How to invest using cashback rewards
If you have a cashback credit card, you probably look forward to receiving your reward every quarter. After all, it's fun to rush out and treat yourself!
But instead of using your reward on a big purchase — or even applying it to your balance — you can turn that cashback into even bigger cash by investing.
All you have to do is earn cashback rewards and then make a corresponding contribution to your investments every month. And in some cases, you can request your reward as a check and then just endorse that check to your investment fund.
However, certain credit card reward programs are offered in connection with investment banks, and you can redeem your reward directly as a contribution to your retirement savings or education savings or even a charitable giving account. This can allow you to largely automate your investments and not rely on your own effort and willpower to voluntarily make monthly contributions.
As with any rewards credit card, these cards are best used by those who avoid interest by paying their balances in full each month. When you need to carry a balance, you're better off using a non-rewards card, which will have a lower interest rate than cards that offer rewards.
Credit cards you can use to make investment contributions
1. Fidelity® Rewards Visa Signature®
This card offers you 2% cash back on all purchases, with no limits. Your cash is deposited into a qualifying Fidelity Investments account, which can be your regular or retirement investment account, a college savings plan or a charitable giving account. This is a great benefit for investors, since Fidelity is one of our favorite online stock brokers. This card also offers benefits such as auto rental savings, travel and emergency assistance services and lost luggage reimbursement. There's no annual fee for this card.
2. Upromise® Mastercard® From Barclays
This card offers you 1.25% cash back on all purchases, and 1.529% if your card is linked to an elligible 529 College Savings Plan. It also includes the Round Up feature, which lets you round up your purchases to the nearest dollar, up to $500, and that additional money is deposited into your savings. New accounts also receive 15 months of 0% APR financing on balance transfers. Benefits include free access to your FICO credit score and no foreign transaction fees. There's no annual fee for this card.
3. American Express Platinum Card® for Morgan Stanley
Like the American Express Platinum Card® for Schwab, the American Express Platinum Card® for Morgan Stanley allows you to redeem points toward investment savings, albeit at 1 cent per point. Otherwise, it comes with all of the same travel fee credit and benefits as other platinum cards, as well as the same $550 annual fee.