Conventional thinking:  All debt is bad, especially credit card debt.  I should get rid of all my credit cards and start using debit cards instead to force myself to only use money that I have in the bank.

Contrarian thinking:  You can use debt to your advantage.  Credit cards in particular offer a number of incentives which, when properly managed, can be financially rewarding.

Let’s talk about a few ways to use credit card debt to your advantage:

Get Cash Back

One of the best ways to use credit cards to your advantage is to sign up for a credit card that offers cash back.  Some cards offer up to 5% cash back on certain items.  For example, Kiplinger magazine named the American Express Blue Cash the best cash rewards consumer card in the market.  This card offers no minimum spending, no caps, and no annual fees.  Here is how it works: For the first annual $6,500 that you spend on the card, it will pay you 1.0% on everyday spending and 0.5% on everything else.  Everyday spending is money you spend in supermarkets, gas stations and groceries stores.  Once you get past the $6,500 hurdle that is when the real big benefits come in.  Anything above $6,500 will qualify for 5% cash back for everyday purchases and 1.5% on everything else.

There are many other cards out there that offer cash back on your purchases.  You can use these cards for your personal expenses, but also, if you are an employee that pays for reimbursable company expenses, you can get free cash by using one these cards.  The key is to pay off your balance every month so that you don’t end up paying high interest rates that outweigh the benefits of the cash back program.

Transfer Balance to 0% APR Introductory Offers

Many credit cards offer 0% APR introductory offers for balance transfers, usually for 6 months.  Some people use their credit card spending limit to the max and every 6 months transfer the balance to another card that is offering 0% APR on balance transfers.  If you do this right and never let the introductory period expire, you can live on other people’s money paying zero percent interest rate.

Use Credit Cards to Finance a Business

If you are an entrepreneur in need of cash to start a business, using a credit card may be your only option.  If you have exhausted all other alternatives, you can use credit card debt to finance your business venture.  You would be surprised by how many start ups were initially financed on credit card debt.

The key is to shop for cards that offer the lowest possible APR.  Even then, you will be paying hefty interest charges on your credit card debt.  But if this is the only option you have to finance a business that you are very confident will provide a good return on your investment, it might be worth it.

Don’t assume that all debt is bad, even credit card debt.  When used properly, debt can be a fantastic way to use other people’s money to finance your dreams.

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