Earning Money for Investments With Credit Cards?

If someone were to tell you that you could save for retirement by racking up purchases on a credit card, you might think he was off his head.

But a variety of brokerages are offering credit cards that allow you to earn points as you spend and then to turn those points into cash for retirement accounts. The more you spend, the more rewards points you earn for your investments.

What's the catch? You must have an account with the brokerage firm offering the credit card; you can't divert the rewards into an account you have set up elsewhere.

Adding to Your Investments

The Fidelity Investments Rewards Signature Visa Card, for instance, lets you earn 1.5 points for every dollar you spend up to $15,000 per year. You provide your Fidelity account number when you apply for the card. Then once you reach 5,000 points, you can have them automatically converted to cash -- 5,000 points equals $50 -- and deposited into your account.

The Ameriprise World Financial Mastercard lets you earn up to 1.25% cash back when you redeem points into a qualifying Ameriprise financial account and up to 1.5% cash back when you redeem points for a certificate for discounts on Ameriprise Financial Planning Service fees.

With the Edward Jones Personal Credit Card, meanwhile, you can redeem rewards points for your Edward Jones traditional IRA or Roth IRA account.

These are just a few of the various options on the market.

Credit Cards for Investments: A Good Idea?

That depends. Obviously an investment rewards credit card isn't intended as a primary strategy for saving for retirement. But if a credit card enables you to add a bit to your retirement savings and it's with a brokerage you want to use anyway, then it might be worth mulling over.

Consider the following tips:

• Read the fine print.

Evaluate investment rewards credit card offers as you would any other. Read the terms and conditions carefully to check whether there's an annual fee, how rewards points are earned and what the limits are. If a hefty annual fee wipes out any savings you might achieve, then forget it.

Watch Out For High Interest Rates

• Don't carry balances.

If getting a new credit card will only tempt you to rack up credit card debt, then find another way to boost your savings. Credit card interest rates are high, and finance charges will offset any rewards points you earn for your investments account.

• Watch your spending.

Even if you don't carry a balance from month to month, an additional credit card will hurt you if it leads you to spend more than you should. Rather than getting a credit card to help you save, review your budget to find areas where you can cut down on spending. Set that money aside to boost your retirement savings if you haven't maxed out your annual contributions to an IRA or 401k. Or, if you don't have an ample emergency fund, sock away that extra cash into a high-yield savings or money market account, or find the best CD rates and begin building a CD ladder.

Finally, remember that no credit card can replace a good financial strategy. At the most, these credit cards can boost your savings a bit. You'll still need to address your financial future the old-fashioned way -- with sound planning, good counsel from trusted advisers and commitment.

How Long Should You Keep Records of Investments and Other Financial Documents?

If your closets and file cabinets are overflowing with financial documents that date back to the days before DVDs, iPods, and the World Wide Web, then it's time to sort through and perhaps do some serious shredding.

Whether you're a pack rat or a merely an overly conscientious record keeper, chances are you holding on to stuff you don't need, which, besides taking up space, makes it difficult to find the papers that really do count, such as backup for taxes and proof that you made payments.

That said, you don't want to go overboard. Although brokerages, banks and credit card companies maintain online versions of statements, the institutions vary in how long they keep them, and it's a good idea to store your own records for as long as you need them.

Here's a rundown on some of the key financial records you should keep and for how long:

Tax Records

What about all those receipts, W-2 forms and bank statements for backing up your tax returns? The guideline for how long you should keep tax records depends on what you're trying to prove and how that relates to the period of limitations -- the time in which you can amend your return or the IRS can assess additional tax. For good-faith errors, the period is three years after you file your taxes. But the limitation goes up to six years if you fail to report 25 percent or more of your income and seven years if you claim a loss from worthless securities or bad debt deduction. The limitation period is indefinite for fraud or failing to file a tax return, but assuming you've done neither of those and your records are squeaky clean, you're safe if you keep them three years. Keep them seven years to be iron-clad safe.

Utility Bills and Credit Card Statements

Unless you need them to claim deductions for tax purposes, you don't need to hang on to these bills once you've gotten the next statements showing your payment has been credited.

Home Purchase and Improvement Documents

Hang onto records showing how much you've invested in your home, both in the purchase as well as home improvements and any expenses related to the sale of the home. Money you paid to improve and sell the home will lower your profit for tax purposes. Once that gain or loss is reported on your taxes, you'll need to keep the records another seven years.

Checking Account and Savings Account Statements

Unless you're self-employed and need to show proof of income, most experts say you don't need to keep monthly bank statements for longer than a year. Of course if you're in the middle of a dispute, keep the statements until the problem is resolved.


Keep loan documents and statements until you've paid off the loan, and then just keep the document showing you paid in full.

Brokerage Statements for Investments

Keep the records showing how much you paid for the investments, including fees and commissions and any reinvestment of dividends, which you'll use for figuring your capital gain or loss when you sell the investments. It's a good idea to save end-of-year statements, but you don't need the monthly statements, unless they show purchases.

Retirement Accounts

Keep records of contributions and withdrawals from retirement accounts indefinitely. You'll need proof that you already paid taxes on any non-deductible contributions you make. Keep your annual retirement account statements until you retire.

Pay Stubs

Keep them for a year and make sure they match up with your annual W-2 your employer sends at tax time. After that you can shred them.

Consider getting a safe deposit box to keep vital documents, such as savings bonds, a certificate of deposit, deeds, leases, car titles, birth certificates, copies of wills and others you don't want to lose.

Talk to your financial advisor if you're in doubt about what to keep or toss out, and don't forget to shred any documents with your personal financial information before trashing them.

The Four Types of IRAs

Individual retirement accounts were created in 1974 as way for people to make investments for their golden years when their companies didn't offer them pensions. Today they're a staple in retirement planning.

IRAs come in several varieties. With a traditional or Roth IRA, you can set up a retirement savings account with a bank, stock broker, or mutual fund, and have your contributions invested in money market accounts, CDs, stocks, and mutual funds. Here's a look at those two types of plans as well as two types of employer-sponsored IRAs:

Traditional IRA

Contributions to a traditional IRA may be deductible from your income taxes, depending on your income tax filing status, and your account grows tax free until you make withdrawals. Then you pay income taxes on money you take out, and there are minimum distribution requirements starting at age 70 1/2. You'll get hit with a 10% federal tax penalty plus income tax on the withdrawal amount if you take money out before age 59 1/2. You can contribute up to $5,000 to a traditional IRA this year and an additional $1,000 if you're 50 or older

Roth IRA

The Roth IRA, created in 1997, was off-limits to high-earners until this year, and it continues to offer appealing advantages to younger investors. Contributions to Roth IRAs are made with after-tax money, and distributions are tax-free--a key difference from the traditional IRA. In addition, the Roth allows some tax-free withdrawals before retirement, including up to $10,000 for a first home after the account has been established for at least five years and money for children's college educations. There is no minimum distribution level for Roth IRAs after age 70 1/2--another difference from traditional IRAs, so you take out only the money you need when you're retired. This year you can contribute up to $5,000 to a Roth IRA and an additional $1,000 if you're 50 or older.


A SEP--or Simplified Employee Pension--is an IRA set up by an employer for its employees. It's called a simplified plan because it's easy for the employer to set up, and the administrative costs are lower than they would be for a more complex plan. The big difference between a SEP and SIMPLE IRA is that only the employer contributes to the SEP. The contribution obligations are flexible, and a company of any size--even a sole proprietor--can set up a SEP IRA for its employees. If you're self-employed, talk to your financial adviser about whether you should consider setting up a SEP IRA for yourself. This year employers are limited to contributing up to 25% of an employee's compensation or $49,000, whichever is less.


A small employer can set up a Savings Incentive Match Plan for Employees IRA. Employers can match employees' contributions dollar for dollar up to 3% of pay or 2% of pay for an employee who elects not to contribute to the plan. An employer has to contribute to a SIMPLE plan, and an employee may contribute. As an employee, you can contribute up to $11,500 in 2010 to a SIMPLE IRA, and if you're 50 or over, you can add another $2,500. You'll face a 10% federal tax penalty if you withdraw money before age 59 1/2, and a 25% penalty if you withdraw anything in the first two years of participation.

With Americans falling short on retirement savings, boosting your contributions to an IRA, no matter which kind you have, is a good idea if you're not already contributing up to the limits.


Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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