3 Little-Known Ways to Use Cash Back

Cash back is a popular perk. In fact, cash back credit cards are the most common type of card that Americans have. More than two-thirds (68%) of Americans have a cash back card, according to credit card research by The Motley Fool Ascent.

One of the reasons people love cash back is because of how easy it is to use. When you want to redeem it, you can put it toward your credit card bill. For example, if you have $50 in cash back, you could lower your credit card bill by $50. Many cards also let you send cash back to your bank account or request it as a check.

But those aren't the only ways to redeem your cash back. There are also little-known ways to use cash back, and in some cases, they could get you even more value.

1. Invest it

People often use cash back to save money, but you can also use it to build wealth. There are a few credit cards that make it easy to invest your cash back.

If you have a Fidelity brokerage account, there's the Fidelity® Rewards Visa Signature® Credit Card. It earns an unlimited 2% back on purchases. You can deposit your cash back into any eligible Fidelity account, including a brokerage account, to invest it.

Bank of America credit cards are the same way. You can deposit your cash back in an eligible account with Merrill. If you have a Merrill Edge brokerage account, you could send your cash back there.

If you don't have any of those, you can still invest your cash back. You'd first need to deposit your cash back to your bank account, and then transfer the money from your bank to your brokerage account. It's not quite as fast, but it works.

2. Use it to buy discounted gift cards

Many cash back cards give you the option of buying discounted gift cards with your cash back. For example, with Discover credit cards, you can currently use cash back to buy gift cards at 5% to 20% off. Discount amounts will depend on the store and the offers available with your card issuer.

Check whether your card issuer has any gift card offers before you redeem your cash back. If you see a store you're planning to shop at, you could buy a discounted gift card and use it yourself. For example, instead of using $90 in cash back to save on your credit card bill, you could use it to buy a $100 gift card and save an extra $10. You could also buy a discounted gift card for someone else this way.

3. Donate it

With some credit cards, there's an option to donate your rewards. If so, you can donate your cash back to any charities partnered with your card issuer. This is the quick, convenient option. But there are a couple of drawbacks:

• You can't write off donations of cash back or credit card points on your taxes. The IRS classifies credit card rewards as rebates earned on spending and not income.
• You're limited to the charities available with your card issuer. The charity you want to choose may not be on the list.

Another option is to deposit your cash back to your bank account, and then make your donation. You'll be able to donate to any charity you want, and it will be considered a monetary donation. Monetary donations are generally eligible for tax write-offs (consult a tax professional to be sure).

Even with a credit card perk as straightforward as cash back, there may be many ways you can use it. Investments, gift cards, and donations are all outside-the-box options to consider.