Best principles on how to leverage credit cards to build wealth. Which ones are they? Can you create wealth through credit cards? Read on to learn more.
There is no bad financial situation that you can’t come out of. Whether you live paycheck to paycheck or have amassed debt that seems impossible to repay, the right financial habits can turn the tables around.
Take me, for example; while I might not be a millionaire, for now, I have managed to move from a negative $95,000 net worth to over $1 million net worth. All this was possible by changing my financial decisions and habits.
Credit cards are incredible financial tools that can help you build your wealth significantly if used well. However, if misused, they can be the start of your financial misery. While credit cards offer you lines of credit that you can leverage to grow wealth, they can also be the source of an unending debt cycle.
So, do you know how to leverage credit cards to build wealth without ending up in unserviceable debts? Well, if not, we have just the ideal solution for you. Check out the following strategies to start your wealth creation journey.
Table of Contents
Best Strategies on how to Leverage Credit Cards to Build Wealth
1. Buying an Investment Property
Real estate is among the most stable and lucrative industries you can venture into. When you buy a property, your chances of losing your money are quite slim. In fact, you are almost sure of making some good money in the long run.
As I mentioned earlier, your credit cards offer an excellent way to grow your credit score. And your credit score determines how much money lenders are willing to loan you.
Therefore, if you can play well with your credit cards, including timely payments, paying off the balances in full, and maintaining that low credit utilization, you can achieve an 800 credit score and above. With such a score, you can get enough funding from various financial institutions to venture into real estate.
Investment properties are incredible options on how to get rich off credit. So, don’t just sit on that gold mine! Utilize your credit cards and grow your wealth.
But, before you make that property investment decision, ensure you have done your research. Even with the high probability of making profits, you can still make losses if you get the wrong property.
Use trusted real estate platforms like Fundrise, DiversyFund, or RealtyMogul. With such platforms, you are certain of getting the best deal in real estate investment. This is certainly one of the best strategies on how to leverage credit to make money.
See related: How to Raise Money for Real Estate Investing
2. Upgrade Your Property
Are you planning to sell your home soon? If yes, your credit card can help you earn more money from the sale.
Instead of selling the property just as it is, you can use your credit card limit to fund some repairs and remodeling. By doing so, your property will attract better purchase offers, earning you more money than initially anticipated.
You can also do some landscaping with the money and include home staging when you put the house on the market. This can help you increase your home’s value raking you more cash. If you are still wondering how to leverage credit funding to make money, I bet you would agree that this is an excellent option.
Instead of using that credit limit to buy consumables, you can invest it, allowing you to cover the interest and still remain with some money.
For instance, a home staging costing around $550 can raise your home’s value by over $2,000, according to Realty Times. In this case, using your credit card to fund home staging is an excellent idea.
3. Flipping Items for More Cash
Credit cards have credit lines that allow you to make purchases on credit up to a certain limit. So, how about making money from the purchases you make? This is quite possible.
Since you can use your credit card to buy almost anything, try buying items at lower prices and reselling at higher prices. If you can find some undervalued items that you can modify or refurbish to resell at a profit, this can earn you some money to increase your income level.
The more profit you make from this, the higher your chances are of repaying your credit card balance on time, increasing your credit score, and subsequently your wealth – especially if you re-invest this money.
You can also try to buy antiques, if you have a good eye, and make incredibly good money when you resell them. Seek items that will give you a higher profit margin. Therefore, if you are unsure how to use credit to get rich, you can certainly try this strategy.
4. Utilizing 0% Credit Promotions
For entrepreneurs, zero-interest credit can come in handy in starting or boosting your business. This includes a 0% APR credit line for a fixed period. If you open such a credit card account, you can make use of the funding to grow your business or start one at no extra charge.
And, there are numerous businesses you can start with that funding. Whether you want to open an online store to start selling items online or even start a blog that will earn you millions later, a 0% APR credit allows you to do just that. However, the amount of funding will determine the type of business you start.
The only thing you need to do is apply for a credit card with the best terms when it comes to interest-free credit promotions. For instance, Wells Fargo has a credit card with an incredibly long 0% APR introductory deal. With such, you can start or boost your business without much worry.
5. Turn Your Credit Card Debt into Good Debt
In most cases, credit card debt is considered a bad debt due to the high-interest rates. Also, most people misuse their card limits with things that don’t add value to their finances.
However, since we are looking at how to leverage credit cards to build wealth, it means that there is a way to turn the misconception around. You can use the same credit cards to create wealth.
The only way to do this is by growing your credit score, which gives you access to cheaper loans and even larger limits.
After getting the cheaper loans, use them to invest and conduct businesses that bring you more income. This way, instead of just accumulating credit debt, you have created a few income streams.
6. Invest in Yourself: Use the Credit Card to Pay for a Course
What is better than earning something long-term from that credit card debt? Paying a course that will help you get a salary raise using your credit card sounds like an excellent option.
If you’ve been living paycheck to paycheck due to a meager salary, you might as well utilize that credit limit to help grow that income. With a higher income, you can live a better life and have something extra to save or invest.
And, with online investment platforms that require quite minimal to start investing even in real estate or stocks, you’ll be on your way to building wealth. For instance, a platform like Fundrise requires you to have only $10 to start investing. And, with around $1,000, you can access most of the platform’s investing opportunities.
As the saying goes, knowledge is wealth! You can pick a course in anything including stock trading, dropshipping, or even real estate. Any of these courses can transform your finances as you have more knowledge and options to make money. Even better, you can learn how to manage your money better, to grow your wealth.
The good thing about paying your fees with a credit card is that you can repay the money even with up to 12 instalments. This means that you’ll have finished your short course and started earning more. However, always note that the faster you can repay your debt, the lower the interest rates will be.
5. Make Use of Available Discounts
In wealth creation, even the slightest saving on expenditure matters! If you can save on your purchases, it implies that you’ll have more money to invest in ventures that can bring you even more money.
The good thing about credit cards is that they offer numerous opportunities for discounts. No matter the type of product or service you wish to purchase, whether clothes, dining, or travel, there are discounts everywhere. Sometimes, some credit cards allow you to enjoy even up to 50% off a product or service.
For instance, if you were planning a vacation to the Caribbean for $3,000, and your travel credit card offers 30% off this trip, you’ll have saved $700. Now, that’s a good amount of money to put into another money-generating venture.
While the opportunities might not always be there, you can make sure that any time they arise, you can take advantage and save some money. For instance, you can buy things in bulk to get some discounts and save some money.
The only thing you should avoid is buying things you didn’t intend to buy, just because they are discounted. This might cause more damage than good to your finances.
Use Credit Cards to Improve Your Credit Score
While leveraging credit cards, always avoid traps that might lead to unending debt cycles. Here are some incredible tips to help you use your credit cards to improve your credit score and build wealth.
1. Keep Your Balances Low
One common trait with millionaires is that they keep their credit card balances as low as possible. And you read that right! While the average “us” want to use every dime of our credit limit, accumulating too much debt that strains our finances, millionaires do the opposite.
They don’t exceed their credit limit and ensure that their credit card balances are cleared at the end of every billing cycle. This not only helps them to get higher credit limits from their issuers but also grows their credit score. Higher credit scores, in return, allow them to access even more credit from financial institutions and at low rates.
With such a wide array of credit and loan options, you have money to grow your businesses or invest in various industries such as real estate, farming, or even technology and grow your wealth.
For this reason, if you want credit cards to work for you, don’t live beyond your means. Spend what you can afford and grow gradually.
2. Making Timely Payments
Late credit card balance payments only lead to more interest and fines. Now, this hurts your finances and your creditworthiness. Your credit score decreases, closing your borrowing doors and opportunities.
When you utilize your credit cards limit, ensure that you pay on time. This helps avoid late payment costs and enables you to maintain a positive credit score. Always remember that your credit score gives lenders an overview of your repayment history. And, no lender wants to lend money to a person with a high potential of not repaying.
Learning how to leverage credit cards to build wealth isn’t all complicated. You just need the right tips and the ability to make the right decisions.
3. Have Several Credit Cards
While it might seem like a bad idea, it’s actually beneficial to have several credit cards. But, you must use them well.
The fact is, several credit cards can help you in growing your credit score. How? Through credit utilization!
Your credit utilization, which is the amount of debt you owe against the total amount available on your credit line, significantly affects your credit score. Maintaining lower credit utilization helps grow your credit score, and the opposite is also true.
Having several credit cards helps you maintain that low credit utilization (which experts recommend at 30%) while still having enough credit to cover your needs.
For instance, if your card has a $3,000 limit, and you spend around $2,500, your credit utilization stands at 83%. Now, this is extremely high and will work against your credit score.
But, if you can share the $2,500 among four credit cards, you will have met your needs while not exceeding your debt ratio. Therefore, if you were using that money to invest, you can earn money while growing your credit score simultaneously.
This is one effective tip on how to leverage debt to build wealth you should maximize.