The easiest way to make money with credit cards is by earning rewards, particularly cash back rewards and big signup bonuses. So long as you use a cash back credit card for purchases you were going to make anyway, and then pay your bill in full to avoid interest, you’re getting free money back. Same goes for credit card signup bonuses: As long as the spending requirement is money you would’ve spent in that timeframe anyway, the bonus is free money.
Other ways to make money with credit cards, at least indirectly, include peer-to-peer lending and, possibly, piggybacking credit (though that’s frowned upon). Nevertheless, taking full advantage of rewards remains the easiest, most reliable way to make money with credit cards, as you can discover in greater detail below.
How to Make Money with Credit Cards:
- Get a cash back credit card.
Any rewards credit card will reduce the cost of the purchases that you make, but cash back credit cards make it easiest to make money. Cash rewards cards give you cash back on purchases that you can redeem for statement credits, personal checks and/or bank account deposits. You can also set up automatic cash back redemption, so that once your earnings hit a certain amount, they’re cashed out according to your preferences.
The average cash back credit card gives a little more than 1% cash back on purchases, but you can find cards with higher earning rates. Check out the best cash back credit cards to see which will make you the most money.
- Earn a credit card signup bonus.
Many of the best rewards credit cards come with large signup bonuses for meeting a minimum spending requirement in the first 1-3 months. For example, you could make $150 to $500+ from rewards bonuses without spending more than you would otherwise, just by using the right card.
Once you earn the signup bonus, one redemption option is to apply it directly to your credit card bill to cover purchases you’ve made. You might also be able to redeem for a check, bank account deposit, gift cards, travel, merchandise and more, depending on the card, if you’d rather save money another way.
- Cash in credit card points/miles.
The simplest way to cash in your points or miles is by using them to pay for purchases that you’ve charged to your card. You basically get those purchases for free. Most credit card issuers will let you apply your rewards to past purchases, usually at a rate of 0.5-1 cent per 1 point/mile.
You can also cash in rewards for gift cards to the places you shop at most. Another option to make money is to sell your rewards to friends or family members, but that’s a bit trickier.
- Buy Visa gift cards with a bonus rewards card.
Some credit cards offer bonus rewards on groceries. For instance, cardholders might earn 6% cash back on the first $6,000 spent annually at U.S. supermarkets. That would create the opportunity to buy general-purpose gift cards – like Visa gift cards, which can be used anywhere – and save up to $360 per year in the process.
There are fees for buying Visa gift cards, ranging from $2.95 to $5.95. It depends on the value of the gift card, which can be $10 to $349.99. It’s in your interest, then, to purchase higher-value gift cards since the fee for a $349.99 gift card only amounts to 1.7% of the 6% cash back you’d be earning in the above example.
- Try peer-to-peer lending.
Peer-to-peer lending is exactly what it sounds like: lending money to your peers. Essentially, you finance someone else’s personal loan and get paid back with interest. One of the reasons people take out personal loans is to refinance credit card debt. If you become a lender on a peer-to-peer lending site (such as LendingClub), you can give money to people who are looking to pay off credit card bills, and then personally reap the rewards of their interest payments.
However, this is really only worthwhile if you have extra money you don’t need at the moment and are willing to get repaid over the course of months or years. There’s also some risk your loan won’t ever be paid back in full.
- Piggyback your credit (not recommended).
Essentially, piggybacking is using your own credit history to help someone else with either poor credit or no credit build theirs. When you add someone as an authorized user on a credit card, information about that account gets added to their credit report on a monthly basis. If that information is positive, it can boost the user’s credit score.
Many individuals will pay to be added as an authorized user and piggyback your credit. But being paid to boost someone’s credit score is a legal gray area and you shouldn’t try it. It’s possible doing so could be considered bank fraud.
Using credit cards strategically provides unique opportunities for cardholders to make money. For example, applying for a new card with a signup bonus during a time when you’ll be making large purchases can put extra money in your pocket without much effort.
However, using a credit card irresponsibly just to earn more rewards won’t be worth it. If you don’t pay your credit card bill in full each month, high interest rates will quickly eat away at your earnings. And if you start missing payments, your credit score will suffer.
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