Credit cards are well known for their sky-high borrowing costs, usually starting at 20%+ annual interest rates. In an economy where the cost of borrowing for the banks is just over 4%, credit card users are cash cows that quite literally print free money for lenders and borrowers.

But what if I told you that I’ve been using credit for over the last 2 years, borrowing £1000’s yet I haven’t paid more than £5 in interest!

Instead, YOU could be making money off the banks and credit card companies. It’s all about how you go about using them.

While credit cards do rip you off on interest rates, interest is usually only charged up to 56 days after your purchases. To avoid being charged interest, all you have to do is pay the credit card off in full before the statement due date (it’ll be on your credit card bill). It’s that simple!

Now for many of you out there, it’s not that simple – your car broke down, you needed to make some house repairs, or buy lots of Christmas presents (if the kids aren’t on the naughty list). Whatever the reason may be, there’s a good chance that you’ll need to spend more money than you can earn and pay back every now and then.

To prepare for those scenarios, I’d strongly recommend having a ‘rainy day’ fund of at least 1 month’s worth of expenses – you can save this up by putting away the spare $ or £ you get during quieter months. It may require a couple months of tighter budgeting at the start, but it’ll save you 100’s if not 1000’s in credit card interest over the years – that’s a couple holidays paid for!

That’s not even including the rewards you get for spending with your credit cards – American Express (Amex) cards are the best known for these. Here in the UK with a basic Amex rewards card, you can earn 1 point for every £1 spent – that’s worth anywhere between 0.4p to 2p depending on how you redeem your points. Sounds like a very measly amount but if you’re anything like the average household, you’d have around £220 per week of disposable income – if you spent it all using an Amex, you’d have over 11,000 points in a year which could be worth up to £220. If you’re in the US, this number will be even higher.

Add on top of that you could earn extra interest by keeping your salary in a savings account for longer. Now we’re in a situation where you can actually profit a fair bit off by owning a credit card, it’s kind of nuts.

And if you’re wondering where that ‘free money’ comes from, it’s from the very people that pay interest on their credit cards by not paying off their bills in full every month!

This is how the wealthy travel in business class for free and its time for you to join them! If you haven’t already got a credit card, check out Experian or MoneySuperMarket.com (not sponsored) and look out for one that you’ll be accepted for.

There’s a lot more to owning a credit card that could set you up for financial success! I’ll be covering this more in a future post.