Interested in investing for your future and earning cash back at the same time? These apps allow it, as long as you pay attention to fees and make sure not to overspend. These tips can help.
Acorns Found Money, EvoShare and Stash Invest have all introduced cash back rewards programs for investors. They each work differently but share the same goal: rewarding app users with cash they can use to invest and grow wealth.
That’s a big incentive to sign up, especially for younger adults who may not have made much progress with investing yet, says Logan Allec, a certified public accountant who owns the personal finance site Money Done Right.
“Millennials trust apps for everything from tracking their health to finding a date,” says Allec, and these apps make it easy to find the money to invest.
If you’re ready to wade into the market, these tips can help rev up your portfolio using an investing app.
See related: Best cash back credit cards
5 tips for earning cash back using investment apps
- How investment apps work, how they earn, invest cash back
- How much cash back can you earn using investment apps?
- Think about where investment apps fit into your financial strategy
- Tailor purchases to maximize your investing app’s cash back potential
- Factor in the ROI of using investing app to get cash back
Investment apps: How they work, how they earn, invest cash back
The first thing to know about investing apps that offer cash back is that they aren’t all the same. This table highlights how the cash back programs offered by Acorns, EvoShare and Stash invest compare:
|How it works||What Can You Earn?||How Cash Back Is Invested|
|Acorns Found Money|
How much cash back can you earn?
EvoShare offers the most cash back, whether you’re shopping online or in-store.
The potential to get 5 percent back with Acorns or Stash, however, is comparable to what you may get with certain cash back credit cards that offer rotating categories, such as Chase Freedom or Discover it® Cash Back.
In terms of what you can invest in, Acorns offers exchange-traded funds while Stash offers ETFs and individual stocks. In both cases, your investments are held in taxable investment accounts.
With EvoShare, your investment options are dictated by the retirement or college savings fund you link to your account.
See related: How to use a cash back card as a savings tool
Think about where investment apps fit into your financial strategy
What’s appealing about these programs is that they make it easy to accumulate cash to invest based on how you already shop, online or in-store.
Looking at cash back offers as a bonus to the shopping you already do can help you keep spending in perspective, says Dustyn Ferguson, owner of personal finance site Dime Will Tell.
“In the chase of earning cash back, we can sometimes spend more than we normally would, which is actually hurting your financial goals,” he says.
Ferguson says understanding how the apps work can make it easier to determine where they belong in your larger financial plan.
Investment apps can offer benefits beyond cash back as well. Riley Adams, a certified public accountant and founder personal finance site Young and The Invested, says they encourage people to adopt investing as a regular money habit.
“These apps have done a wonderful job of changing the mindset from travel points or cash back points meant to fuel more consumption to one which encourages long-term thinking,” says Adams. “By rewarding spending with stock investments, it allows younger people to get invested in the market earlier when they can benefit from the power of compounding.”
For example, assume you earn $100 a month in cash back with an investing app. You invest the money and earn a 6 percent annual return. After 30 years, you’d have nearly $95,000 in spare cash just from spending and earning rewards through the app.
Tailor purchases to maximize your investing app’s cash back potential
You can link any type of credit card to Acorns or EvoShare. If you have a cash back credit card, that’s an opportunity to stack rewards.
- Say you have the Citi® Double Cash Card, for example. This card offers 1 percent on purchases when you make them and another 1 percent when the purchase is paid.
- You link your card to Acorns Found Money and shop online at their partner brand Nike, which offers 5 percent back. Altogether, you’d earn 7 percent back on what you spend.
- Five percent would go into your Acorns Core account to invest. The other 2 percent you’d be able to redeem through Citi for statement credit, gift cards or a cash deposit into your bank account. Other than the initial sign-up that’s required for Acorns, it’s really that easy.
Allec says you can leverage your credit card for more rewards by being strategic in which cards you link to an investing app.
“Don’t be afraid to change payment methods within the app to maximize rewards earnings,” he says.
If you have a card like Capital One® Savor® Cash Rewards Credit Card, for instance, which offers 4 percent back on dining, you have an opportunity to supersize cash back earnings by connecting it to a dining deal through the app.
Just pay attention to merchant codes when you’re spending to earn cash back with an investment app to make sure you get the most cash back possible.
EvoShare and Acorns, for example, partner with Expedia and Airbnb, respectively. If you were using the Chase Sapphire Preferred Card to book travel and take advantage of a cash back deal, you’d be OK since Chase codes those purchases as travel.
Other travel cards, however, may not. In that scenario, you may only get cash back from the investing app, not your card.
See related: Best cards for Airbnb
Factor in the ROI of using investing app to get cash back
Getting cash back through an investment app is great, but it’s not necessarily free. There’s no rule saying you can’t use all three of the ones mentioned here, but it may be more cost-efficient to stick with just one.
“Many of these kinds of apps charge a flat fee per month for certain account balances and it doesn’t make sense to pay a monthly fee twice,” says Allec.
- Both Stash and Acorns, for example, charge $1 per month for taxable accounts with balances under $5,000.
- Once you pass $5,000 with Stash, the fee switches to 0.25 percent of your assets. On a $10,000 balance, for example, you’d pay $25 in fees.
“While this may not sound like a lot, it can eat into returns at low investment levels,” says Allec.
You also have to weigh the fees against the cash rewards you’ve earned with the app, as well as any fees or interest paid to your cash rewards card if you used it to shop through the app.
“If you get $100 per year in rewards but pay $50 in fees, you haven’t come out too much ahead,” says Adams.
Perhaps most importantly, consider the potential long-term cost to your financial health if you’re tempted to overspend through an investing app just to get cash rewards.
“If you earn 5 percent cash back when you shop at a given store with an investing app, you may be inclined to shop there more and maybe even spend more than normal,” says Ferguson. “But, the extra cash back rarely compensates for the extra money you spent.”