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Earning Money for Investments With Credit Cards?

Barbara Marquand | guest writer for GoTalkMoney

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.

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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