Many people are familiar with the challenge of having too much credit card debt, something that can impact households across the board. In a survey conducted by GOBankingRates.com in 2016, it was found that the typical amount owed on a credit card is around $2,000, which is a common situation for many individuals.
If you have a lot of money you owe on your credit card, the extra charges that keep adding up can really hurt your finances. The credit card companies make money from these extra charges, and you end up losing your own money. But, there’s a smart way to handle this and get rid of your credit card debt while making your credit card work for you.
Just using your credit card for everything won’t make you rich, but if you use it wisely, it can help you get some extra money. You can use this extra money to pay off your credit card debt or, if you don’t have any debt, to save up for things like a vacation or a new TV. In this article, we’ll look at seven clever ways to use your credit card to improve your finances.
1. Cash-Back Credit Cards: Earning While You Spend
To harness the power of credit cards for financial gain, consider acquiring a cash-back credit card. These cards provide an opportunity to earn money as you make everyday purchases. Depending on the specific card, you can accumulate cash-back rewards ranging from 1 percent to an impressive 5 percent on certain transactions. One notable example is the Discover it card.
The Discover It card allows you to earn 5 percent cash back on rotating categories, such as expenditures on gas, restaurants, and more, up to $1,500 in purchases every quarter. To put it into perspective, if you spend $1,500 on qualifying purchases in a quarter, you’ll receive $75 cash back, straight into your pocket. Additionally, this card offers a unique benefit – Discover matches, dollar for dollar, all the cash back you earn during your first year. This matching can significantly bolster your earnings.
The more frequently you utilize a cash-back credit card, the greater your potential earnings. Nevertheless, it is vital to exercise caution. To truly benefit from this strategy and avoid falling into the debt trap, always pay off your credit card balance in full every month. Accumulating a substantial credit card debt and incurring high-interest charges can quickly negate the advantages of cash-back rewards.
Making your credit card work for you, especially through cash-back rewards, can be a prudent and rewarding financial move, but it requires responsible and disciplined use of your card. By taking full advantage of these opportunities, you can turn your credit card into a valuable financial tool that helps you achieve your financial goals and secure a brighter financial future.
1. Earn Bonus Rewards Points: Make Credit Cards Work for You
Leveraging credit cards to your financial advantage often involves capitalizing on bonus reward points. The marketing manager at TimePayment, which specializes in equipment financing for businesses, believes one of the most effective ways to make money with credit cards is to open a new card offering a substantial flight mileage bonus. These bonus points can then be utilized for free or heavily discounted flights.
Numerous credit cards offer enticing sign-up bonus points, such as one of the best travel rewards credit cards. Travel cards offer lucrative deals: You can earn 50,000 bonus points after spending $4,000 within the first three months of opening an account. This translates to $625 that you can put towards your travel expenses.
To fully capitalize on this strategy, it’s advisable to use cards like the Chase Sapphire Preferred, or similar rewards cards, for as many expenses as possible. Furthermore, consider using your credit card to pay your rent to accumulate more reward points. Roman Shteyn, the co-founder of RewardExpert.com, a platform dedicated to helping travellers maximize their credit card points and airline miles, highlights the fact that one often overlooked expense that could yield substantial rewards is rent.
2. Invest Your Cash Back: Grow Your Rewards
Another way to make the most of cash-back rewards is by investing the money, even if your earnings are modest, perhaps even just a few hundred dollars. Through the power of compounding interest, these cash-back rewards can grow into a significant nest egg over time.
For instance, if you earn $300 in cash back annually and invest that amount into an account with a 7 percent annual interest rate, your balance will exceed $4,000 in a decade. Some rewards credit cards, such as the Rewards Visa Signature credit card, offer the added benefit of linking your card to eligible investment accounts. With this card, you can earn an unlimited 2 percent cash back, which is automatically deposited into a suitable Fidelity account, including brokerage accounts, 529 college savings plans, retirement accounts, and more.
To optimize your investment returns, search for credit cards with minimal restrictions on the categories in which you can earn rewards. The fewer restrictions there are, the more opportunities you have to cash in and invest your rewards effectively.
3. Sell Your Rewards Points (with Caution): Monetize Unused Points
For individuals who don’t travel frequently, travel rewards credit cards can be an underutilized asset. a solution like : consider selling your accumulated points to others by booking tickets for friends and family in exchange for cash. This can be mutually beneficial, as your acquaintances get discounted tickets, and you receive cash at a rate potentially higher than what your bank may offer.
However, it’s essential to exercise caution when selling your rewards points. Some rewards programs may have terms and conditions prohibiting or restricting the sale of points for cash. It’s crucial to thoroughly review the terms and conditions of your credit card rewards program to ensure compliance with their rules and to verify that the process is legal in your state.
4. Do Your Shopping Online: Earn Cash Back or Points
Certain credit cards offer online shopping benefits that allow cardholders to earn cash back or points when making online purchases. To access these savings and take advantage of these deals, you may need to log into your credit card account.
For example, eligible Discover card members can earn extra cash back through Discover Deals. This feature offers 5 percent cash back when shopping at select online retailers like LivingSocial, Apple, and Walmart. Additionally, it provides opportunities to obtain gift cards, such as a $25 Sam’s Club gift card, or savings on future purchases.
Various credit card issuers provide similar online shopping portals. When using these platforms, it’s crucial to read and understand the terms and conditions to make the most of the program while ensuring a secure and informed shopping experience.
5. Invest Your Credit card cashback money
By investing the money you earn from your credit card, you can transform your everyday purchases into a wealth-building strategy. Once you’ve accumulated cash back, bonus rewards, or other earnings, consider opening an investment account like a brokerage account or an Individual Retirement Account (IRA).
Diversify your investments across various asset classes, such as stocks, bonds, mutual funds, and exchange-traded funds, to reduce risk. Define clear investment goals, whether it’s saving for retirement, a home, or education, and tailor your strategy accordingly. Depending on your risk tolerance and objectives, choose a suitable investment approach, and regularly monitor and adjust your portfolio to stay aligned with your financial goals. By investing your credit card earnings, you can potentially grow your wealth over time, taking steps to secure your financial future and achieve your desired milestones.
6. Get Creative with Expired Credit Cards: Turn Art into Cash
Expired credit cards might no longer serve their original financial purpose, but they can find a second life as a unique form of art, and in turn, generate some extra income. While this idea might be unconventional, some crafty individuals are exploring their creative side by crafting handmade jewelry using expired credit cards.
The profit potential from selling these one-of-a-kind fashion pieces can vary, but for those interested, you can find credit card accessories on platforms like Etsy.com, with prices ranging from as low as $5 to as high as $20. Since credit cards are cut into small pieces during this creative process, the risk of someone reassembling the card to access your sensitive information is minimal. Nonetheless, it’s advisable to exercise caution and avoid using too many pieces from the same credit card when crafting a single piece of jewelry.
7. Make Credit Cards Work for You: Turn Everyday Purchases into Cash
Credit cards, when used judiciously, can offer more than just a convenient payment method. By strategically leveraging them, you can effectively turn everyday purchases into cash that can be used to pay down debt or achieve your financial goals. Whether it’s earning rewards points, investing spare change, or even creating art from expired credit cards, these creative approaches can help you make the most of your credit cards and turn them into valuable financial tools. Remember, the key to success is responsible and disciplined use of your cards, as this ensures you reap the benefits without falling into financial trouble.
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