Credit Card Wealth Secrets

"Credit card wealth secrets," the advertisement read. Being a skeptic by nature, I assumed it was another unworkable get-rich-quick scheme. Then I remembered the times in my life when I have used credit cards to make money.

As Robert Kyosaki of "Rich Dad" fame says, there's "good debt" and "bad debt. Using credit for consumer items is bad-debt. Doing so limits your future options, and you get less in life. It may seem like more, because you get it now, but with interest, and the tendency to pay more when buying on credit, you'll never be able to have as much as those who pay cash.

Credit card wealth secrets revolve around the idea of "good debt." This is any debt that is used to increase your income, or produce capital gains. How do you get your credit cards to start doing that for you?

Credit Card Wealth Creation Secrets

A friend once borrowed $6,000 from me at 9% interest. I didn't have the money, but I had a credit card offer for a cash advance for 8 months at 5% interest. I loaned him the money for six months (he is extremely trustworthy). A 4% spread meant only a $120 profit in the end, but it was easy.

A better example is the little house we bought in Montana. A cash offer would get us a great price, so with our savings and $2,000 worth of repairs on a credit card, we made it work. We paid $100 in interest before selling the house a few months later for a $6,500 profit.

My money was tied up in other projects when my brother found a truck we could make some money on. I raised the money with a credit card, and paid maybe $35 in fees and interest. My brother sold the car ten days later, and we split the $950 profit.

A friend once borrowed $300 at more than 100% annual interest ($50 for two months). Why would he do that? For tools he needed to re-start his dry-walling business. He probably made enough the first week in business to repay the loan.

The point is that debt - whether from credit cards or from other sources - is good debt if it creates more than it costs. I've known people that have started successful businesses or "flipped" houses for big profits with the help of credit cards. Can you get rich quick in this way? It's doubtful, but then my skepticism almost made me forget my own "credit card wealth secrets."