Americans are no strangers to credit card debt. In fact, the median amount owed on a credit card is $2,000, according to GOBankingRates.com’s 2016 U.S. Household Debt survey.
If you’re one of these people carrying a high balance on your card, you’re probably racking up interest charges. So, as your credit card issuer is making money off the interest and fees you have to pay, you’re losing more and more of your hard-earned cash.
But there’s a smart way you can pay off your credit card debt: Make your credit card work for you.
Sure, swiping your card everywhere you go won’t get you rich quick. But when you use your credit cards strategically, you can generate some cash for payments. Or, if you’re debt-free, you can use the extra funds to pay for an upcoming trip or that flat-screen TV you’ve always wanted. Here are seven creative ways you can make money with your credit cards.
GET MONEY WITH CASH-BACK CREDIT CARDS
To make money using credit cards, get a card that pays you to shop. This type of card is called a cash-back credit card. Depending on the type of card you get, you can earn 1 percent or even 5 percent in cash-back rewards for certain purchases. Take the Discover it card, for example.
With this credit card, you can earn 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. And in addition to 5 percent cash back, you get 1 percent unlimited cash back on all other purchases.
This card also offers a rare perk: Discover matches dollar-for-dollar all of the cash back you earn in your first year, which can add up quickly.
The more you use a cash-back credit card, the more cash 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 cash-back rewards might not be worth it.
EARN BONUS REWARDS POINTS
“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 – named one of the best travel rewards credit offers by GOBankingRates – 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.
So, you might want to use this card, or similar rewards cards, for as many expenses as possible. And if possible, see if you can rack up rewards points by using your credit card to pay your rent.
“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. “However, oftentimes people are not charging one of their biggest monthly expenses to their cards: their rent.”
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 will 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, 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 and more.
To maximize your investment earnings, look for credit cards with no restrictive categories. The more restrictions, the fewer opportunities to cash in and invest your rewards.
SELL YOUR REWARDS POINTS – BUT BE CAREFUL
Travel rewards credit cards are a godsend if you’re a frequent traveler. But what if you don’t travel often? 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.
So before you sell, carefully read your credit card rewards’ terms and conditions thoroughly – and make sure the process is not illegal in your state.
DO YOUR SHOPPING ONLINE
As a credit card benefit, some cards allow you to earn cash back or points 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, Wal-Mart and other online retailers. They can also score gift cards, like a $25 Sam’s Club gift card, or savings off their next purchases. Other credit card issuers have similar shopping portals.
Whichever shopping portal you use, read the terms and conditions and fully understand how the program works.
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, turning 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.
There’s a $1 monthly fee for using the service. But if you’re a college student with a valid .edu email address, you can use Acorns fee-free for up to four years.
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, 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 vary. But if you’re interested, there are credit card accessories on Etsy.com selling for as little as $5 and as high as $20.
Since the credit cards are cut into tiny pieces, the chance of someone piecing the card together and getting their hands on your 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.
Credit cards can get you into financial trouble if you don’t keep a close eye on spending. But if you use them to your advantage, you can get free cash from everyday purchases and use these earnings to pay down debt.