Since this blog is my journey to passive income it would make no sense to ignore the role that credit cards play. Credit cards, when used wisely can be a very beneficial financial tool. The unfortunate part is that credit cards have built up a horrible reputation over the years. Credit cards have become “very evil” in the personal finance community. However, I like to keep an open mind. This is why I wanted to look at how credit cards can be viewed as passive income:
0% balance transfer fee.
Do you have an outstanding balance on your current credit card? Many times promotional offers arise where you can transfer your balance from one credit card to another, at no additional cost. Along with the free balance rate you aren’t charged an interest rate. If you owe $10,000 on a credit card that’s charging you 19% interest, think about all of the money you could potentially save by paying no interest at all. You’re technically not earning any money, but you are saving yourself lots of cash.
–Wait just one minute though. Before you even consider this option you need to understand that this is a tricky process with a miasma of FINE PRINT. You must stay on top of the fine print. Many of these options are often for a limited time, the rate could change at any moment, and the whole process could be thrown off gear. You don’t want this “amazing offer” to mess up your entire financial system.
Cashback rewards credit cards.
Any income that you do not actively work for is considered passive income. For those of us that often use our credit cards/pay for big ticket items, it adds up at the end of the year. I haven’t made a fortune, but I’ve received a few bucks at the end of the year when I needed some extra cash.
The reason that I do get cashback is because I use my credit card for MAJOR purchases. Whenever I plan a group trip or my family is heading on a vacation, I collect the cash in hand, and then put the purchase on my credit card. As a result, I’ve had decent amounts of cashback payouts from my credit card.
The major concern that I need to stress here is the justification of each purchase. Often people will use their “cashback” as an excuse for spending money. What’s the point of spending money, for the sake of receiving a minor amount of money down the road?
Is it worth it?
I don’t think so. Credit cards can be a very effective form of passive income. Unfortunately, the tactics are fairly technical and the process is really easy to mess up. You need to be 100% in control of your finances if you want to start playing around with credit cards in this manner.
Another important point that I need to mention is that often times the earnings can be minuscule. There are more effective ways (mentioned here soon) to increase your passive and active income then playing around with credit cards.
