7 ways to make money using your credit card

While many people associate credit cards with spending, or even debt, you can also actually make money using your credit card. Using a few hacks and taking advantage of various credit card perks, you could maximize the returns on your credit card spending and put some cash back in your pocket.

The ideal way to use these strategies is to pay your credit card balance in full each month to avoid interest charges. Also, be sure to stay within your budget to avoid going into debt. With these things in mind, here are seven inventive ways to make money using your credit card.

1. Accrue Miles for Free Travel
Travel might feel out of reach for some people due to the cost, but travel insiders know you don’t need to pay full price for flights. Travel hackers, as they’re often called, are people who take advantage of credit card sign-up bonuses to get a large sum of miles for minimal effort.

For example, if you sign up for an American Airlines credit card and make $3,000 in purchases in the first three months, you’ll be awarded a 50,000-mile bonus. Using those miles, you could go to Europe off-season (Oct. 15-May 15) for 40,000 miles. You just have to pay for taxes and service charges.

If you want to make money on your credit card through free and low-cost travel, do your research on the best travel rewards cards and explore the redemption options, including various locations and time frames. Just be sure you can actually meet the spending requirement, and that you are not overspending just to get the miles. Also, be aware that these cards typically have annual fees, but they might be waived for the first year as part of the promotion.

“We use several flexible rewards credit cards for everyday spending and large purchases,” said Holly Johnson, founder of the personal finance blog, Club Thrifty. She and her husband redeem their miles and points for free travel and hotel stays several times a year.

2. Invest Your Cash-Back Rewards
Instead of just spending money on your credit card, you can make some money back through cash-back rewards. Using cash-back rewards, you can put your bonus money in a high-yield savings account or a retirement vehicle to get more bang for your buck.

The Chase Freedom card has no annual fee and offers a $150 bonus after spending $500 within three months. Using the Chase Freedom card, you can get 5 percent cash back on purchases in various categories throughout the year and 1 percent cash back on all other purchases. In addition, you could make $25 by adding an authorized user, such as a spouse, after they make a purchase within the first three months.

If you spend approximately $500 on your credit card for items like insurance, groceries and bills, and add an authorized user, within three months, you could have close to $200. You stand to earn even more for qualified purchases during bonus periods. Using the extra $200, you could save it in a high-yield savings account or a Roth IRA. That way, your spending can help you earn more for later.

3. Pay Off Your Student Loans
Currently 40 million Americans have at least one student loan, according to data from credit bureau Experian. Although paying back your student loans might be a drag, you can expedite your repayment using your credit cards.

Not every loan servicer will accept credit card payments. However, there’s a tactic that you can use to earn cash with your credit card to pay back your student loans. Jacob Wade, founder of the budget-loving site I Heart Budgets, and his wife recently used their reward points to make a payment on their student loans.

“Paying down student loans can be a daunting task,” said Wade. “But what if you could get some help from an unlikely place: your credit card? Believe it or not, you can use your credit card rewards to pay down your student loans. My wife and I paid down $1,100 recently using our credit card rewards.”

Wade shared how you can benefit from using credit cards to pay off your student loans:

Call your student loan servicer, and ensure they accept checks from third parties.
Sign up for the Citi ThankYou Premier credit card — specifically look for the 50,000 bonus point offer.
Put all your bills and spending on that card until you meet the bonus spending requirement — usually about $3,000 in three months.
Once your bonus posts, call Citi ThankYou rewards and request to use your points for a “Student Loan Check” to send to your loans.
Every point is worth approximately $.01, so 50,000 points = $500 check.
Read: 9 Ways to Pay Off Student Loans Before Your 30s

4. Go Shopping With Your Points
Certain credit cards allow you to accrue points and redeem them in-house using their shopping portal. For example, using Chase Sapphire Preferred, you can accrue points on every dollar you spend and additional points on travel and dining. If you sign up for Chase Sapphire Preferred, you can get 50,000 points after spending $4,000 in three months.

Using those points, you could get five $100 gift cards to Starbucks, Macy’s, Target, Bloomingdale’s, Williams-Sonoma and more. If you go to those places anyway, or have upcoming shopping, save your own hard-earned cash and get a gift card.

In addition to redeeming points for gift cards, Chase Sapphire Preferred allows you to connect your points to Amazon and use your balance for shopping. You can do this by signing up for the Chase Sapphire Preferred card and meeting the spending requirement of $4,000 in transactions in three months. Once you get your bonus, you can buy gift cards or shop through Amazon by linking your card to your Amazon account and paying with your points at checkout.

5. Earn Money for College
Using the Fidelity Investment RewardsAmerican Express Card, you can earn 2 percent cash back and deposit your rewards into one of their eligible accounts. One of those eligible accounts is a 529 College Savings Plan. A College Savings Plan is a tax-advantaged account used specifically for college savings. While you spend money, you could be earning money for your child’s education.

This card has no annual fee and no limit on rewards. Every $2,500 spent is equivalent to $50. If you charge your groceries, dining, entertainment, insurance and more on your card — and pay it off in full each month — you could earn $50 in two to three months.

6. Pay Your Bills to Earn Rewards
Rewards credit cards can help you earn cash back or miles, but in order to earn them, you typically need to spend money. Because of this, reward cards can be a slippery slope, enticing you to spend more. But if you focus on paying your existing bills using your credit card, you can meet your spending requirements for bonuses and earn more without going over budget.

There are a few platforms that can help you pay your bills using your credit card. Using ChargeSmart, you can pay your bills such as mortgage, student loan and auto loan. You will be charged a percentage based on your payment, but it might be worth it for the rewards.

In addition, you can pay friends, family and colleagues using PayPal and Venmo — both of which accept credit cards. There is a 3 percent fee for using credit cards on Venmo and a 2.9 percent plus 30-cent fee per transaction for PayPal. Before using any of these methods, be sure to read the fine print and understand the fee structure.

7. Try Credit Card Arbitrage
Credit card enthusiasts will go to all lengths to ensure their credit cards are working for them and making them money. One controversial method is credit card arbitrage. Credit card arbitrage is the process of taking a zero- or low-interest loan on a credit card and depositing the money into a high-yield savings account or investing vehicle.

In order to do this, you sign up for a zero percent or low-interest credit card that offers cash advances or balance transfers. Many of these cards have introductory rates for a limited time, so be sure to read the fine print and understand when the promotional period is over. Once approved, you write a check to yourself and deposit the money into something like a CD or money market account.

It’s crucial that you make all minimum payments during this time on your credit card. Because there’s no to low interest, you can make higher returns using the money in a high-yield account. Pay off the rest of the loan before the introductory period ends, and pocket the interest earnings. In short, you’d be able to profit off the interest and make more money than what you borrowed. For example, if you took a loan of $10,000 and got a return of 3 percent, you could make $300 in interest, minus any potential fees.

This method is by far one of the more risky strategies, as there could be transfer fees — and even one late payment could cost you in late fees and damaged credit. You must be organized to play the game.

Spend Responsibly
Using these seven methods, it’s possible to make money with your credit card. However, in order to be eligible for certain rewards credit cards, you typically need to have good credit — think 700 or above. In addition, watch out for fees and read the fine print to make sure you are actually making a profit.

These money-earning tactics are best reserved for responsible credit users who make on-time payments and have good credit. If that’s you, you could have your credit card earn you money and work for you.

From GobankingRates.com: 7 inventive ways to make money using your credit card

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