In a previous post I mentioned how to make dough simply by using credit cards for your regular spending habits. I came under a little bit of flack in a comment on fivecentnickel. So I figured I’d clarify since my original post missed some important points.

This isn’t about taking on debt to build wealth. This is about leveraging a payment method with some additional benefits. Credit cards offer excellent buyer protection from identity theft, rewards points (in my case 1-3% cash back, with a $50 bonus for getting $200 cash back), and are accepted nearly everywhere.

However, these benefits are immediately negated the instant you don’t make the full payment. As such, I do not view this as taking on debt. If you pay the minimum payment you are, for lack of better terminology, screwed. 20% interest is bad.

Now, 1% cash back isn’t a ton, but we’ll use this as a baseline. Calculating out all my regular expenses, such as heating bills, cell phone bills, groceries, eating out, etc. I spend in excess of $20K per year. If I charge them to my credit card, I wind up with an extra $250 in cash every year. If I write a check, or use cash, I wind up spending the same amount, but get no money back. Plus, it is significantly harder for me to keep track of my cash spending vs. my credit/check spending.

Now, for people who would have a hard time paying off their credit card, or who would tend to overspend with their credit cards, then I would suggest not doing this… But for people who are fiscally responsible, it’s a nice little extra cash infusion you can get every year without doing anything extra.

—Zach

So I woke up Wednesday morning. Life was pretty good. Then on my way to work I got a call from Chase, informing me that they needed to talk to me about some unusual transactions on my Freedom Card. They then asked me to press any key on my phone to continue. As I viciously dug about in my coat pocket attempting to find my phone the call hung up because I spent to long. No biggie.

Not giving any personal information on a call you do not initiate is a wise policy. So I called them back when I got to work, and discovered that, yes, some people in California used my credit card to pay for their gas at a 7-11. They then tried to get a $20 cash advance at an ATM. They asked if I recognized these transactions, and I said “no.”

They stated they have already frozen my card, and are reissuing a new one, transfering my balance to the new card, and sending it in the mail.

The flags that triggered it was probably the fact that They used my CC in California. Something I’ve never done before. I live in Michigan, 2/3rds of a continent away. A pointer to people stealing my identity, stay local! I’m far to lame to go some place cool, like California.

All in all a surprisingly painless experience. Just checked my Chase Online account, and the new card shows up already there. All rewards and transactions carried over just fine, and the invalid transactions do not. Pretty good experience, IMHO. It feels good to know that Chase has my back.  The only question that remains is “how many false positives they get?”

—Zach

I was reading a blog post from a guy calling himself the “Debtbeater.” He’s $250K in debt, and he’s working to pay that debt off. He then posted an article about a lady who is $100K in credit card debt, yet continues to dig herself deeper into debt.

I, thankfully, am not like that lady. It terrifies me to think of how easy it is to fall into this kind of trap though…

One of the questions I’d like to ask this lady and also the debtbeater is “How much of it was cultural for you? How were you raised fiscally? Was this something your parents fell into or was it something you trapped yourself in on your own?” Those kind of questions intrigue me.

I was personally raised in a semi debted home. We never owed in the hundred thousands (Excluding mortgages) but  my parents consistently carried credit card balances. I picked up on some of the pressures that debt would bring my parents, and I think that helped shape me into the incredibly anti-debt person that I am now…

It makes me wonder how much of this debtor nation is inherited…

Please, keep in mind this is in no way a condemnation for the people who are in debt yet attempting to pay off. Those kind of people need all the support they can get. It’s a long hard road and they need all the support and help they can get. Good luck to them!

—Zach

I was recently reading an article about using balance transfers to get a credit balance refund check. As such, I would like to add an addendum to this post. Simply put, using that technique and the Citi Professional Cash Card you can actually get a no fee cash advance at 0% interest! Amazing! the Citi card has no fee for the first balance transfer, and has 12 months 0% interest from it’s start time… definitely a more profitable set up, especially because there’s no fees to offset your interest earnings!

—Zach

Wanna know how to  make money as opposed to pay money using credit cards? Simple. Read the rest of this entry »

—Zach

There are a few different types of debt. There is investment debt, depreciating debt, delayed debt, and necessary debt. Each have different roles, purposes, and pros and cons.

I’ll start with depreciating debt. Read the rest of this entry »

—Zach

Addendum: Feb 1st, 2008: Hello gang. This post was made assuming there would be fees involved in acquiring your 0% interest cash advance. Read my post “Addendum to Thoughts on Leveraging 0% interest cash advances to earn interest…” to get a bit more information. — Zach

So I was thinking the other day about if I could utilize 0% interest cash advances to gainme a bit more interest. I looked on creditcards.com to find a 0% cash advance card and found the “Bank of America Worldpoints Plus Visa Credit Card.” Did a bit of reading, and they charge 3% of the loan amount as fees.

I already have an eTrade Complete Savings account, which earns me an APR of 4.93%, so I figured I may be able to make some cash here. I went ahead and applied for the card, and was approved with a credit limit of $3500.

I did some research, and it seems most credit cards have a minimum monthly payment of 4% of the balance per month. Since I slug away $140 a month anyway for savings, I figured I’d run some numbers to see how much money I would make on that $3500 after the CC fees and taxes.

So here’s what I did, I started tabling data. ‘Course I used a google spreadsheet.

INTERESTINGLY ENOUGH. If you put the $3500 in immediately in a 4.93% APR account, it turns out that you make LESS than if you put $140 in per month. Seriously. I think it’s because you’re being taxed at the higher rate for the interest, and you have to use the interest pay off the 3% fee, so you wind up paying taxes on that interest befor eyou pay off the fees. Doing a little bit more tweaking, I discovered that it would take a 9% APR to even break even in this situation. Ah well. Was a fun little exercise though.

—Zach