Credit card rewards help me get rich. here’s how

Image source: Getty Images

I put my rewards to good use – and you could too.


Key points

  • I have a credit card that pays me cash back and I deposit that cash back into an investment account.
  • I add hundreds of dollars to this account every month and use it to invest in ETFs.
  • This means that my credit card spending helps me build wealth.

Credit cards sometimes get a bad rap because if you have a balance and don’t pay off all of your cards, you could end up paying a lot of interest. This may affect your ability to build wealth.

But, rather than costing me money, my credit cards make me richer. Here’s how it goes.

Creating Wealth Through Credit Card Spending

My credit cards help me build wealth because of the structure of my rewards program.

Check it out: This card has one of the longest 0% interest intro periods.

More: Consolidate your debt with one of these top-rated balance transfer credit cards

I chose to sign up for a rewards credit card that gives me cash back on all purchases I make. So every dollar I spend earns me money – and I load whatever I can onto the card to take advantage of it. This means I get a lot of rewards on daily purchases of essential items that I should be buying anyway.

When I receive this cashback, the money is deposited directly into an investment account. It never reaches my bank account so I don’t even see it and don’t even remember it coming. The funds are automatically deposited with my brokerage firm, and I can then use the money to invest in assets of my choice.

I chose to buy exchange-traded funds (ETFs) because I don’t like picking individual stocks. Since I pass a lot on my credit cards and earning a reasonable amount of cash back because I get rewards from being part of my card’s loyalty program, I end up having hundreds of dollars a month deposited into my brokerage. Everything is then invested in an index fund that tracks the performance of the S&P 500 (a financial index made up of around 500 of the largest American companies).

The S&P 500 has consistently produced average annual returns of around 10%. So, every month, I invest hundreds of dollars in my brokerage without any effort on my part – only through my credit card spending and the rewards I earn. I expect that over time I will earn around 10% per year on these effortless investments. And, as I earn returns, that money will be reinvested so I can enjoy compound growth.

It helps me a lot to build wealth because investing $200 a month in an investment that produces average annual returns of 10% would leave me with an account balance of almost $400,000 after 30 years. This is all money that I will end up with just because I am earning lots of credit card rewards and investing this money for my future.

Could this strategy work for you too?

Using credit card rewards for investing will work for anyone who signs up for a cash back card that lets you deposit money into an investment account. If your card offers you cash back in the form of a statement credit, this may be a little more difficult as you will need to have the discipline to manually transfer your cash back amount to an investment account.

Of course, how much you’ll get depends on how much you spend on your cards each month and how much you earn in rewards from that spending. But anything you can add to your investment account by using your credit card rewards wisely will help improve your financial situation in the long run.

The best credit card waives interest until 2023

If you have credit card debt, transfer it to this top balance transfer card guarantees you an introductory APR of 0% in 2023! Plus, you won’t pay any annual fees. These are just a few of the reasons why our experts consider this card a top choice to help you control your debt. Read our full review for free and apply in just 2 minutes.

Comments are closed.