We’re talking $2,000-$4,000+ of easy money here, folks, requiring only around 5-10 hours of work in total and zero dollars whatsoever. Oh, and to be clear, that’s $2,000-$4,000 annually. No gimmicks or fuss, either.
I realize this already sounds like an infomercial, but I’m serious guys, this is very easy money, and I want you to have it. I don’t want you to not have it; you really should have it. You owe it to yourself. So keep reading for a step by step guide on how to start taking advantage of the easiest money you’ll ever make, but probably aren’t.
What’s $2,000 a year? $6.5 million in 50 years if you invest it! $4,000 annually would get you over 13 mil. Wait another decade and it’s up to 43. Now you’re interested, huh? :)
The best part is that if you’re like most people, you’ll make more per hour in pursuit of this 2-4K than you do at your job. In other words, this is the easiest, quickest money you’ll ever make. The second best part of this strategy is that this money is received completely tax free, regardless of income bracket, meaning you’re actually taking home 2-4 thousand more each year. And thirdly, there’s no end in sight to this income source’s availability. Once you master it, you’ll reap the rewards for years and years to come. I'll say it directly, albeit with some jest, that you’d be a fool - borderline irresponsible - not to take advantage of this!
So let’s cut to the chase. The easy money I’m referring to is earned through credit cards. Sure, you already know about credit cards, and you have one in your pocket right now. But still, you probably aren’t using them to the tune of thousands every year, and you should be.
I’m not talking about getting a card or two to build up your credit score. That’s important but it misses the point. And I’m definitely not talking about going into credit card debt. Please pay your statement balances in full and don't let that big, shiny 'minimum payment' button woo you. What I’m talking about is optimizing your credit card usage in order to maximize the value of your credit card rewards, bonuses, and cash back. And believe me, it adds up quick. Check out the math:
In general, credit card companies allow people to get 5 new credit cards within any 24-month window. So if every two years, you get five cards with an average bonus of $500, plus a modest 1.8% cash back on your annual spending & giving of lets say $50,000, you’re making:
That’s $4,300 every two years - or $2,150 / year! Together with your bonuses, you’ve made an effective 4.3% back on your spending. If you’re married, this essentially doubles, as each of you can apply for your own 5 credit cards and qualify for your own separate bonuses. And if you’re not married, there are still plenty of ways to increase this $2,150, which we’ll get into. Without a doubt, this is a simplified equation, but it serves to illustrate how credit cards can make you some real money.
Now I know this topic might feel intimidating, but I’m hoping to convince you of its ease. Still, if I fail to accomplish this in writing, you really ought to hire me (or someone else) to walk you through it one on one. Don’t let the small cost of financial coaching keep you from an extra $2+grand a year!
My observation is that there are four camps, or levels, when it comes to credit card usage: credit builders, system implementers, card churners, and manufactured spenders. Below I characterize each of them so that you can discover which one you identify with and what your next steps could be.
Level One - Credit Builders
Oh, the credit builders. They are often former or current Dave Ramsey aficionados, having tepidly applied for a credit card at some point in their life but still unsure of what they think about them. They feel oddly nervous using a credit card, as if almost fearful or guilty. They pay off their account balance multiple times in a month just to make sure they don’t accidentally go into debt. They have a credit card, but couldn’t exactly tell you why, other than that they’re “building credit” - but what does that mean again? Despite these complex emotions, the pressure they felt from family, friends, or the internet to get a card - or the lure they felt towards earning a meager 1.5% cash back - was simply too hard to resist. So here they are.
Next Steps: If you are a credit builder, your most immediate course of action is more mental and emotional than practical. It’s time to consider the morality of credit card use, because if you aren’t comfortable with them ethically, you’ll never use them effectively. I’d also recommend you get educated and excited about credit cards’ earning potential, which hopefully this article is already aiding. After all, if 1.5% seemed attractive to begin with, why miss out on 3 or 4 or 5% or more?
Next Card: If and when you’re ready internally, it’s time to expand your credit card playbook. Start with one or two more cards that have no annual fee, like the Discover It, Chase Freedom Unlimited, or Bank Of America Cash Rewards. These cards might not have the largest sign up bonuses, but for the sake of lengthening your credit history and lowering your credit utilization rate, it’s worth it.
Tips For Success: Even if you stop using these cards one day, don’t close them out. Keeping them open strengthens your credit score, and with no annual fees, there’s no harm or risk to you. Also, when choosing these cards, aim for complimentary rewards / cash back categories. For example, one card that gives 3% back on dining out and travel, and another earning 3% back on groceries and gas. Learning to use different cards for different categories can significantly boost your overall return rate.
Level Two - System Implementers
System implementers are credit card experts, or so they think. They have their 2-5 cards that they use for different purposes based on their respective cash back categories. One of them might even be a travel card with an annual fee! They enjoy the ease of having their go-to cards already set in place; they know where each of them are located in their wallet. Utilizing this intentionally crafted suite of credit cards (as opposed to just one card) bumps their total cash back to somewhere around 2.5%. Not that they would be able to tell you that - they aren’t spreadsheet-obsessed number crunchers, after all. But they aren’t scared of credit cards, either. Quite the contrary, if a store they frequent has a credit card and asks them to sign up, they think, “Why not? Free money!” Having found their favorite card combinations, they now sit back, kick their feet up, and enjoy the points. Life is good!
Next Steps: If you are a system implementer, you probably feel good about yourself and generally confident about your credit savvy. Yet, while you're on the right track, you’re missing out on 60-70% of the money you could be earning through credit cards! The reason is that the bulk of the money to be made in credit cards is through sign up bonuses, not through cash back on your spending. I hate to say it, but if you want to advance from level two, you need to break up the system. That means applying for big-bonus cards that don’t fit nicely into your rotation, canceling them after you earn their bonuses, and then doing it again. Rinse and repeat.
Next Card: If you haven’t yet, it’s time to get a travel card or two. Consider the Southwest Plus / Premier and the Chase Sapphire Preferred. When it comes to premium cards, don’t worry so much about the cash back return rates, but rather, go after the biggest bonuses available to you. Due to the fact that high-end cards charge annual fees, you won’t want to keep them open indefinitely. Instead, make all of your purchases on one card until you earn the sign-up bonus. At that time, apply for a new card and start working towards your next bonus! If feasible, put your bonuses to use within the year so that you can cancel each card before you cross over 12 months, saving yourself from paying the annual fee.
Tips For Success: The biggest reason you won’t do this? To do it successfully, you need a spreadsheet. I know, I know. But listen, this is a veeery simple spreadsheet. So simple that you could even do it on a word document instead if you prefer. Basically, you’ll just want to have a place to record the dates of when you opened your credit cards, so that you can be sure to cancel them before their first or second year passes. I’ll give you my sheet if you want it - just don’t let your disdain for spreadsheets cost you $4 grand! Here’s one more tip: think twice before getting a store-specific card (Target, Amazon, your go-to gas station, etc.). Often they have little or no bonuses, yet they still take away from your 5 card limit within 24 months. Additionally, they usually result in you spending more money at that store than you otherwise would have, meaning you might be netting a loss by getting their card.
Level Three - Card Churners
Their friends may think they’re crazy, but card churners know they’re on to something. They rotate through credit cards to qualify for various bonuses. They know which card they need to cancel next and they know which one they’ll apply for to take its place. They have no card or bank allegiances; it’s all about getting the most rewards at the end of the day. You better believe they have a spreadsheet devoted to their credit card activity. Instead of getting overwhelmed by the complexities of credit cards, they’ve turned to the best tutor of all time to show them the ropes - Youtube. Card churners are the ones taking vacations for free with their boatloads of credit card points. They’ll happily tell you about it and send you their referral code as well. After all, why stop at sign-up bonuses and cash back? Referral money is a great third wheel to credit cards’ earning potential.
Next Steps: When it comes to churning well, you need a common currency to evaluate the quality of your credit card rewards. In other words, before applying for your next card, convert credit card points and perks to a dollar value so that you can compare offers apples to apples. Not all points have the same redemption value, and not all perks have the same value to you. That said, if your ambition is to advance to level four, you’re going to need to start thinking outside of the box. The key to growth from here lies in your ability to creatively increase your card spending without it impacting your bottom line.
Next Card: You're going to want a card that gives you 2% back on everything. Citi Double Cash is a solid, fee-free option. If you’re moving to level four, you’re moving to the territory where every 0.1% counts, and 1.5% as a baseline isn’t going to cut it here.
Tips For Success: In my opinion, most normal people can execute at level three without becoming overly obsessive about credit cards and spreadsheets. That isn’t true for level four. Level four takes some work, and it’s not for everyone. And make no mistake, card churners are definitely bringing home an easy $2-$4K every year - the original goal has already been accomplished at this level. That said, how much more money is there to be made for making the leap to level four? Technically, infinite.
Level Four - Manufactured Spenders
If the friends of card churners think they’re crazy, manufactured spenders don’t have friends in the first place. They do have friends, of course, but not friends with an opinion about their credit card usage. That’s because the people on level four typically don’t bring up the topic of credit cards in social settings, at least not the full picture. This is partially to avoid judgment, and partially to keep their secrets close to the chest. Manufactured Spenders aren’t just going on free vacations; they’re flying first class to five-star resorts for free. Their referral bonuses aren’t just a cherry on top in their credit card rewards; they may just be the lion’s share. Manufactured Spenders are spending $80K a year but only making $50k in income - yet they don’t have any debt to speak of. How is that possible? To put it simply, they’ve discovered loops where they can spend money for free. In other words, they’re buying things on their credit cards (like vouchers, gift cards, money orders, thrifted items to flip, etc.), converting those purchases to cash, and netting the credit card points as profit. Yeah, it's come to that.
Next Steps: If you’re a manufactured spender, you know who you are. You didn’t get here by accident. But if you’re going to stay here, you may want to do some fine-print reading on your credit card agreements. Companies are cracking down on level four, and if you get flagged for any ‘abnormal activity,’ you may just get shut down entirely. Don’t get so ambitious in earning your next $500 that you get cut off from the easy 4,000 that level three offers you. You also don’t want to get so obsessive that you burn out - evaluate your mental health periodically and ask yourself if Manufactured Spending is really for you.
Next Card: If you’re committed to rising to the top of the credit card ladder, you need a top-of-the-line credit card to show for it. After all, credit card wizardry has now become part of your personal brand, and it’s time to capitalize on that. If your cumulative wealth or annual spending isn’t high enough to qualify for an invitation-only credit card, get yourself the American Express Platinum. American Express brands themselves as the card for the prestigious and elite, meaning you’re not if you don’t have one. This isn't about cash back or even bonuses anymore, this is an investment into your budding credit card business.
Tips For Success: In a mathematical sense, determining whether or not level four is worth it for you is simple. First, how much can you increase your annual spending by? And second, how much time will it take you to convert that spending back to cash? Divide your first answer by your second answer, and this is what you’ll earn per hour of manufactured spending. For example, say you’re going to buy discounted items with your credit card and sell them for cash. If you buy $5,000 worth of stuff in a year and sell it all back for say $5,500, you’ll take home $500 of profit plus 2% cash back on your spending for $600 bucks total. How long would that take? It depends.
The more expensive the items you buy, the fewer man hours it will take you to sell it all (e.g., buying a couple cars, laptops, or high-end pieces of furniture, versus buying 500 articles of clothing). However, smaller items often sell quicker and for a wider profit margin (e.g., spending $10 per item but selling within a week for $25 per item). To maximize your potential, focus on items within a specific category and create an online store to generate a following amongst your target consumer. If you can do it successfully on $5K of spending, who’s to say you can’t do it with $50K?
In summary, playing the game of credit cards goes something like this: you step in cautiously, get your feet wet, and get used to paying off your balance in full each month. Once comfortable, you create a playbook of a couple different credit cards in order to increase your overall cash back percentage. After optimizing your cash back, it’s time to optimize your sign-up bonuses. This takes a little more work but is substantially more rewarding. Finally, you come face to face with the deep end. Less discovered but limitless in potential, you begin looking for ways to artificially bump your spending without going insane in the process.
Let’s take a look at our original example of the person who made $2,150 a year with credit cards, and adjust it to a married couple operating on level four:
Add it up and this couple is raking in $14,000 every two years, or 7 grand a year, solely through their credit card activity.
Would that make a difference in your budget?
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