Sarah Travers
The beauty of cash back lies in its simplicity, you can use it to reduce credit card bills, transfer it to your bank account, or receive it as a check. However, what many might not know is that there are lesser-known, yet highly beneficial ways to make the most of your cash back rewards. In this article, we explore three intriguing methods that could potentially offer even greater value.
Invest in Your Future
While many people view cash back as a means to save money, it can also serve as a tool for building wealth. Some credit cards offer the opportunity to seamlessly invest your cash back. Take the Fidelity® Rewards Visa Signature® Credit Card, for instance. With this card, you can earn an unlimited 2% cash back on purchases, which can be directly deposited into any eligible Fidelity account, including brokerage accounts, facilitating effortless investment growth.
Bank of America credit cards offer a similar feature, enabling you to deposit your cash back into an eligible Merrill account, such as Merrill Edge brokerage accounts. Even if you don’t possess these specific cards, you can still invest your cash back.
The process involves initially depositing your cash back into your bank account and then transferring the funds to your brokerage account—slightly less expedient but equally effective.
Discounted Gift Cards for Savvy Shoppers
Cash back rewards often come with the added perk of purchasing discounted gift cards. For instance, holders of Discover credit cards can leverage their cash back to acquire gift cards at significant discounts, ranging from 5% to 20%, depending on the store and card issuer offers. Before redeeming your cash back, be sure to check if your card issuer has any ongoing gift card promotions.
This presents a unique opportunity to save even more on your shopping endeavors. Instead of using your cash back to reduce a $90 credit card bill, you could utilize it to purchase a $100 gift card, saving an additional $10. Furthermore, these discounted gift cards can be gifted to others, adding an extra layer of versatility to your cash back rewards.
Pay It Forward with Donations
Many credit cards provide the option to donate your cash back rewards to partner charities, offering a convenient way to make a positive impact. Nevertheless, it’s important to keep in mind a few factors. Firstly, the IRS classifies credit card rewards as rebates earned on spending, not as income, which means you cannot claim a tax deduction for donating cash back directly.
Additionally, your choice of charity may be limited to those affiliated with your card issuer. An alternative approach is to deposit your cash back into your bank account and then make a donation. This allows you to contribute to any charity you desire and potentially qualify for tax write-offs, subject to professional tax advice.
Unleash the Full Potential of Your Cash Back Rewards
Even seemingly straightforward credit card perks like cash back rewards can harbor hidden potential. By exploring lesser-known avenues like investment opportunities, discounted gift card purchases, and charitable donations, you can maximize the value of your cash back rewards.
So, the next time you earn cash back, consider these unconventional methods to make your money work harder for you. Unlock the full potential of your financial choices and take your cash back rewards to new heights.
