1Most of us think of credit cards as a tool for spending. If we choose a card to earn rewards, they are usually for a specific product or service, like travel, or cash back.

And for the average consumer, cash-back rewards are usually fairly small. The majority of credit cards (about 50 percent) offer just 1 percent cash back on every purchase. That equals $1 for every $100 you spend, meaning you have to use your card for just about everything in order to earn any substantial rewards. Among the remaining 50 percent of credit cards, it’s possible to get cash back at higher percentages, but usually the higher rewards only apply to certain types of purchases. You might earn between 3 to 6 percent back on groceries, gas, or travel, for example, but only 1 percent on all other purchases.

Regardless of the percentage of cash back you receive on your credit cards, it usually only amounts to a few hundred dollars a year. A study by the Bureau of Labor Statistics found that the average consumer earns about $180 dollars from credit card rewards in a year, assuming about $1,200 per month on the card at 1 percent cash back. While most people wouldn’t turn down almost $200, the fact is that in the overall scheme of one’s financial life, that’s a pretty small amount.

It doesn’t have to be like that, though. With a few smart money moves, you can actually turn your credit card rewards into an investment.

Making Your Money Work for You

Credit Cards: A Tool For Investing?The easiest way to make your credit card rewards earn money for you is to add them to your existing investment accounts. Even just an extra $180 per year can make a difference when it comes to calculating your compound interest; within 25 to 30 years, assuming a conservative 5 percent rate of return, that money can potentially add more than $10,000 to your retirement fund. Considering it is “free” money that you earn buying lattes and spaghetti sauce now, that’s a good return on investment.

An even easier way to turn your credit card rewards into an investment is to choose a card that does the saving or investing for you. Several card products allow you to invest your cash directly, without any extra steps. These generally fall into one of three categories:

Rewards Savings Accounts. These cards either allow the cardholder to deposit rewards directly into a personal savings account at any time, or establish an interest-earning savings account for the cardholder that can then be drawn upon as needed. Often, these accounts come with hefty sign-up bonuses, making them a good choice for building savings quickly.

Investment Savings Accounts. A few cards are tied to a specific investment bank, and rewards are automatically deposited into qualifying investment accounts — including retirement accounts.

College Savings Plans. Savings for educational expenses gets a boost with these cards, which deposit rewards into qualifying 529 College Savings Plans.

Pitfalls to Avoid

However you decide to invest your credit card rewards, there are a few important points to remember to avoid losing value.

First, credit card rewards programs are only worthwhile if you pay your balance in full each month, or before a zero interest promotion expires. Carrying a balance means paying interest charges, and the typical monthly interest charge tends to be more than most cardholders earn in a month from rewards. And of course, you should always look for the lowest interest rates possible on any credit card.

Second, watch out for fees. Again, paying annual fees might negate the value of the rewards if you don’t use the card enough. Finally, read the fine print and ensure you can meet any minimum spending requirements might be on the card.

For instance, cards that offer cash sign-up bonuses often require a certain level of spending within a certain period to trigger the deposit. If this will require you to spend more than normal, it may not be a great deal. If you are planning to transfer a balance to meet requirements, confirm that you will still qualify for the bonus before you do.

With some savvy planning, you can easily put your credit cards to work earning you even more money. Take time to compare offers, and consider the long-term benefits before you sign up for a new card.