By: Jason Steele
Updated: July 5, 2019
Many people consider credit cards to be a symbol of debt. But that doesn’t have to be the case. In fact, it’s actually possible to use your credit card rewards to contribute to your monthly investments. Here’s how.
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.
6 Credit Cards You Can Use to Make Investment Contributions
1. American Express Platinum Card® for Schwab
This premium rewards card offers you points in the Membership Rewards program, just like other versions of the Platinum Card. However, holders of this version can redeem their points for 1.25 cents each as deposits into an eligible Charles Schwab account. In contrast, most other reward options, like gift cards, travel reservations and merchandise, will return just 1 cent per point redeemed, at best.
This card also comes with numerous travel benefits including a $200 annual airline fee credit, membership in airport business lounge programs and a $100 statement credit toward the application fees for TSA PreCheck or Global Entry (which includes PreCheck). You also get $100 in statement credit annually toward Saks Fifth Avenue purchases. Finally, you’ll receive elite status with Marriott and Hilton hotels, as well as with National and Hertz car rentals. New applicants receive 60,000 reward points, worth $750 in deposits, after spending $5,000 within three months of account opening. There’s a $550 annual fee for this card.
2. Schwab Investor Card® from American Express
If the $500 annual fee for the American Express Platinum Card® for Schwab is a little too expensive for you, you can consider this card, which has no annual fee. It offers you 1.5% cashback on all purchases, and those rewards are automatically deposited into your eligible Schwab account. And while its travel perks aren’t nearly as extensive as the Platinum Card’s, you still get purchase protection, car rental loss and damage insurance, return protection and extended warranty coverage. Finally, you can earn a $100 statement credit after spending $1,000 within three months of account opening.
3. 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 collision damage waiver, travel and emergency assistance services and lost luggage reimbursement. There’s no annual fee for this card.
4. Upromise® Mastercard® From Barclays
This card offers you 1.25% cash back on all purchases, plus a 15% bonus on your total cash back when linked to an eligible 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, with a 3% balance transfer fee. Benefits include free access to your FICO credit score and free two-day shipping and returns through ShopRunner. There’s no annual fee for this card.
5. 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.
6. The Morgan Stanley Credit Card From American Express
This version of the Morgan Stanley credit card has no annual fee. It offers 10,000 Membership Rewards points after you spend $1,000 on new purchases within three months of account opening. You also earn 2x points for airfare purchased directly from airlines, purchases at U.S. restaurants and select U.S. department stores and for car rentals purchased directly from select companies.
You’ll earn an Anniversary Spend Award of $100 from Morgan Stanley after you spend $25,000 in purchases on your card each year by your card anniversary date. And like the Platinum version of this card, you can redeem your points for 1 cent directly as a deposit into your qualifying Morgan Stanley brokerage account.