5 Ways to Turn Credit Card Rewards Into Real Wealth

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Wise Bread Picks

• Travel Rewards Credit Cards
• Cash Back Credit Cards
• 0% Balance Transfer Credit Cards

Using a rewards credit card is an easy way to pocket a few hundred dollars a year in cash back rewards, or earn free travel. And if you're willing to put in the effort, you'll find there are plenty of ways to parlay your points into something more meaningful and long-lasting.

1. Invest your cash back for the long haul

The simplest way to make cash back rewards even more rewarding is to put the money into a retirement account and let compound interest work its magic. For example, we've worked out how to save over a thousand dollars a year using credit cards.

Let's say you banked your $1,000 in rewards and savings and invested them in a Roth IRA each year for 20 years. If you earned an average return of 6 percent, you'd have almost $40,000 after 20 years, before fees.

2. Invest in experiences

Ask any dying person what they value most, and it won't be money they speak of. Most people look back on their lives and cherish the memories they've made — the sight of beautiful places, the laughter of their children, and the life-changing moments they've spent with the people they love.

Travel rewards cards may not help anyone grow rich, but they can help them afford a wide range of experiences that may otherwise be out of reach. An Alaskan cruise may fit into even a modest budget with the smart use of credit card rewards. Meanwhile, a $1000+ economy flight to Europe can be had for as little as 45,000 American Airlines frequent flyer miles, which you can earn with an American Airlines credit card.

Used wisely, travel rewards can help families make memories they'll cherish for a lifetime. At the very least, they make it possible to travel farther, participate in more activities, and stay longer once you're there. (See also: How to Earn a Free Vacation in 9 Months With Credit Card Rewards)

3. Donate rewards to a worthy cause

Even if you aren't remotely interested in spending rewards, you can make a difference. Some credit cards give rewards directly to charities. Other credit card programs let you donate your points to charity, letting you turn your regular spending into a boon for someone else.

While each credit card rewards program works differently, most make it possible to donate your rewards to causes you believe in. And if you don't want to donate through your issuer's official program, you can always simply give the cash back you earn to your favorite charity.

4. Use rewards to pay down debt and save money on interest

If you have credit card debt, you shouldn't be chasing credit card rewards. But if you have other debt that you'd like to pay off sooner, like a car loan, you can rack up cash rewards and make an extra payment each year. This will help you reduce interest on that debt as well as pay it off sooner.

5. Avoid a high-interest loan

If you have a huge expense coming up and need to take out a loan, you can avoid interest payments and earn rewards in one fell swoop. With a credit card that offers 0% APR on new purchases you essentially get an interest-free loan for a limited time.

For example, let's say you plan to finance a roomful of furniture to the tune of $5,000. You want to pay it off over a year or so, and hope to avoid huge interest payments. You can get a card that offers 0% APR for the first 15 months, allowing you to pay off that $5,000 interest free. Remember though that you have to stay committed to your plan to pay off that amount during that period. Rewards cards typically charge higher interest rates. If you don't think you'll be able to pay off your balance, you'll want instead to look into low interest credit cards to keep a handle on your debt. Before you pursue rewards, make sure you're prepared to use credit responsibly.