How can I leverage my credit card to generate income?*
I’m guessing you have used the term “leverage” to mean “take advantage of” but I can’t help noting that leverage also means borrow, as in “Wall Street Banks were leveraged by 1:30 during the run up to GFC”.
While “Transactors” – me included – pay off their full monthly balance on their credit card every month, a sizeable percentage of credit cardholders are “Revolvers” i.e. they pay less than the full balance and carry forward the outstandings to the following month. By doing so, they’re effectively borrowing money from the credit card company aka bank. They can generate income if they deploy the loan in money-earning pursuits.
There are legends about Silicon Valley startups whose founders raised seed capital by doing exactly that on 15 credit cards! Many of them went on to become unicorns, thus generating income from credit card debt.
One other way to generate income from credit cards is rewards. Copy-pasting from Credit Card Best Practices – Part 1:
Put all your spends on credit card so that you can maximize your rewards earnings.
There’s this story of this Hong Kong billionaire who leveraged rewards to new heights. As I highlighted in InCREDible Rise Of CRED:
Hong Kong billionaire Liu Yiqian won the auction for a famous painting and put the ~$175 million tab on his American Express credit card. He earned enough reward points from this transaction to get unlimited number of free first class tickets from him and family from anywhere to anywhere in the world by any airline for their entire life. On a side note, this is testimony that people may use credit card even when they have cash. Source: Billionaire earns first-class travel for life by putting Modigliani nude on Amex.
My personal favorite of generating returns from credit card is via cash advance, as I described in Credit Card Best Practices – Part 2:
The tax year end was fast approaching. I wanted to open a Public Provident Fund account (India’s equivalent of pension) to save income tax. I didn’t have the spare cash. I took a cash advance on my credit card and used that money to fund the PPF account opening. I paid the outstanding in full the next month. Of course, I incurred exorbitant interest charges. But the amount of tax I saved was 5X the amount of interest I paid. I don’t think I’ve ever achieved such a high ROI on any other “investment” in my life.
*: This is the original question I answered. I’m repeating it to help me make sense of my answer in case it’s moved to / merged with some other question that I didn’t answer.