Current trends in the United States have seen many people overextending themselves with credit and debt. This has caused high rates of bankruptcy and has forced many families regardless of how much money they bring in to literally live paycheck to paycheck. Unfortunately, with so many credit cards available, so many different offers and incentives to get more, people keep accepting more plastic and racking it up at the same time.

The biggest issue people have is when they have more than one credit card. Most people don’t consider the overall debt that they have, they consider how much they have on each card. For example, someone might have 6 credit cards, all with $150 on each one. This doesn’t seem like all that much money, but when you do the math, that is $900 in debt from those six cards. While this is a relatively low amount, some people find themselves using their credit cards until they are maxed out and then paying the minimum payment on them until the balance is paid off. Unfortunately, many credit cards are almost impossible to pay off by paying just the minimum. It would take you hundreds of years to pay off your credit cards using this method. This results in many people paying in thousands more for items than they would have if they would have just paid cash for the item or paid off their credit card immediately after purchasing that item.

If you consider someone that has 6 credit cards, all have a maximum balance of $500, and all of them maxed out, with minimum payments of $25 per month. Now lets assume that the $25 per month only pays the balance down by a few dollars each month because the interest rate is so high. This means this person has to pay $150 per month to her credit cards alone, just to stay on track. This debt will almost never go away without them paying more, but because of this debt, they are now living paycheck to paycheck.

It really is a shame and it could all be avoided. The best thing to do is build your credit up by starting with 2-3 different cards. After your credit is better and you can qualify for a higher limit credit card, get that one and destroy the other ones. Make sure that you are making regular payments on this one card and that you aren’t using it for purchases unless it is an emergency. The other cards, keep them active so that they populate your credit report and help your score, but by destroying them you make it so that you can’t use them unless you order new cards, this of course should only be done in an extreme emergency.

By sticking with this one card method, you are keeping yourself out of extreme debt while ensuring you have lower overall payments, and capping the damage you can do in a wild shopping frenzy.

If you’ve always paid your bills on time, maybe have a credit card, a student loan and a car payment, chances are you have pretty decent credit unless you did something to mess it up in the past. One of the advantages of having a strong credit rating is that you’ll receive a lot of credit card offers that offer 0% APR for up to a year after signing up with the card. These cards are a great way to dramatically reduce the interest you’re paying if you have a balance on another card, but they also have another peculiar use, you can use them to make money. Here’s how it works.
The basic idea is that you are getting a no interest loan on a few different credit cards and putting the money you borrow into a high-interest savings account. When the introductory rate of 0% is over, you take your money out, pay off the loan and keep all of the interest that you’ve earned. Let’s say that you can get a credit card with a limit of $10,000 that has a 0% introductory APR for the first year for balance transfers. You put the cash into a high-yield savings account earning 5.25% APY, and at the end of the year you come home with $525.00 you didn’t have before, which will look a lot more like $375 after you pay taxes on it.

You’re essentially using your credit rating to earn some extra money. Banks are making you very good offers because they know that you’re very unlikely to default on the loans they give you, so you take those great offers and use them to your advantage, it’s as simple as that.

Unfortunately, there are always some downsides and risks which need to be considered when pursuing such a financial venture. The biggest risk is that your credit score is going to decrease while you have the loan at. The reason for this is that you are borrowing more money, so your debt utilization percentage will increase. If you’re going to buy a house or make another big purchase on credit any time soon, it’s not worth it to play the credit card arbitrage game. You’re also dinged for applying for a number of new credit cards. If you’re not careful, you could lose 100 points off your credit score.

There’s always the risk that you’ll make some sort of mistake and end up owing the bank which offered you the card some money. If you don’t pay off the loan on the right date, miss a payment, or don’t read the terms carefully, you could end up owing some significant interest to the bank and all of your gains will be lost. If you do decide to go ahead with and use a credit card to make money, you have to be extremely diligent in making sure all of the proper transfers are done and that they are done at the right time.

If you’re extremely diligent and don’t need a stellar credit score any time in the next year, you’ll make a few bucks here and there off your good credit score. You won’t get rich by any means but it’ll be $500 or $1000 that you didn’t have before. And remember, keep careful records and be diligent with your actions, otherwise you’re asking for trouble.