The Noprobo Free Money Method

April 16th, 2009

Sensationalist title aside, banks do give free money to their customers. They do so because they believe people will spend more than they should and poorly manage their finances. In most cases, they’re right. However, if you avoid temptation by following this system, you’ll get the bait without triggering the trap. The most beautiful part: this method comes with the added bonus of encouraging financial responsibility and requires little more than simply living your life and paying your bills.

How much free money is there to be made? It depends on your spending. Annually you can expect returns in the hundreds of dollars based on a low to medium spending level.

How It Works

As we all know, there’s no such thing as a free lunch. The money gained from this method only seems free because we exchange that which that costs us nothing (customer loyalty, market data) for something valuable (interest and rewards). We do this all in a controlled and fiscally responsible way to maximize profits and eliminate expense. Here are the realities that make this possible:

1. Many credit cards give generous rewards for charging purchases.
2. Most credit cards give 21 days to pay without being charged any interest.
3. Daily savings accounts pay interest for every day you carry a balance.

So, in a nutshell, here’s how to employ the system:

1. Make all your purchases on a rewards credit card.
2. Immediately move the same amount of money to your savings account.
3. Pay the credit card in full just before it is due.

This way, you earn rewards and at least 21 days of interest on your credit card charges. This cycle repeats itself every month, perpetually earning interest and rewards with no cost.

The Tools

There are ways to maximize the effect of this strategy. Inversely, there are ways to lose money if you’re not careful. Picking the right tools and using them carefully is essential.

• A rewards credit card:
  • Give preference to cards that offer cash-back rewards, or whose rewards can be exchanged for essentials (groceries, toiletries, etc.). There’s no point in wasting your rewards on something you can live without.
  • Compare apples to apples. Find out how much you have to spend on each card to get a $20 gift certificate. Whichever requires less spending is probably the better choice.
  • Avoid cards that charge an annual fee. The annual fee can take a large chunk of your gains.
  • Don’t focus on interest rates. They’re of little importance with this method as you should never carry a balance.
• A daily savings account:
  • Ideally use a savings account provided by the same bank that holds your main chequing account. Money will be moved frequently between these two accounts and keeping them under the same roof makes things quicker and easier.
  • Look for the highest interest rate you can find.
  • Avoid accounts that charge fees, require minimum balances, have a lock-in period, or generally have catches.
  • Preferably designate a separate savings account for this purpose only.
• A tie box:
  
  • Doesn’t have to be a tie box, just any long, flat box will do. Tie boxes fit the bill.
  • Holds receipts for a period of time. 90 days is usually sufficient.
  • Keeps the receipts handy for reference or returns.
  • Ensures all purchases have enough money set aside in the savings account, or encourages financial restraint if unable to do so.

The tie box acts as a physical financial enforcer, cutting off spending should there be insufficient funds to pay the bills.

When a purchase is made, its receipt is placed in the box once you’ve set aside money for it. If you don’t have sufficient funds to set aside, place the credit card in the box with the unaccounted receipts on top. It only makes sense to not have the credit card handy if there aren’t enough funds to pay for future purchases. Otherwise it’s easy to dig a financial hole, and not get any of the benefits from this system. Never carry a balance. Ever.

In Detail

So a typical use of the method may look like this:

1. Purchases are made on a rewards credit card. Use an additional store loyalty reward card for added bonuses, if applicable.
2. When returning home, add up all credit card purchase receipts.
3. Using your bank’s online interface, transfer the amount charged into a designated savings account.
   
   • If you’re not in possession of enough money, place the credit card in the tie box, with untransferred receipts on top. This acts as a limiter for overspending, forcing you back to paying with cash or barter. When the bill comes, there may still be enough in the savings account to pay it unless you completely blew the bank on a purchase. If you drastically overspent and know you won’t have enough money in time to pay the credit card bill in full, you better return your impetuous purchase(s), which unearths your credit card from the pile. In this system, carrying a balance ruins the free money effect. There’s no room for it.
   • If you have enough money, place only the receipts in the tie box. Continue to carry the credit card. Strive for this every time.

Frequent transfers to a savings account may seem time consuming, but the cost of optimal finances is constant vigilance. If you are unwilling to accept that fact, or hire someone to accept it for you, you will encounter financial boondoggles. Guaranteed.

4. Right before the credit card bill is due, pay it from the savings account balance.
5. Periodically shred the old receipts when you’re sure they won’t be needed any longer.
6. Enjoy the rewards, interest, and financial steadiness.

My Experience

While I began using this system primarily for financial self-restraint, I eventually noticed the amount of income was promising. Without any attempt to bolster the numbers I confirmed a total of $257.76 in rewards and interest from April 1, 2008 to April 1, 2009. This number is for my own personal spending only, not on a shared card. It also came in a savings climate offering terrible interest rates, and with no particular effort to find the best card reward offer. I get 1% cashback on my card, although I’ve heard of cards offering up to 5%.

Perhaps most importantly, this system has helped me maintain my lifelong passion of avoiding interest charges. I have never carried a balance on my credit card and hope to never start.

I spent several years selling financial products, including savings accounts and credit cards, in a banking environment. I’ve read all the fine print, and this system plays by the rules. Hopefully this method gives you the benefit of my experience without having to read any long legalese, learn any acronyms, or endure any of the ennui of the banking world. Most of all I hope it helps rewards people’s financial self-restraint, an incentive the economy could sorely use.