This Credit Card Trick Could Make You Richer

by Maurie Backman | Published on Sept. 22, 2021

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African American woman happily uses her credit card to make an online purchase.

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If your card gives you cash back, you might be able to turn it into a larger sum.

If you use credit cards regularly, you're no doubt aware that you can rack up a fair amount of cash back on your purchases. And there are lots of things you can do with that money.

Some people use their credit card cash back to pay bills, enjoy entertainment, or take vacations. Others use their cash back to pad their savings. But what if you take your cash back and use it to start investing?

Why it pays to invest your cash back

The great thing about investing is that you might grow your money into a larger sum. Many people struggle to carve out money to invest, but if you're sitting on cash back from your credit card, you don't have to worry about finding the money.

So why should you invest? Say you get $250 back from your credit card. If you invest that money in stocks, you might score a 7% yearly return, since that's a bit below the stock market's average. In that case, if you leave your $250 alone for 10 years, it could turn into almost $500.

There are other investment choices. You can also consider putting money into cryptocurrency. Many people are enjoying success buying digital coins, but there are extremely large risks associated with crypto. If you're willing to take them on and you can afford to lose all the money you invest in crypto, you could make a nice profit.

How to get started investing

If you're ready to use your credit card cash back to invest, start by opening a brokerage account. You have many choices, so it's important to know what to look for.

Find a brokerage account that offers:

  • A wide range of investment options. Some brokerage accounts only let you buy stocks, bonds, and mutual funds -- not digital coins. If you're interested in buying cryptocurrency, find a brokerage that offers that as well.
  • No account minimums. If you're funding your brokerage account with credit card cash back, you may not have a lot to put in right away. And so it's a good idea to find a brokerage account that doesn't impose a minimum balance requirement.
  • No-fee trades. If you expect to do a lot of trading, you want a brokerage that doesn't charge every time you make a transaction.
  • Research and resource tools. A lot of brokerage accounts have their own knowledge centers that can teach you about investing. If you're new to the game, that's an important feature.

While you have choices in spending your credit card cash back, investing that money is a good way to grow it into a larger sum. In fact, it's a good idea to invest whatever extra money you come into, whether it's a tax refund or a bonus from your job (assuming you don't need that money to save for emergencies or pay off debt). The more you invest, the wealthier you potentially can become.

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