Should You Use Your Credit Card Rewards to Buy Crypto?

Credit card rewards may seem like free money. So should you spend yours investing in digital coins?

The upside of using credit cards to pay for expenses is getting to rack up rewards for the purchases you were already planning to make. And often, those rewards translate to cash back in your pocket.

It's easy to look at that cash back as free money. After all, you accumulated that cash simply by paying for expenses with a piece of plastic instead of cash or a debit card. As such, you may feel that your reward dollars are yours to spend as you please, whether that means using them to take a vacation, upgrade your cellphone, or purchase new clothing.

But if you've been eager to get in on the cryptocurrency action, you may be inclined to use your credit card rewards to invest in digital coins. Here's how to know if that's a good idea.

Should you buy cryptocurrency with credit card rewards?

If you're in a solid place financially, you should feel free to spend that money as you please. But if you have existing credit card debt or you don't have a fully loaded emergency fund, then you should use your credit card rewards to chip away at your balance or pad your savings account.

Assuming that both of those are in good shape, there's nothing wrong with using your credit card rewards to start investing in cryptocurrency. Many people have enjoyed financial success buying digital coins, and this could be a money-making opportunity for you.

That said, cryptocurrency is a pretty risky investment. The value of digital coins can swing wildly from one day to the next, and if you're going to put money into cryptocurrency, you need to come to terms with the fact that you may lose it all. If you're okay with that, then you should feel free to research the different types of cryptocurrency (there are several thousand out there) and see which are best for you.

The good thing about investing your credit card rewards in cryptocurrency is that if you do lose money, it may not sting as badly as it would if you were to lose a portion of your hard-earned paycheck. After all, credit card rewards can be looked at as free money, so you may have an easier time parting with it.

Another investment option for your credit card rewards

Of course, if you're eager to invest your credit card rewards, there's another option to consider -- stocks. Stocks have been around longer than cryptocurrency, and while they're certainly not risk free, they are less volatile. If you're new to investing, you may want to start out by buying stocks and eventually work your way into cryptocurrency. Or, you can find a brokerage account that allows you to invest in both stocks and cryptocurrency.

Credit card rewards are a nice perk to enjoy, and investing yours in cryptocurrency could put more money in your pocket. Just make sure you're comfortable with the risks associated with buying digital currencies and do your research before diving in.