You are probably used to (or more than used to) reading articles about how credit cards are at the root of your money problems. There’s probably not a single article about debt that hasn’t waxed eloquently about how improper management of credit cards can send you into a debt spiral.
But how many articles have you read about the various ways credit cards can make you rich? If you were honest, you could probably count the number of times on one hand.
And if you have never known that credit cards can be money-making tools, read on to find out just how they can make you rich!
1. Put Your Rewards to Work
So, you have a cashback card that rewards your every spend. That’s great. Now instead of letting the money stay idle, why don’t you put it to work?
It doesn’t matter how much you earn. Even if it’s a few hundred dollars, thanks to the power of compounding, your money will grow!
Let’s assume that you earn a maximum cashback of $500 each year. If you invest it in an account that gives you a return of 5% p.a., in 7 years it will amount to $703.55. And if you invest the money in other financial products such as recurring deposits or even investing it in equity, your returns will only multiply!
2. Link Your Card to an Investment App
So, you want to invest, but you aren’t the savviest investor out there. No worries. Thanks to technology, you can always link your credit card to an investment application like Acorns and then sit back and watch your money grow.
Well, let’s say that you have decided to buy a coffee that costs $3.75. Spare change apps round up your purchase and invest the spare change in portfolios. So, in this case, the amount is rounded up to $4 and the difference of $0.25 is invested.
So, each time you use your credit card, a small portion is invested. And before you know it, that $0.25 from a cup of coffee, will amount to hundreds of dollars!
3. Sell Your Points
Have you ever had points that are about to expire sitting idle in your account? Well, if you don’t want them to go to waste, you could consider selling them. What exactly does this mean?
Well, say your family member is planning to go on a trip, you can book the tickets using your points and exchange it for cash!
Before you do that, though, you should remember that not all credit cards allow you to transfer your points to family members. And if they do, there may be certain conditions that need to be fulfilled.
So, before you go ahead and transfer points, do read the terms and conditions that govern your credit card carefully.
4. Make Money via Stoozing
Okay, so you are probably wondering if stoozing is even a word. And it is.
In financial terms, stoozing is the practice of making money by borrowing on credit cards which have a 0% interest rate.
Basically, you borrow money on your credit card and then invest it in high yield accounts. As a practice, stoozing was quite common before the 2008 recession, but it is slowly gaining followers once again.
The important things to remember with stoozing are:
- Only borrow on a 0% interest credit card. If it isn’t a 0% interest card, then you will probably end up paying way more in terms of interest than you will earn by investing the money.
- Make sure that you pay the full outstanding amount each month on your card or you may not be eligible for the 0% interest.
- And right before the introductory period for the 0% interest ends, make sure you pay up the entire amount you owe on the credit card!
Before you go down this route, though, do go through the terms and conditions governing your card with a fine tooth comb. You don’t want hidden fees and charges to take you by surprise.
5. Earn Money by Saving Money
If you use a credit card well, you can save money each time you spend. Using your card to spend on categories that it rewards the most, is the best way to make sure that you are getting the best out of your card.
If you have a card that gives you rewards points, you can accumulate the points and redeem them for travel, retail, or dining vouchers. So, you essentially get to dine at a fancy restaurant at a discounted rate because you used your credit card to make grocery purchases!
Some cards even offer ancillary benefits such as insurance on rental cars or complimentary extended warranty on any gadget you buy. Others will even insure your travels with complimentary travel insurance! All of this means that you don’t have to spend money and buy any of these!
So, the next time someone tells you about how you shouldn’t get a credit card, you need to just show them this list!