A handful of financial products on the market will actually pay you if you know how to play them right. We show you how you can make money from your credit card, savings, or current account.
Believe it or not, it is possible to make money from the financial products that you use every day. This can be a great way to build up a little extra cash without changing the way you save or spend. Of course you’ll need to play by the rules to make sure you get the most out of these products; we show you how.
Make money from your credit card
If you’re someone who uses a credit card on a regular basis and are very disciplined when it comes to paying off the balance in full when you get your statement, there’s no reason why you shouldn’t be earning money while you spend. You can do this by using a cashback credit card, which will pay you back a percentage of any purchases you make.
This means that if you spend on your credit card regularly you can earn a little back, simply by making purchases and using the card as you normally would. Spending £200 on a card that pays 4% on purchases would mean you’d get £8 back at the end of the month – a small amount that can quickly add up if you continue to use your card regularly.
What’s the catch?
The main drawback of using a cashback credit card is the higher-than-average rates of interest charged by most cards. As such if you aren’t disciplined enough to pay off your balance in full every month you’ll find that the balance quickly grows, outweighing the benefit of any cashback earned. As well as being disciplined you’ll have to be certain you have the necessary funds to cover your balance every month.
There’s also a real sting in the tail if you use your cashback credit card to withdraw cash, as the interest you’ll be charged for doing so will vastly overshadow any cashback you earn. As such if you are going for a cashback credit card reserve it for spending only, and always pay off your balance when you get your statement to make your earned cashback really count.
Make money from your current account
It’s a well-known fact that most people stick with the same current account for years rather than shopping around for something better. So, as an incentive to tempt the business of new current account customers who wouldn’t otherwise be on the market, a number of banks routinely offer money back when you switch to, or start using one of their current accounts. As such if you are prepared to switch to a new current account you could earn yourself some extra money for doing so.
For example, some accounts will offer you up to £100 cashback simply for signing up, while others will pay you as much as £5 on a monthly basis when you pay in a certain amount. If you were considering moving your account anyway, there’s no reason not to take advantage of these offers.
What’s the catch?
With cashback incentives such as these it’s a good idea to look into all the terms and conditions that come with the account, as well as those that govern how and when you’ll be paid, before you consider switching your account to a new provider.
For example some accounts will require you to pay in a certain amount per month in order to qualify for the free money, or may require you to move all your direct debits, standing orders and salary payments to the new account. In the case of package current accounts that offer cashback, you’ll need to pay a monthly fee for use of the account which may outweigh the benefit of any free cash.
It’s also important to check that the account you’re considering moving to can offer you everything you need for your everyday banking. As a current account is so central to your daily incomings and outgoings, it’s vital to get an account that will suit you. So, although it’s a good idea to look out for cash incentives (particularly if you are considering moving accounts anyway) remember to make sure you are happy with how the account will work for you.
Make money from your savings
It’s possible to make your money grow on its own by saving it in a high interest savings account that will see an amount of interest paid on your savings either monthly or annually. Although savings rates at the moment are nothing to write home about, you will still earn a level of interest on your savings if their rate is above that of inflation. (If it’s below the rate of inflation, you could be losing money – check the current CPI to make sure your interest rate is higher than this).
For example, by depositing £1,000 in a fixed-rate bond for 3 years with an interest rate of 5.15%, you would have £1,116.69 at the end of those 3 years simply by leaving your money untouched. Assuming you have the £1,000 to begin with, earning nearly £120 in interest alone isn’t bad when you consider that no effort is required beyond the initial deposit.
What’s the catch?
To make the most of interest on your savings it’s generally more cost-effective to save money in a high interest account and leave it there untouched to grow interest. However it is also still worth going for an account that doesn’t penalise you for withdrawals, if you do anticipate that you may need access to your money.
Additionally, you’ll have to make sure the rate of interest paid on the account is above that of inflation, so if your savings rate drops below this you’ll have to move your savings to a new home to ensure they are still earning money rather than losing it.
By being savvy it is possible to make money from your existing financial products – and while these methods won’t make you rich, they’ll certainly help you earn a little extra.
