4 Ways You Can Invest With Credit Card Rewards (and Watch Your Assets Grow)

If you have credit card rewards and you aren’t using them for travel, you might want to consider investing them instead.
Last updated Jun 10, 2020 | By Ben Walker
4 Ways You Can Invest With Credit Card Rewards

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Credit card rewards are often seen as a bonus you receive for money you’re already spending. You put purchases on a credit card; you receive cash back, points, or miles in return; and you use the rewards for a dream vacation or as extra money in your pocket. It’s a tried-and-true method, but it may not always be the way to get the most value out of your points.

Fortunately, there are other ways to use your rewards that can, in effect, keep the rewards coming. It’s possible to earn money from investing your credit card rewards. There are a few ways to do it — none of which is difficult to do — and this strategy can earn you a lot more money in the long run. It’s a good option if you want to start investing during a recession, especially if the travel industry has taken a downturn as well.

Let’s talk about four ways you can start investing your credit card rewards.

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1. Get a card that lets you earn investment rewards

One of the best ways to earn investment rewards is by using an investment credit card. These cards typically have unique benefits that allow you to either invest your credit card rewards directly or earn extra rewards for investments.

Fidelity Rewards Visa Signature Card

If you’re interested in retirement, health, or college savings, the Fidelity Rewards Visa Signature Card could be a great choice. This card has a $0 annual fee and you can earn 2% cash back per dollar spent on eligible purchases in the form of Reward Points. You can redeem 5,000 Reward Points for a $50 deposit into your eligible Fidelity account. Eligible Fidelity accounts include 529 College Savings Plan accounts, Traditional and Roth IRAs, Fidelity HSAs, and more.

TD Ameritrade Client Rewards Credit Card

The TD Ameritrade Client Rewards Credit Card offers a simple earning rate and a big bonus for TD Ameritrade account holders. This card has a $0 annual fee and you can earn earn 1.5% rewards on all eligible purchases. You’ll receive a 10% bonus when you redeem your rewards for cash back into an eligible TD Ameritrade brokerage account, so this card makes the most sense if you want to pad a brokerage account.

Barclays Upromise Mastercard

The Barclays Upromise Mastercard is designed for use with a 529 College Savings Plan. You’ll earn 1.25% cash back on every purchase you make, which is a decent return. However, if you link your Upromise Program account to an eligible 529 College Savings Plan, you’ll receive a 15% bonus on your total cash back at the end of each billing cycle. So if you earn $100 in cash back, you’ll receive $115 in your 529 Plan. For college savings, those numbers are hard to beat.

Schwab Investor Card from American Express

Amex has partnered with Charles Schwab to create the Schwab Investor Card from American Express. This card has no annual fee and earns 1.5% unlimited cash back on all purchases. Cash back is automatically deposited into your eligible Schwab account. If you’re looking to build your Schwab investments, this card could help you boost them with cash back from everyday purchases.

American Express Platinum Card for Schwab

For one of the best travel credit cards that also comes with Charles Schwab benefits, you might consider the American Express Platinum Card for Schwab. This card has the same benefits as the Platinum Card from American Express, but you have the added bonus of being able to deposit Amex Membership Rewards points directly into your eligible Schwab account.

Membership Rewards points convert at a 1:1.25 ratio when you deposit them into a Schwab account. This means 60,000 Membership Rewards points would equal a $750 deposit.

Even better, you can also receive a Schwab appreciation bonus each year if your Schwab holdings meet certain thresholds. You’ll receive a $100 statement credit if your qualifying Schwab holdings are equal to or greater than $250,000 or a $200 statement credit if they’re equal to or greater than $1 million.

The Morgan Stanley Credit Card from American Express

This card is similar to the Amex Schwab Investor Card, except this one is a partnership with Morgan Stanley. With this card, you can earn 2X points on airfare purchased directly from airlines, 2X points at U.S. restaurants, 2X points at select U.S. department stores, 2X points at select car rental companies, and 1X points for all other eligible purchases.

If you take advantage of these bonus categories, you can earn a lot of Membership Rewards points and deposit them straight into a qualifying Morgan Stanley brokerage account. Membership Rewards points convert at a 1:1 ratio when you deposit them into a Morgan Stanley account, which means 60,000 points would equal $600.

The Platinum Card from American Express Exclusively for Morgan Stanley

If you want to invest with Morgan Stanley by using a premium travel card, then The Platinum Card from American Express Exclusively for Morgan Stanley would be the perfect option for you. It comes with the same benefits as the Platinum Card from American Express, but you can also convert your Membership Rewards points into a deposit to your qualifying Morgan Stanley brokerage account.

Travel purchases net you the most rewards with this card so they are the best way to earn rewards to increase your Morgan Stanley investments.

Bank of America Cash Rewards Credit Card

With the Bank of America Cash Rewards Credit Card, you can earn valuable cash back that can be redeemed as contributions to a qualifying 529 Merrill account. This card has a $0 annual fee and earns 3% cash back on the category of your choice; 2% cash back at grocery stores and wholesale clubs (on the first $2,500 spent each quarter in the 2% and 3% categories combined); and 1% cash back on all other purchases. This makes it easy to build up a Merrill investment savings account by making everyday purchases.

You can earn even more rewards if you’re also a Bank of America Preferred Rewards member. To become a member, you’ll need to open a personal checking account with Bank of America and then enroll in its no-fee rewards program. Then, as long as your three-month combined balance between eligible Bank of America and Merrill accounts reaches a certain threshold, you’ll earn bonus credit credit card rewards.

Here are the thresholds and bonuses:

  • Combined balance between $20,000 to $50,000 – Receive a 25% bonus on your credit card rewards
  • Combined balance between $50,000 to $100,000 – Receive a 50% bonus on your credit card rewards
  • Combined balance more than $100,000 – Receive a 75% bonus on your credit card rewards

At that highest tier, that means that your 3% reward category actually becomes 5.25% cash back that you earn on your purchases. That’s a pretty major amount of cash back that you can then invest.

2. Use cashback credit cards to fuel your investments

The best cashback credit cards allow you to earn valuable rewards on a variety of purchases. Some offer an unlimited, flat amount of cash back on every purchase, whereas others offer bonus cash back in certain categories. But no matter what you want to invest in, you can leverage the cashback rewards from these cards to start investing now or to continuously pad your existing investments.

So instead of using the cash back you’re earning from credit card purchases toward travel, gift cards, or statement credits, you can cash it out and invest it. This is an easy way to grow any type of investment without changing your routine or spending habits. Use cashback credit cards to make everyday purchases, reap the rewards, and then invest them.

Here are a few cards that offer generous, yet simple cashback rewards:

3. Cash out your credit card rewards and get into real estate

Cashing out your credit card rewards isn’t normally advisable if you’re using a travel credit card. Travel rewards cards can offer great value for your points or miles when you use them toward award travel deals, but these same points and miles are typically not worth as much in the form of cash back.

But with the danger of travel rewards devaluations looming, travel redemptions aren’t always the safest bet. Airline and credit card rewards programs can change their policies at any moment, sometimes without notice. In many cases, these changes cause your points or miles to suddenly be worth less when redeemed for travel. This is called a devaluation, and it happens frequently.

Instead of hoarding your points and miles, you can use credit cards for real estate investments. Real estate is typically a safe investment if you know what you’re doing because people always need a place to live or work. It can be difficult to put aside money necessary to get started in real estate investing, but if you have credit card rewards, saving up can get a lot simpler. You can buy investment properties with credit card points by making the decision to cash out your rewards instead of using them for travel.

That is exactly what our resident credit card and award travel expert Brandon Neth did when he and his wife used over $28,000 in credit card rewards to fund the purchase of a multi-family investment property. They can still earn and use points for travel, but they also now have investments that can earn them money for the foreseeable future.

4. Cash out your credit card rewards and get into easy-to-use investment apps

If you’re interested in stocks, you can use credit card rewards to start investing in the stock market. In the same vein as investing in real estate with credit card rewards, you would need to cash out your rewards and use the cash to start investing.

If you’re new to investing, there are plenty of options to get started. Even better, you can start small with companies like Stash, Robinhood, and Acorns. They can all be accessed from your phone, which makes it simple to monitor your stocks on the go.

Stash

Stash takes the complication out of investing by making it simple for new investors to learn how stocks work. You can start investing in fractional shares of companies and ETFs with $1 or less, so there’s no huge commitment if you’re just getting started.

You can choose between different Stash plans that offer access to personal investment, retirement, and custodial accounts (for your kids). You can also check your accounts straight from your smartphone, and browse through hundreds of stock options and ETFs with ease.

The Stash experts are also dedicated to providing free educational resources. You can learn about budgeting strategies, investment tips, and more.

Robinhood

There is no minimum deposit required to open an account with Robinhood and you won’t have to pay a commision on any of your investments. With a free account, you can instantly deposit up to $1,000 and immediately start investing in more than 5,000 stocks. Even better, you can access your account straight from your smartphone.

As Robinhood completes its rollout of fractional shares investing, you will be able to invest in stocks with as little as $1. So if you want to get a piece of big names like Ford, GE, Disney, and Apple, Robinhood would be a great way to get started.

Acorns

To date, more than seven million people have used Acorns. For as little as $1 per month, you can join and start investing with an Acorns Invest account. This account will allow you to invest in ETFs without any trade fees and you can set up automatic investments for daily, weekly, or monthly intervals. Acorns also offers the Acorns Later retirement account, which is an IRA that can help you save for retirement.

Bottom line

With the travel industry in flux, there’s no telling what might happen to the value of points and miles as we move forward. So if you’re racking up credit card rewards, now might be a good time to start investing them.

If you’re looking to start investing, we recommend doing the proper research beforehand. For real estate investing, take it step by step and figure out the ins and outs of financing and the market first. For stocks, focus on what you need to know about starting in the stock market before you begin making random investments.

If you put in the time and effort, your credit card rewards can become even more valuable for you when you invest them.

Stash Benefits

  • Get $5 to make your first investment
  • Invest in stocks, bonds, and ETFs
  • Fractional shares available
  • Start investing with just $1