Did you know that you could boost your investment or savings account while making everyday purchases with your credit card in 2023?
There are credit cards on the market that will reward as much as 2% on every purchase that you make and then automatically deposit those cash back earnings into the account of your choice.
So while you’re spending, you also could be earning for your future.
Team Clark has analyzed the credit card market to spotlight some of the best options for saving and investing your rewards.
We also have talked to money expert Clark Howard to develop the optimal strategy for investing credit card rewards.
Table of Contents
- What Types of Credit Card Can You Use for Investing?
- What Types of Investing Can You Do With Credit Card Rewards?
- Best Rewards Credit Cards for Investing and Saving
- Clark’s Picks and Strategy for Investing Credit Card Rewards
- Final Thoughts
What Types of Credit Card Can You Use for Investing?
As long as you’re not required to use your credit card rewards for specific things like airline miles or hotel nights, there should be way to convert those rewards into an investable asset.
You can get a check from some cash back cards and then invest the money yourself. But there are cards out there that simplify the process for you, making automatic deposits to an account that you choose.
For the purposes of investing and saving credit card rewards, there are three different types of rewards card that are ideal candidates:
Brokerage-Branded Credit Cards
These are credit cards that carry the name of some of the biggest financial brokerage companies in the United States.
In exchange for using their branded card, you’ll receive rewards that are geared toward investing in their products or services.
For example, the Fidelity Rewards Visa Signature Card offers 2% cash back on all your spending as long as it is applied to a Fidelity investment product.
This can be an easy, passive way to turn credit card rewards into long-term investments.
We’ll focus on this type of card extensively later in this roundup.
Cash Back Credit Cards
No matter what your savings goals are, keeping a solid cash back credit card on hand can be a smart decision.
With cards such as the Citi® Double Cash Card – 18 month BT offer or the PayPal Cashback Mastercard, you can earn unlimited 2% back on everything you purchase. That percentage is better than many of the brokerage-branded cards on the market.
You can request a check or direct deposit for your cash back earnings with these cards, which would allow you to then invest your gains.
Select Local Bank or Credit Union Credit Cards
Another place to look for a credit card that will help you invest or save your rewards is your local credit union or bank.
There are often good credit card offerings on the local level, and some of those may have ties to investment products offered by that bank or credit union.
Since the options vary from community to community, we won’t spend too much time on this type of card in this article.
However, you should check with your local banks and credit unions as you’re doing your due diligence in this process. They could have a great fit for investing credit card rewards.
What Types of Investing Can You Do With Credit Card Rewards?
The concept of investing for the future, while simultaneously using a credit card in the present, may seem counterintuitive on the surface.
But with some discipline and the right rewards card, it can be done effectively.
Some of the credit cards on this list will help you invest and save efficiently by automatically depositing your rewards into investment products. Others will give you the cash value of your rewards, which you can then turn into savings or an investment on your own.
Some examples of the type of investing or saving funding you can fund with your credit card rewards include:
- Retirement accounts, such as a traditional or Roth IRA
- Brokerage accounts, which allow you to invest in stocks, bonds or commodities
- College savings plans, such as a 529 plan
- Long-term savings vehicles, such as money market accounts or CDs
- Short-term savings accounts, which could help you build up your rainy day fund
Best Rewards Credit Cards for Investing and Saving
For this roundup, Team Clark has reviewed several of the top brokerage-branded credit cards as well as the top flat-rate cash back credit cards on the market.
Here’s what you need to know about each of the top options:
Who This Card is For: If you already have a Fidelity investment account, this card should be an easy fit into your wallet as a passive way to boost your investing. Even if you’re not a Fidelity customer, the unlimited 2% cash back makes it worth looking at opening an account there. There are free investing products available that you could fund with this card.
This card is Clark Howard’s top choice for investing your credit card rewards.
Who This Card Is For: This card is for everyone whether you’re saving and investing or not. It’s in Clark Howard’s wallet, and it is one of the top cards he recommends because of the unlimited 2% cash back and the lack of an annual fee. You’ll need to invest or save this cash back on your own, but it can be a great way to ensure a solid return on all of your spending.
This card is on our top rewards credit cards list, and is one of Clark’s top choices for investing and saving rewards.
Annual Fee: $0.00
Rewards Program Details:
Earn an unlimited 1.5% cash back automatically deposited into your eligible Schwab account for purchases made with your card.
Who This Card Is For: You must be a Charles Schwab account holder in order to apply for this credit card, and that account must remain active in order to get the 1.5% cash back reward. Though it does not offer the top cash back rate available, this card is a “set it and forget it” option for Schwab investors.
Annual Fee: $0.00
Rewards Program Details:
Earn 1.25% Cash Back Rewards. Earn 1.25% bonus cash back rewards on your purchases if your Upromise Program account is not linked to a College Savings Plan. Earn 1.529% Cash Back Rewards on your purchases when your Upromise Program account is linked to an eligible College Savings Plan.
Upromise Round Up lets you round up your purchases to the nearest dollar, based on the limit you set (from $1 to $500). The total Round Up Amount is considered a purchase and converted to cash back rewards.
Who This Card Is For: This card could make sense for savers who are already committed to funding a 529 college savings account. The 1.25% cash back is pretty low compared to some other cards on this list or the best cash back cards on the market. However, linking the card to your College Savings Plan could boost the rewards enough to make it make sense for you.
Clark’s Picks and Strategy for Investing Credit Card Rewards
I sat down with money expert Clark Howard to talk about strategies for investing credit card rewards.
He responded to my first question with four words of advice for everyone:
“Fidelity, Fidelity, Fidelity and Fidelity,” Clark says.
“Get that 2%. Fidelity is a brilliantly run company. They have this ability to cut through the clutter and offer certain things that are clearly better than the competition. The 2% credit card is a perfect example.”
While the 2% cash back is a huge selling point for the card, Clark says that Fidelity’s investment menu makes the card even more enticing.
“Check out the Fidelity Zero Funds,” Clark says. “They have no commission and no ongoing expenses.”
Team Clark’s Christopher Smith has an in-depth review of all the products Fidelity has to offer here.
If you’re unwilling or unable to go the Fidelity Rewards card route, Clark says the next best idea is to get a no-annual-fee credit card that rewards 2% cash back and then make the investments yourself.
Clark recommends the Citi Double Cash for this. He carries it in his wallet.
Team Clark has long recommended that you use a credit card for most of your daily transactions thanks to the added purchase protections and benefits that you receive from most card issuers when compared to a debit card or cash.
So it should seem like a natural progression in the process that we’d recommend getting a rewards credit card that could help you with saving for your next big purchase, education or retirement goals.
Clark recommends that you seek a 2% cash back return on your credit card purchases, and then invest those rewards into no or low fee vehicle for your desired investment goal.
But be careful!
Team Clark always advises against spending more than you should just to get the cash back returns. That can lead to carrying a balance at a high-interest rate, which will negate any benefits you may receive from the spending rewards.