Even though credit cards offer convenience, they often can be a trap, leaving you with mountains of expensive debt. Rather than thinking of your credit cards as a way to spend, you can turn them into money-earning devices.
As long as you make your payments faithfully, the judicious use of credit cards can be quite profitable. Take a look at these 10 ways you can turn your credit cards into money-making tools.
1. Get Money With Discount and Cash-Back Credit Cards
To make money using credit cards, get cards that pay you to shop. These types of cards are called cash-back credit cards.
Capital One’s Quicksilver card gives you 1.5 percent cash back on every purchase you make. If you tend to shop in one store more than others, consider a store card. The Kohl’s credit card, for example, gives you between 15 and 30 percent off on most purchases you make at the store, even online.
The more you use a cash-back or store credit card, the more cash or discounts you can earn. Be careful, though. Pay off your credit card balance in full every month to avoid racking up credit card debt and paying high-interest charges. If you fall too deep into debt, the rewards might not be worth it.
2. Earn Sign-Up Bonuses
“The best way to leverage credit cards for money, in my experience, is to open a new card with a large flight mileage bonus and use the points toward a free or heavily discounted flight,” said Stacy Caprio, search marketing manager at TimePayment, which provides equipment financing for businesses.
You can take your pick of credit cards offering sign-up bonus points. For example, the Chase Sapphire Preferred credit card lets you earn 50,000 bonus points after spending $4,000 in purchases with the card in the first three months after opening an account. That’s the equivalent of $625 you can use toward travel.
Because credit card rewards vary, you need to keep your eyes open for a good deal. The original sign-up bonus on the Chase Sapphire Reserve credit card, for example, was 100,000 points, making it one of the best credit card offers.
3. Invest Your Cash Back
You can also put cash-back rewards to work for you and invest the money — even if you earn less than a few hundred dollars. Thanks to the power of compounding interest, your cash-back rewards can grow into a sizable nest egg over time.
Let’s say you earn $300 in cash back every year. If you invest that $300 into an account that earns 7 percent interest annually, then in 10 years your balance will grow to more than $4,000.
As an added credit card benefit, some rewards credit cards allow card owners to link their cards to eligible investment accounts. Take the Fidelity Rewards Visa Signature credit card: You can earn unlimited 2 percent cash and have those rewards automatically deposited into an eligible Fidelity account, such as a brokerage account, a 529 college savings plan, a retirement account or another account.
To maximize your investment earnings, look for credit cards with no restrictive categories. The more restrictions the card has, the fewer opportunities you have to cash in and invest your rewards.
4. Do Your Shopping Online
As a credit card benefit, some cards allow you to earn cash back or points just by shopping online. You might need to log into your credit card account in order to access these savings and take advantage of the deals. For example, eligible Discover card members can earn additional cash back when they shop through Discover Deals. This includes 5 percent cash back when they shop LivingSocial, Apple, Walmart and other online retailers.
As a cardholder, you can also score gift cards or savings off your next purchases. Other credit card issuers have similar shopping portals, but whichever shopping portal you use, read the terms and conditions fully in order to understand how the program works.
5. Join Acorns and Link a Credit Card
If you want to invest but don’t know where to begin, the Acorns app might be an excellent starting point. This investing platform automatically invests your spare change from everyday purchases.
Simply sign up and link your credit card or debit card. For every purchase you make, Acorns rounds up your purchases to the nearest dollar and invests the difference, so you can turn your spare change into income.
Your funds are invested in a diversified portfolio to lower your risk, and you can link as many credit cards as you like. The amount you can potentially earn through the app depends on how often you use a linked credit card. And if you’re a college student, you can use Acorns fee-free for up to four years.
6. Get Creative With Expired Credit Cards
You can’t make a purchase with an expired credit card — but you can turn the card into art and cash in. This is probably a foreign concept to many people, but some DIY-ers are exploring their crafty side and making handmade jewelry using expired credit cards.
The profit you can generate from selling these unique fashion pieces varies. But if you’re interested in purchasing some, there are credit card accessories on Etsy.com and other retailers selling for a range of prices.
Because the credit cards are cut into tiny pieces, the chance of someone piecing the card together and getting their hands on your old card number is unlikely. Still, it’s safer to err on the side of caution. Don’t use too many pieces of the same credit card for one piece of jewelry.
7. Take Advantage of Bonus Categories
“It’s common knowledge that the best way of getting value — or money — back from credit card use is earning points,” said Roman Shteyn, co-founder of RewardExpert.com, which helps travelers make the most out of their credit card points and airline miles.
Leverage the points-earning game by assigning your spending to cards that give you bonus points — or bonus cash back — in certain categories. For example, the Chase Sapphire Reserve card pays triple points on travel and dining expenses, making it the best rewards credit card for some people. Many of the best hotel credit cards, like the Club Carlson Premier Rewards Visa Signature card, offer extra points for expenses incurred at their hotels.
The Discover it card offers 5 percent cash back in rotating categories — such as gas, restaurants and more — on up to $1,500 in purchases every quarter. So, let’s say you spend $1,500 on qualifying purchases — that’s $75 going right back into your pocket.
8. Sell Your Rewards Points — Carefully
Travel rewards credit cards are awesome if you’re a frequent traveler. If you don’t travel often, however, Shteyn suggested selling your points for money by booking tickets for friends and family with points in exchange for cash.
“It can be a win-win for both parties,” he said. “Your friends get a discounted ticket, and you get cash back at a higher rate than your bank may offer.”
But before you get too excited and start selling your unwanted rewards for cash, know the risks. Although some rewards programs allow members to gift rewards or points to their family and friends, selling these perks for cash might violate the terms and conditions of some programs.
Before you sell, carefully read your credit card rewards’ terms and conditions thoroughly — and make sure the process is not illegal in your state.
9. Earn Free Cash Using Your 0% Cards
Many cards offer a 0 percent interest rate for a certain time period, such as one year. To earn money on that type of card, place your daily charges on the card and only pay off the minimum balance. Place the amount you charge into an interest-bearing account, such as a money market fund. Although you won’t get rich even with the best 0 percent purchase credit cards, you’ll be able to earn income on that money as your credit card balance accrues no interest charges.
When the promotional 0 percent time period expires, transfer the money from your money market fund to pay off the balance, and keep the interest you’ve earned. You can also get cash this way from balance transfer credit cards, but be aware that balance transfer cards typically charge a fee of 3 percent or more.
10. Get Free Ancillary Benefits
Sometimes, you can earn money by saving money. In addition to paying cash rewards or signup bonuses, many credit cards offer ancillary perks that translate into real money. For example, the Chase Sapphire Preferred card, among others, offers primary car insurance on rental cars, so you don’t have to pay for additional coverage at the time you rent. Other cards, such as select cards from Citibank, extend the warranties on products you purchase — an additional 24 months in the case of select Citi cards.
If you would have bought the extended warranty, you might be saving tens or even hundreds of dollars; if not, you might be saving the replacement cost of your purchase if it fails shortly after the original warranty expires.