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Using a good rewards credit card for your everyday expenses is an easy way to earn free money or travel rewards. The rewards quickly add up when you’re paying for groceries, gas, insurance, utilities, and other necessary bills with your credit card. And if you’re using cards strategically to maximize rewards, you could wind up with plenty of free travel or surprising amounts of cashback.
Once you’re racking up the rewards, the next step is to decide how to use those rewards. Without a plan, it’s easy to wind up wasting this free money. There are actually a number of very productive and fun ways to use your rewards.
Below, we’ve listed some of the top ways to use your credit card rewards and make the most of this extra cash.
1. Redeem Your Rewards for Travel
If you enjoy traveling, it’s worth looking into travel rewards credit cards (see our rankings of the best travel rewards credit cards). Travel rewards cards allow you to redeem your reward points through an online portal to use them for travel bookings.
Typically, using this method to book your travel will give you a better conversion rate, so you could end up saving even more. For example, with the Chase Sapphire Preferred (currently our top-rated travel rewards card) you’ll get a 25% bonus on your points when they’re redeemed through Chase Ultimate Rewards. That means instead of getting $100 in cashback, you can get $125 in free travel.
In addition to the redemption bonuses, travel cards often have the best signup bonuses and offer some of the best ongoing rewards. The $1,250 in free travel you can get as a signup bonus from the Chase Sapphire Preferred can go a long way.
You don’t need to be someone who travels constantly to benefit from a good travel rewards card. Using your points for an annual family vacation could also be a great way to take advantage of the opportunity.
The Best Travel Rewards Credit Cards
Chase Sapphire Preferred
Chase Sapphire Reserve
Capital One Venture Card
Vital Dollar rating
Vital Dollar rating
Vital Dollar rating
Redeemed through Chase Ultimate Rewards
If you spend $3,000 in the first 3 months
Earn 2x points on travel and dining
Earn 3x points on travel and dining
Earn 2 miles for every dollar spent
2. Pay for Christmas Gifts
Christmas is an extremely stressful time for lots of families. Many people even find themselves in debt following the holiday period after buying countless gifts for friends and family members.
To reduce the financial strain that the holiday period can cause, it’s a great idea to think ahead and save up your credit card rewards throughout the year. Those points can then be used to pay for Christmas gifts when the time comes.
This is an easy way to put your cashback or rewards to good use. You won’t have to worry about not having the money buy gifts for everyone on your list.
For this approach, I’d recommend a good everyday cashback card to use for the majority of your purchases. The Citi Double Cash card is the best option because it pays 2% cashback for every purchase.
Next, it’s also helpful to have a rotating rewards card like the Chase Freedom Flex card, which allows you to earn 5% cashback on purchases in a specific category that rotates each month. When you’re getting 5% cashback on groceries, those rewards add up fast!
Investing your credit card rewards is a wise way to turn your one-time rewards into something with long-term impact. A lot of people are put off from investing because they feel that they don’t have enough money to invest.
The truth is, you don’t need a huge lump sum to get started with investing, and there are a number of different websites and apps these days that make investing simple and easy to manage. By investing your cashback rewards, you could eventually build a sizeable sum of money without going out of pocket or dipping into your regular savings.
Here are a few great investment options you could consider:
- M1 Finance – By specializing in automated investing, M1 Finance lets you pick your investment strategy. Then all you need to do is periodically transfer your cashback rewards into your M1 account. There are no fees and M1 Finance takes care of all of the complicated stuff.
- Fundrise – With Fundrise, you can invest in real estate for as little as $500. Real estate is a great investment option and Fundrise makes it nice and simple. This could end up being a great long-term investment. You’ll get the benefits of real estate investment with the headaches of managing properties or dealing with tenants.
- Groundfloor – Again, Groundfloor makes real estate investing straightforward and accessible. You can get started with as little as $10, so it’s great for those who are new to investing. You’ll be investing in real estate flips and you can choose the exact projects you want to invest in.
- Robinhood – A popular investment platform, Robinhood makes it easy to invest in stocks, ETFs, and cryptocurrency. You can buy fractional shares, so it’s easy to get started with as little as $5 (and there are no trading fees).
4. Start a Business
If you’ve been sitting on a business idea for some time but haven’t yet taken the plunge and got it up and running, your credit card rewards could give you the opportunity to finally do this!
Lots of people put off starting a new business for fear of failing or because they can’t afford to cover the initial costs. By using your credit card cashback rewards, you reduce the risk since this is essentially free money.
You could use the rewards to take some basic business training, develop a company website, buy inventory or equipment, or cover any other costs that starting your business might incur.
5. Pay Off Your Credit Card Bill
This might not seem like the most exciting or adventurous way to spend your credit card rewards, but it’s sensible and could really help you out if you’re having financial difficulties.
Most credit card companies will allow their customers to use their rewards as credit to offset their existing credit card bill. If you’ve racked up a large bill in the past and have been struggling to pay it off, this might be an excellent opportunity to do that.
If your credit card company doesn’t allow cashback rewards to be used directly to pay off the bill, simply redeem the rewards for cash and then use this to pay it off.
6. Donate to Charity
What better way to put your free cashback rewards to good use than to donate them to a charitable cause? Many of us would love to be able to donate more than we do; it’s extremely rewarding and could truly transform someone else’s life.
Cashback rewards can really add up and simply by using your credit card for all of your regular daily spending, you could free up enough cash to make more regular, sizeable donations. For example, if you use the Citi Double Cash card with 2% cash back rewards and you spend an average of $2,000 per month, that would leave you with $40 in cashback rewards each month. This is enough to sponsor a child through World Vision at $39 per month. You could change the life of a kid without any out-of-pocket expense.
7. Buy Life Insurance
Life insurance is an important part of your financial plan, but it’s often neglected because of cost. Knowing your loved ones will be supported should anything happen to you can give a great sense of peace and relief.
Depending on your age, physical condition, and the amount of insurance you want, you may be able to cover the cost of monthly premiums simply with your credit card rewards. Lots of term policies are extremely affordable. Head to Bestow’s website and you can get a quote in just a few minutes (and they don’t require a physical exam).
8. Build Up an Emergency Fund
Similarly, knowing that you have a savings fund that can be utilized in the case of an emergency is extremely reassuring and sensible.
If you need urgent repairs carried out on your home or car, or you have unexpected medical or family expenses, it’s always a good idea to have some form of emergency fund that can be drawn upon without adding to the stress of the situation with any financial strain or debts.
By transferring your cashback rewards to a high-yield savings account, you could rack up a sizeable pot of emergency savings.
9. Save for College (or Other Goals)
Lots of us have big lifetime goals, either for ourselves or our children or loved ones. This might be going off to college, getting married, buying a first car or home, or retiring comfortably.
Whatever you’re saving for, your credit card rewards could give you a nice little boost and get you well on the way to achieving your goals.
10. Make Home Improvements
Using your credit card rewards to improve or renovate your home is an excellent investment idea. Living in a comfortable, safe home brings a sense of calm and peace to our lives and allows us to truly enjoy the time spent at home with loved ones.
If you’re planning to sell your home in the future, increasing its value through home improvements might also mean you could earn a nice profit when the time comes.
11. Pay Down Your Mortgage
Alternatively, you might choose to pay off a chunk of your mortgage. This will increase your overall net worth, reduce long-term debts, and could save you a significant amount of money in the long run.
Mortgage lenders will let you overpay whenever you wish, so simply redeem the cashback rewards and use them to make one lump-sum payment.
Bonus Idea: Splurge on Yourself!
We might be big advocates for spending wisely and keeping a handle on your financial situation, but there’s absolutely nothing wrong with treating yourself from time to time!
If your finances are in check, why not use your credit card rewards to take yourself out to a nice dinner, buy that new pair of shoes, or treat yourself to something you really want.
These are some of the top ideas when it comes to spending your credit card rewards, but in reality, you could spend them on whatever you choose. The most important thing is that you be sure to take full advantage of the free cash and make the most of your credit card company’s rewards scheme.