Credit card rewards are a great way to earn extra money, and people typically make good use of them such as for extra cash to spend as a credit against their bill. But there are many other creative uses for your credit card rewards points, which can help you save money in all areas of your life. Searching for the best credit card rewards can be tiring but are often worth it in the long run. Here are some of the more unexpected ways to use your credit card rewards to revamp your finances in 2019.
Save for Your Future
If you really want to maximize your rewards, you should be saving them for the future. You can deposit your cash-back rewards into a savings or investment account, then watch them add up and earn interest. Another option is to put your cash-back rewards into a retirement account, like a Roth IRA, that you don’t touch until it’s time to retire. No matter what savings vehicle you choose, the key is to funnel all your cash back into the account and leave it there until you need it.
Save for Your Kid's Future
College is getting more expensive every year, and with so many other financial obligations, saving for college can be challenging. Putting your cash rewards toward a college fund when your kids are little can go a long way. Open a 529 college savings plan and deposit all your credit card rewards into it every single year. When the time comes to pay for college, your cash rewards will have grown, and you won’t pay taxes on qualified withdrawals.
Help Out Your Kids at College
Once your kids get to college, you’ll find there’s a lot more to pay for than just tuition. They need money for books, their dorm room and for food. Some credit cards allow an authorized person to redeem the rewards points earned on the primary cardholder’s account. So if your child has a credit card, or another account like savings or checking, they can easily redeem the rewards points you’ve earned to pay for their late-night study snacks. This is a nice way to slip your kids a few extra bucks at college without having to drain your savings.
Pay Off Your Student Loans
Are you still paying for your own college experience? Your credit card can be used to chip away at those loans so you can pay them off once and for all. Simply let your rewards points or cash-back rewards accrue, and when your balance reaches a certain level — either one you’ve set or the minimum amount for your card — redeem the rewards and put the money toward your student loans. To pay your loans off faster, make sure you still pay your minimum balance each month, and any additional payments you make — using your credit card rewards or otherwise — goes towards reducing your principal balance.
Chip Away at Your Mortgage
It can be challenging to find “extra” money to throw at your mortgage so you can pay it off faster. But by exchanging your rewards points for cash and directing that to your mortgage, you can put a little extra money towards your principal balance every month, so you’ll pay less interest overall and pay off your mortgage faster.
Build Your Emergency Fund
Finance experts agree that the first step toward financial independence is to have an emergency fund with three to six months of living expenses set aside. This will protect you in the event of a job loss, medical emergency or another unforeseen crisis. It’s not easy to put that money aside for emergencies, especially if you’re just starting out or are paying student loans. Taking the money from your credit card’s cash back or rewards program and putting it straight into your emergency fund will help you get where you need to be faster.
Go On the Vacation of a Lifetime
If you travel frequently, you might have a travel credit card that gives you miles or points that you can use to save on even more travel. You could just use your rewards to take a few dollars off your next trip. Or, you could save up those miles and, when you have enough, trade them in for a trip you’ve always dreamed about. Save up enough points and you can pay for airfare, hotel, a rental car — even meals and spending money — at an exotic destination. Save for your dream trip even faster by looking for a travel credit card that offers a welcome bonus.
Plan a Family Reunion
Family reunions are an event for everyone to look forward to, but with so many people involved, it can make planning and paying for things that much more complicated. Some credit cards allow you to pool your rewards points with other people who have the same card. By pooling points with your family members, your whole family can contribute towards paying for everyone to get together at a family reunion.
Financial experts and self-made millionaires agree that investing is one of the best ways to build wealth. Putting your cash-back rewards or rewards points into an investment account is a great way to build yourself a nest egg. Whether you’re adding to an existing account or starting a new one with your rewards, regular contributions, even if they’re small, will help you build wealth.
Do Your Holiday Shopping
If you’re getting a new rewards credit card that comes with a welcome bonus, you could use those points to make a big dent in your holiday shopping. If you’re already spending the money, it doesn’t hurt to get rewards or cash back. Depending on how many people are on your shopping list, that bonus can cover all or most of your holiday shopping.
Give to Charity
You can donate your rewards to charity directly by selecting this option through your credit card issuer. Some charities will take rewards points to use for necessary travel or to fund their efforts. The IRS says rewards points are discounts, not income, so you can’t take a tax deduction for the points. You also have the option to redeem your points for cash and send a cash donation to the charity. Choose this option if you want to get a tax deduction for your donation.
Use It for 'Fun' Money
Everybody has a purchase they’d like to make, if only they had the “extra” money. Perhaps putting aside those credit card rewards will let you save up the money you need to buy that special item you’ve had your eye on but couldn’t justify until now.
These creative ways to use your credit card points or miles will make them feel like the rewards they are supposed to be.
More on Credit Cards:
- 3 Killer Credit Card Combos for Travelers That Earn You (Almost) Quadruple the Rewards
- Best Cash-Back Credit Cards of 2019
- Sweeping Changes Are Coming to Credit Card Rewards Programs — Use Your Points Now
About the Author
Karen Doyle is a personal finance writer with over 20 years’ experience writing about investments, money management and financial planning. Her work has appeared on numerous news and finance
websites including GOBankingRates, Yahoo! Finance, MSN, USA Today, CNBC, Equifax.com, and more.