Put your credit card to work for you – a novel way to generate revenue

I’m a huge fan of my    It’s one of those random things that get me excited.   Every year I deposit a significant amount of money into my retirement savings (RRSP) thanks to my credit card.  I thought I would share this technique with you.  These principles should work with any card that gives points that you can redeem for gift certificates or cash back, though this post focuses on the RBC Avion.   With you can get gift certificates for RRSPs, RESPs, or put towards loans or mortgages.

I’m in no way endorsing any particular bank or program here.  RBC’s Avion visa is the program I’m familiar with and I’ve been using for the past six years.  Please feel free to leave a comment describing your experiences with other banks and rewards programs.

Interest kills the entire thing

The very first thing you need to know is that you can NOT carry a balance on your card.  Ever.  These “premium” cards that give points always have a very high interest rate – 19% and up.  Carrying even a tiny balance will eat any potential benefits in no time.  Though I never encourage spending more than you can afford, if one month you over extend yourself, paying off your balance with a lower interest credit  might be your best option.  It’s important to note that if used properly, a credit card is a free loan.  Depending on the timing of your purchase(s) you can get up to a 45 day, interest free loan.  

Use Your Visa for EVERYTHING

The next key step to this process is to use your Visa card for EVERYTHING.  Even if you have cash in your wallet get used to using your Visa exclusively.  Save your cash to pay off your next Visa statement!  Setup as many of your automatic monthly expenses as possible to automatically deduct from your Visa:

  • Cell Phone
  • Home Phone
  • Satellite / Cable TV
  • Internet
  • etc.

This also has the added benefit of making bills a little easier to pay each month as instead of having to pay them individually.   There are several other benefits to this including no debit card fees, better exchange rates than cash when travelling abroad, and you also get all the various benefits of the premium card like insurance and what not.  Sadly my power and gas companies refuse to accept Visa so I have to waste time each month to manually transfer money to each one of these accounts.  (Come on Epcor and Altagas.  Get with the times).

Big ticket items rack up the points quickly.  If you’re planning on buying a new TV or other large items– put it on the card.  We renovated our new home this year and I managed to get 75% of the expenses on my visa.  This significantly increased the points earned for the year.   A lot of times car dealerships will let you make a down payment on a new vehicle using your Visa.  It is unlikely they will let you buy the entire vehicle using your card, as there are costs to vendors when accepting credit cards.  

Let’s consider the new car scenario.  Assume for a minute you have negotiated a price of $10K for a new vehicle.  You have $10K in cash in the bank to pay for your new vehicle.   The dealership will allow you to pay for up to $5000 of your new vehicle using your credit card.   Instead of giving the dealership $10K in cash, you make one payment of $5000 with your Visa, and one payment of $5000 with your cash.  At the end of the month you use the other $5000 to pay off your credit card.  So at this point you’ve spend the same amount of money BUT you gained 5000 points.

Using a credit card this was does take some personal responsibility and care.  Spending on credit as opposed to spending cash can result in EASILY over spending.  Be mindful of this if you’re new to credit cards.   Learn your payment due dates and set calendar reminders for the day before as well as the week before to make sure you pay it on time!

Leverage your business

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