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Credit cards are great for relieving you of your hard-earned money faster than you can say ‘swipe.’ However, did you know that some credit cards can actually help you save? Whether you’re trying to put money aside for a rainy day, saving for college, or want to sock money away for retirement, there are credit cards that will help you do exactly that.
Indeed, with virtuous credit cards, you can have your cake and eat it too. Virtuous credit cards are a twist on cash back credit cards. Instead of getting the earnings paid out in cash, you can have the credit card attached to a retirement or savings account and have the cash back earnings deposited directly into your account.
Several virtuous credit cards offer higher than average cash back rewards. Fidelity Investments’ Retirement Rewards card and Schwab Bank Invest First Visa credit card will deposit the equivalent of 2% cash back on your charges into your retirement or investment account. Visa’s NestEggz card lets you earn 1% cash back towards your retirement savings, and when you shop with their partner vendors, you earn additional cash back on purchases, averaging from 2-6%. The sponsoring banks want your business, so they’re willing to pay out higher than average cash back rewards into your retirement or investment account.
One drawback of some of these cards is the need to open an account with the financial service company sponsoring the card. For greater flexibility, look for cards that allow you to designate your regular savings account for the cash earnings. Bank of America’s Accelerated Cash Rewards American Express Card, awards you a 1.25% cash earnings for each dollar you spend, and there is no cap on the earnings. The Discover More family of credit cards lets you earn between 1 – 5% cash back on your purchases, and again, you can choose to have the cash earnings electronically deposited into a savings account of your choosing.
To really make virtuous credit cards work for you, make a habit of charging all your household expenditures to the card linked to your savings account. To maximize earnings, consider paying bills like utilities, telephone and cable via your credit card. Over the course of one year, the earnings can add up to some real change. It won’t turn into a nest egg, but keep it up over several years, and virtuous credit cards can create a comfortable cash cushion.
Of course, you want to follow the usual rules for earning rewards with credit cards: never keep a balance on the card and never use the card for ATM withdrawals. Otherwise, your earnings will quickly be eaten up by interest charges and ATM fees.
