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How this retiree invests his credit card cash back to make his retirement even better

One retiree shares why using a cash-back investment card is part of his retirement strategy.

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Photo courtesy of Peter Dueber
Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

At a time when millions of Americans await their third government stimulus check, some are finding creative methods to stretch their cash.

Cash-back credit cards, when used wisely, can be an easy way to make a little extra money on the purchases you make every day. Flat-rate cards like the Citi® Double Cash Card earn you a straightforward percentage on every eligible dollar you spend, while some cards have rotating bonus categories, like the Chase Freedom Flex℠ which offers 5% cash back on up to $1,500 in combined purchases in categories that change every quarter (when you activate).

Retiree, father and personal finance enthusiast Peter Dueber takes this cash-back strategy one step further by using a card linked to his brokerage account. He's able to invest the cash back he earns, so it grows over time and provides some extra spending money so that he can enjoy his retirement years.

"It's kind of fun," Dueber tells Select. He appreciates the ability to draw on the extra funds if need be while living on an otherwise fixed retirement income.

"My sister-in-law is the points queen, and I tip my hat to her," Dueber says. But he prefers the simplicity of his Fidelity® Rewards Visa Signature® Card.

Ahead, Dueber explains why he pays his household bills with his Fidelity Rewards card and how much he earns in a typical month.

Fidelity® Rewards Visa Signature® Card

Information about the Fidelity® Rewards Visa Signature® Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    2% cash back on every eligible net purchase

  • Welcome bonus

    N/A

  • Annual fee

    $0

  • Intro APR

    None

  • Regular APR

    13.99% variable

  • Balance transfer fee

    Either 3% of the amount of each transfer or $5 minimum, whichever is greater

  • Foreign transaction fee

    1%

  • Credit needed

    Good/Excellent

Terms apply.

Pros

  • Straight-forward cash-back program
  • You can deposit your rewards in up to five qualifying accounts at a time
  • Visa Signature® perks and benefits

Cons

  • 1% foreign transaction fee

How Dueber uses the Fidelity Rewards Visa card

Dueber maximizes the cash back he earns by paying most of his bills with his Fidelity card.

"Over the past 12 months, I have paid about 75% of my household expenses with my Fidelity Visa," he explains.

His typical monthly spend is around $3,000, which earns him roughly $60 per month thanks to Fidelity's rewards program (2% cash back on every eligible dollar spent).

Every month, the cash-back earnings get automatically deposited into his Fidelity joint brokerage account. The card doesn't have an annual fee, so Dueber doesn't pay any extra to invest. Between 2019 and 2020, he earned an extra $1,146 just by using the card to make everyday purchases.

Dueber reviews his Fidelity account every month or so. He sometimes transfers cash from his brokerage account to his personal checking account when he wants to supplement his fixed income, since he limits his annual retirement distributions to roughly 2% to 3% of his overall savings. He considers his Fidelity cash back a small, enjoyable perk that lets him treat himself and his family.

"Right around the time I was looking at the Fidelity Card, I was in pre-retirement planning," says Dueber, who retired from the trucking industry at age 58. "I was looking for ways to ever so slightly supplement my income."

"What I liked about it was that it put the money into my investment account so that I didn't have to consciously decide whether to spend it, use it or save it."

If Dueber chooses to keep the cash in his Fidelity account for a while, it has the potential to grow in value through interest and dividends. But if he chooses to spend it, there's no extra fee to transfer it into his checking.

Cardholders who use the Fidelity Rewards Visa Signature card can deposit their rewards into as many as five eligible Fidelity accounts (belonging to both you and your family) at once. They include:

  • Fidelity Brokerage account
  • Fidelity® Cash Management Account
  • Fidelity®-managed 529 College Savings plan
  • Fidelity Retirement account
  • Fidelity Go® account
  • Fidelity Charitable® Giving Account®
  • Fidelity HSA®

Eligible accounts may also include a Fidelity-managed Traditional IRA, Roth IRA, Rollover IRA, SEP IRA and HSA (subject to IRS rules and specific program policies). 

While Dueber recalls there once being a minimum of $3,000 to open a Fidelity account, the minimum to open a Fidelity Brokerage account is now $1.

Accountholders simply choose the appropriate asset allocation for their risk level, as well as whether they want to invest in domestic or international stocks/bonds

"For me, it's mostly domestic stocks, but I do have a sprinkling of international," Dueber says.

Choosing the appropriate asset allocation for any kind of investment vehicle helps keep your investment on track for any short- and long-term goals. Using extra cash back to invest like Dueber does — especially when you're debt-free and have your monthly bills under control — can be a fruitful tool for retirees and new investors alike.

If you want to get your feet wet with investing, read this three-question checklist to help you determine if you're ready.

Information about the Fidelity® Rewards Visa Signature® Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.