With the current state of the Canadian dollar, some people are adjusting their travel plans or reconsidering their strategies with reward points.

Did you know that it is possible to use credit card points to invest? If you don’t think you’ll need your points any time soon, it may be worth investing them in mutual funds. You can do this tax-free by investing your points in a TFSA, RRSP or FHSA, for example.

Investing With Our Credit Cards Points

Many institutions offer the possibility of using your reward points directly to invest, whether for savings or financial independence.

Saving and Investing With Points

Investing is a great way to take advantage of reward points when there’s no travel goal in sight.

Although the exchange rate remains higher when they are used against travel expenses, it is important to remember that this is sleeping money in the form of points.

Reward Points for Financial Products

Let’s take the example of the National Bank of Canada rate.

With 60,000 points, they can be exchanged for a $500 contribution to a TFSA account for investment purposes.

When compared to the “best rate” of 55,000 points against a $500 travel discount, at first glance, the points are not optimized. In fact, you “lose” 5,000 points, or a value of ~$45.

On the other hand, if there’s no trip on the horizon, it may be preferable to put that $500 to work, optimize our tax return or pay off debts (mortgage, line of credit, etc.) rather than leave it in the form of points.

According to Goldman Sachs Bank, the average annual return of the S&P 500 has been around 10.5% for the last 140 years.

Points Redemption Rates for Investing

To access financial products, you need to open an account and become a customer of the bank.

Here is the number of points required by each financial institution to invest or reduce your debt.

Where Can You Invest Your Points to Turn Them Into Cash?

As you can see, some exchange rates come close to being used against a Statement credit on travel expenses.

Investing in the Stock Market With Points

At the start of the pandemic, I had liquidated the majority of my reward points in order to increase my savings contributions and invest.

Over an 18-month period, my investments grew by more than 20%.

Since we didn’t know when we’d be able to leave again, I found another way to monetize these points despite a slightly disadvantageous exchange rate in the first place.

If you’re facing a significant increase in mortgage payments with skyrocketing rates, you can turn to your points to ease the burden.

Indirect Methods for Investing With Points

However, when there’s a trip on the horizon, it’s really best to redeem reward points for travel discounts. Then, invest the amount saved.

Make Your Money Grow Fast With Points

It’s just a matter of perception, but there are two ways to look at it:

The basic rule of point hunting, remember, is not to create needs.

So, to optimize your points and your budget, use your points and cash back on expenses you would have made anyway.

Money Is Money

During my trip to Turkey, I had booked a tour package with G Adventures. With them, there are several ranges of service for the same journey.

I carefully chose the one that suited me and then applied my National Bank rewards points to the fees.

I reiterate, I selected the circuit that satisfied me and not a more luxurious circuit simply because I had a “big discount”.

Secondly, would I have gone on the trip even if I didn’t have so many points? In my case, the answer is yes.

So by using my points to reduce the cost of my tour, I saved a $500 that I was going to inject into this trip anyway. So I deposited that same amount into one of my investment accounts.

This way of thinking applies to all reward point programs, but also to cashback. Credit cards allow me to save money while pursuing my dream trips.

Unlike direct methods, this allows me to invest my savings anywhere : Wealthsimple, Questrade, Qtrade Direct Investing, CIBC Investor’s Edge etc.

Best Credit Card Offers for Investing in Canada

Bottom Line

More cash flow from savings thanks to credit card points? As savvy investors, we have more money to invest in our long-term financial goals, such as retirement savings or financial independence,while enjoying life to the fullest.

To find out more about investing and personal finance, read our articles and guides:

FAQ