Using Credit Cards (and Friends) to Save

by Team Dinks on May 6, 2010 · 5 comments

friends, food and beer

If you’re like me, a lot of times when going out with friends to your favorite local bars and restaurants hefty bills can easily be racked up, only to be paid for in cash after the final check arrives.  Personally, I see these as missed opportunities…

What if you pay the bill?? I’m not saying right then and there you fork over $100+ in cash.  What I’m saying is to collect cash from your friends (who were already planning on paying cash) in the amount they owe and throw the total on your credit card.  It’s a small example of Time Value of Money…“a dollar today is worth more than a dollar tomorrow”.  Either way you would have had to pay your share, but now you’re able to immediately input that cash into your savings account or invest it elsewhere, while earning interest.  By the time you pay the credit card company your monthly bill total, you have already been able to earn interest on money that wasn’t even yours in the first place!

Obviously it’s not going to save you loads and loads of money if you only do this once a month, but even then it helps, and every little bit does!

And nowadays, with the benefits of certain credit cards (via fly miles, hotel stays, etc.) the fun doesn’t have to stop there.  Take the American Express Starwood Preferred Guest Credit as an example.  This is my go-to card that I swear by.  For every dollar I spend on this card I receive at least a point, and just for signing up for the card receive thousands.  Once I have accumulated enough points, I’m able to use them toward different hotels.  All the hotels/resorts I have stayed at are VERY NICE, and they’re all also rated by Starwood on a five star scale (more stars costs more points).  And some hotels even have specials, for instance allowing you to have your fifth night free (aka not pay points).  And I haven’t done this, but if I plan a vacation through Starwood with my friends and want to get really greedy, I could book the hotel room with my points while having my friends pay me (I hope none of my friends read this haha).  Or could just have my friends cover food/travel expenses.

So to recap:  Get a credit card that has some sort of benefit package included, pay with your card when possible, use your card in large groups and collect the cash, and deposit/invest that cash.

Things to look out for:

  • Credit card maximum (DO NOT exceed!)
  • Pay attention to how much you’re spending
  • Don’t feel obligated to buy goods/services you normally would not
  • Not all businesses accept all credit cards (AMEX charges businesses larger percentages)
  • Deposit the cash you receive (don’t think of it as “extra loot”)

Playing off the same concept, my next arbitrage target is renting.  My goal is to find a two or more bedroom apartment in a complex that accepts my credit card (not an easy task).  Then, I plan on paying the entire monthly rent on my credit card, while receiving my roommates’ monthly checks at the beginning of each month…earning myself extra interest and an exuberant amount of points.

Arbitrage is fun.

(photo by colros)

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{ 5 comments… read them below or add one }

1 Deacon Bradley May 6, 2010 at 11:57 am

That’s an awful lot of work for pennies. Assuming you could find a bank that pays 5% APY compounded monthly you would make 42 cents for your efforts. The assumption that people will NOT view this cash windfall as “extra loot” also seems far fetched.

2 Susie Yin May 6, 2010 at 1:22 pm

Bradley, where exactly is there “work” involved?

3 Kevin May 7, 2010 at 10:04 am

Well, if you also factor in the 1% rewards… you’re looking at like $30.00 annual if you eat out with friends, twice a month, and charge $100 each time. Again that assumes the 5% savings rate which seems much too high. A 2% rate seems more appropriate right now.

But you know, I eat out once a month with about 12 of my coworkers. We all spent about $14-$20 each (let’s call it $15). Some spend less (me) and some spend more (beer isn’t cheap). That amount seems low but we can call it that much. That would still be $25 a year… mostly from the rewards points. The interest from the 2% savings would be negligible.

But I do not do this. Because I always get shorted and I don’t want to be the tip Nazi and sit there demanding that everyone put up enough money for tax and tip. Here, with an 18% tip and a 7% sales tax… that means things cost 25% more than the menu price. Someone will buy a $13 item and assume that $15 covers it, shorting me $1.25… and that one person will negate the entire rewards points bonus. Only once have I been on the opposite side of that problem (more money left than bill and reasonable tip)… and the server was very happy because it all went to her.

4 James May 7, 2010 at 1:37 pm

Seriously, that food looks obscene.

5 John Toomey May 10, 2010 at 1:58 pm

haha the food IS obscene. As far as “work” goes, I in no way see how there’s any work involved with earning extra points through a great credit card program and some extra interest on some extra money. Maybe Deacon was referring to depositing the cash as work?..I don’t know, everytime I deposit I do it with smiles, haha if I could do it more often I might even call it a hobby.

If you’re worried about your friends shorting you on their total or their tip, then maybe you shouldn’t go the route of paying for everyone’s food. I usually run into the issue of them trying to throw in too much money.

The main objective of my article was to give some new ideas of ways in which to earn some extra cash and benefits you’re not already receiving. If you can earn some interest on cash that was never yours in the first place or get a free vacation later on with no risk, I don’t see why you shouldn’t try. And having and using credit cards, assuming you pay them off without an issue, can be great for you credit score. It’s a win-win in my book.

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