest for the remainder of the year.

3. Use your credit card to finance a business idea. If you’ve come up with a product you think can be commercialized, start making it in small quantities. Pay for the needed supplies with your credit card to leverage the amount you can produce. If all goes well and you are able to sell the products, be sure to pay the outstanding credit promptly.

4. Pay your credit cards in a timely manner. The trick to building wealth with credit cards is to avoid delayed payments. Interest rates can build up, even worse if you have more than one credit card accruing interest. Stay on top of your regular payments and do not forget to redeem bonuses as soon as they are available.

5. Compare interest rates of a credit card with a high-yield savings account. If you can find a savings account with higher interest rate, transfer all your balances from your credit card into the savings account. Even if it’s a one percent difference, it’s free money you receive every month. For instance, if a credit card offers a 5 percent on withdrawals or transfers, and a savings account offers 7 percent, you stand to gain $2 every month on a $100 credit card line.

Photo Credit: GotCredit