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Of all the companies I'd like to get back at, the banks that brought down our economy back in 2008 top my list. Wells Fargo (NYSE: WFC  ) , JPMorgan Chase (NYSE: JPM  ) , Citigroup (NYSE: C  ) , and Bank of America (NYSE: BAC  ) each received billions in bailout money following that debacle. I think it's time we consumers got a little payback.

The plan
Believe it or not, you can actually get a bank to give you money that you never have to pay back. You don't even need a phony gun, a threatening note, or a ski mask. Just use your credit cards the right way.

Credit cards can get you into a lot of trouble if used carelessly. But when employed correctly, credit cards are a great way to get banks to give you free cash and rewards. Take the following examples:

Company

Card Type

Rewards

Annual Fee

Pay by date

Wells Fargo Cash Back Card 1% cash back on net purchases N/A 25 days after each billing period
JPMorgan Chase Freedom 1% cash back on purchases + 5% for qualifying purchases N/A 21 days after each billing period
Citigroup Citi Dividend Card 1% cash back on purchases + 5% on qualifying purchases N/A 23 days after each billing period
Bank of America BankAmericard Cash Rewards 1% cash back on purchases + 5% for the first 6 months on qualifying purchases N/A 25 days after each billing period

Source: Company credit card offers.

Each of the above examples pays the user at least 1% on purchases. Though that may not appear like much, 1% can really add up.

Let's say that on average, you spend $600 a month on groceries. If you put that amount on your credit card, and pay it off before the end of the billing cycle (very important), you'll get $6 back each month. That's $72 in free money each year. If you're using the Freedom card from JPMorgan Chase, groceries count as "qualifying purchases" for certain months, so you'd get up to 5% back. That's as much as $30 a month in cash back, just for buying groceries. When you consider that you pretty much have to buy groceries each month, why not put them on the credit card and get free cash back?

Why this works
Banks make money on credit cards in two main ways: They charge the store when you use your credit card, and they charge you interest whenever you don't pay off your monthly balance. (That's right -- banks are actually hoping you won't pay them back on time.) However, if you pay off the entire balance before the end of the billing cycle, you won't get charged interest, and you'll still get the rewards. Great news for you, but bad news for the bank. Remember, though: You must pay off the entire balance, or you will be charged interest, so only use your card for things you've budgeted for.

Stickin' it to the bank
I don't know about you, but getting a bank to give me free money every month for things that I have to buy anyway really makes me happy. It makes me even happier when I consider I can take that free money and invest it myself for an even greater return.

For an added kick, you could reinvest the bank's money in bank stocks! Recently, JPMorgan Chase and Wells Fargo sported returns on equity of 11%, while Citigroup's return on equity was 6%. Bank of America's ... well, at a dismal -1%, I'll skip that one.

Want to keep up with any of the banks mentioned above? Click on the links below to add them to your Fool watchlist:

Fool contributor Katie Spence loves having a zero balance on her credit card and getting free cash back. She does not own shares of any company mentioned above. The Motley Fool owns shares of JPMorgan Chase, Bank of America, and Wells Fargo; has opened a short position on Bank of America; and has created a ratio put spread position on Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 06, 2011, at 9:59 PM, semicrazyguy wrote:

    This is a great strategy. I put almost everything on my credit card for the purpose of rewards and protection from identity theft. Just got a check for $200 in the mail the other day, free money!

    However, unless you're feeding a large, hungry family, $600 a month for groceries is a bit much IMHO.

  • Report this Comment On July 07, 2011, at 12:26 PM, jamess355 wrote:

    I wish I could get down to $600 a month for food! I'm feed my family of two with one on the way for about $1000 a month thanks to Whole Paycheck...

    So I like to get as much back for my purchases as I can!

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Katie Spence
TMFKSpence

Katie Spence has been a financial journalist for The Fool since 2011. She specializes in defense companies, “green" technology, autos, and robots. Follow me on Twitter for breaking news in the defense, auto, and robot industry.

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