How to Invest in Your TFSA Using Credit Card Rewards

If you have rewards and dividends, you can continue investing in your TFSA without spending a cent, even when you’re strapped for cash.

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There are plenty of credit card rewards hacks out there, but if you’re at the Motley Fool, it’s likely you came here for investment advice. So what if I told you there’s a way to take advantage of both? All it takes is the use of your credit card rewards, and a Tax-Free Savings Account (TFSA).

How do you do it? Let’s take a look at an example of how you can use your rewards program to invest in your TFSA.

Why do it at all?

First, let’s look at why credit card rewards can benefit you in the first place. Let’s say you’ve been a Motley Fool investor for a while. You’ve been great at contributing to your TFSA and making smart investments. But then, some sort of financial burden weighs on your finances. Whether it’s health problems, a new house, a new car, or a roof being fixed, suddenly you can’t afford the luxury of investments.

Scratch that. You definitely can. All it takes is your credit card and dividend stocks.

Here at Motley Fool we always recommend paying down debt, and your investments should not get in the way of that. While investments are important, you certainly don’t want to overextend yourself. So instead, you can use your credit card rewards can help to continue contributing.

What’s even better? Use your credit card to buy everything. I went to the store the other day and paid $2.39 for some tortillas. True story. The lady looked at me like I was nuts. But you know why? Credit card rewards!

Now let’s look at how to put them to work with an example.

Start investing without spending a dime

I used the tortilla example, but another thing I’ve made sure to do is to pay as many bills as I can with my credit card. Then, each week I pay it down. Whether you do this by setting up alerts or whatever, this enhances your credit and of course, loads your rewards to maximum capacity.

In my case, I have a Signature RBC Rewards Visa card. Now whether this is the best card for credit card rewards or not is for another article, but I’ve had it for years and it’s served me well. For every dollar I spend, I get a point. And that adds up significantly when paying for bills and tortillas every day (well maybe not everything for the latter).

From there it’s easy. When I’m ready to invest in a company on my watch list, I simply go into my direct investing account and set up my “buy” as usual. The process is exactly the same. I should then have cash in my account from my dividend stocks paying me passive income each month. So whatever is available, I use that to invest. Then, I can select “pay trade commission using RBC Rewards Points.”

And there you have it. I’ve invested again and used zero dollars of my own hard-earned money and just dividends and credit card rewards. It’s simple and effective and allows you to continue investing without worrying that next month, you won’t be able to pay your bills.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe owns shares of ROYAL BANK OF CANADA. The Motley Fool has no position in any of the stocks mentioned.

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