| You are probably well aware that college costs | | | | Month - Credit card acceptance is becoming more |
| are soaring and that the need for parents to build | | | | universal each day. This means new opportunities |
| college savings has never been greater. You may | | | | to earn 529 rewards - e.g. car and homeowners |
| also be aware of various loyalty reward programs | | | | insurance payments, municipal water and tax bills, |
| (such as Upromise and BabyMint) that pledge to | | | | groceries, tuition, etc. For each $1,000 of monthly |
| help build your college savings by paying back a | | | | costs that you can shift to the rewards card, |
| small percentage of the amount you spend using | | | | you'll earn $10 - $20 of free cash for future |
| their credit card and/or buying certain products. | | | | college expenses. |
| Companies offer these programs because, in the | | | | Use the credit card as an intermediary payment |
| aggregate, they know they will lead to higher | | | | vehicle for large purchases. For example, if you |
| spending on their products or services. Smart | | | | borrow to make home improvements, pay |
| consumers learn to maximize earned rewards | | | | contractors and suppliers first with the rewards |
| without altering their spending habits. | | | | card and then pay the credit card with your |
| Reward programs can help build college savings. | | | | home equity loan. This will earn you additional |
| That's the good news. The bad news is that | | | | points. |
| these programs have grown in number and | | | | However, it is very important that you pay your |
| become very complex. It is very difficult for | | | | statement balance in full each month. Rewards |
| parents to take time to fully understand, compare | | | | earned at 1% or 2% will quickly dissipate if you |
| and select the program best suited for them. This | | | | are paying 10% to 13% interest on even a small |
| article aims to cut through the morass and lay out | | | | balance. For rewards to accumulate effectively, it |
| a clear strategy for parents to follow to get the | | | | is essential that you use your reward credit card |
| most from college reward programs. | | | | as simply a substitute for cash payment and not |
| The Basics | | | | as a source of additional credit. |
| The various college savings reward programs fall | | | | 4. Use the Free Upromise and BabyMint Savings |
| into two broad categories: credit card rewards | | | | Clubs - Chances are that you frequent some of |
| and savings clubs. The distinction gets blurry | | | | the grocery and drugstores included in the |
| because many of the "savings club" programs also | | | | Upromise network and that you already buy |
| sponsor a credit card under the same name. | | | | products offering Upromise rewards. Since |
| Nonetheless, you can better understand and | | | | participation costs you nothing, there is no reason |
| optimize your use of the programs if you | | | | not to participate and earn additional rewards. |
| categorize them in this manner: | | | | Sign-up for "loyalty cards" offered by grocery |
| A college savings reward credit card is a regular | | | | stores and drug stores you use. Register these |
| MasterCard or Visa card that - in lieu of frequent | | | | cards on Upromise and then use them every time |
| flier miles or cash back bonuses - makes a 1% or | | | | you shop. The amount you earn will depend on |
| 2% contribution to a college savings account | | | | your family's product preferences. As an example, |
| based on purchases made with the card. | | | | Coke products earn Upromise rewards while Pepsi |
| A savings club (or loyalty program), on the other | | | | products do not. Resist becoming too loyal to |
| hand, is a membership club through which a | | | | brands just because of the Upromise rewards. If |
| network of merchants offers members special | | | | either Coke or Pepsi can satisfy your palette, and |
| rebates for buying their products or services. | | | | Pepsi is on sale, it may be the better buy despite |
| Rebates are directed to the member's college | | | | the lure of Coke's Upromise rewards. |
| savings account. Some savings clubs have | | | | The BabyMint merchant network is not as |
| membership fees or require that you have their | | | | extensive as Upromise. Still, the program is free |
| affiliated credit card to be a member. Others are | | | | and there may be significant opportunities |
| free and permit the use of non-affiliated credit | | | | (especially for on-line shopping) to enhance your |
| cards. | | | | rebates. There are other college savings club |
| College Rewards Credit Card | | | | programs available in addition to Upromise and |
| Associated Savings Club | | | | BabyMint. However, for the most part these are |
| BabyMint College Credit Card | | | | "copycats" and appear to not offer any distinct |
| Baby mint | | | | advantages over the original Upromise or |
| Baby Center Credit Card | | | | BabyMint plans. |
| Baby Center Savings Program | | | | One exception is the edexpress plan which does |
| Being Developededexpress | | | | provide generally higher rebate percentages than |
| Fidelity/MBNA College Rewards | | | | the other savings club programs. The trade-off is |
| NONEfuturetrust Credit Cardfuturetrust | | | | that edexpress has a $24.95 annual membership |
| Savingforcollege Credit Card | | | | fee. It's a worth taking a look at edexpress to |
| NONE | | | | determine if your family's spending habits are such |
| The Education Plan Credit Card | | | | that the additional earned rewards will offset the |
| The Education Plan | | | | annual fee. |
| Citi Upromise Card | | | | 5. Recruit Other Family Members and Friends - |
| Upromise | | | | Following the strategy outlined here, you can earn |
| | | | significant college rewards on your own. But |
| Optimizing Rewards | | | | building a network of family and friends willing to |
| A few of the college savings clubs require that | | | | direct rewards to your child's college savings |
| you have their branded credit card to participate | | | | account can greatly accelerate your college |
| in the savings club. We suggest you avoid these | | | | savings program. According to Finaid.org, 60% of |
| programs in favor of a "best-of-breed" strategy | | | | grandparents say that they would contribute to a |
| that lets you pair the best rewards credit card | | | | section 529 college savings plan if asked, especially |
| with the best savings clubs. Here's a five-point | | | | since they know the money will be spent on the |
| strategy that can help you maximize college | | | | child's education. |
| reward earnings: | | | | Ideally, grandparents and others will use a college |
| | | | rewards credit card and direct reward earnings to |
| 1. Select the College Rewards Credit Card Paying | | | | your college savings account. However, with the |
| the Highest Rebate on All Purchases - Typically, | | | | large number of other credit card reward |
| credit card rewards will generate greater college | | | | programs available, you may not feel comfortable |
| savings than the savings club programs. This is | | | | asking them to give up frequent flier miles to put |
| simply because the rebate (1% or 2%) is paid on | | | | additional cash in your child's account. On the other |
| the value of all purchases made with the card | | | | hand, registering family and friends grocery |
| (subject to the card's limits). Savings club rebates, | | | | drugstore loyalty cards through Upromise will cost |
| on the other hand, are paid only on the value of | | | | them nothing. Typically, the card user will get |
| purchases from specified participating merchants | | | | in-store discounts for buying select items. Behind |
| (although often at higher rates than the credit | | | | the scenes, Upromise rebates accrue, but there |
| cards). Most of the college reward credit cards - | | | | are no alternative uses for these rewards. Often, |
| pay a 1% rebate. The sole exception is the | | | | the use of loyalty cards also generates rewards |
| Fidelity/MBNA College Rewards MasterCard that | | | | for churches or charitable organizations designated |
| pays 2% (up to $1,500 per year). You can find | | | | by the cardholder. This should be pointed out as |
| more detailed information about the various | | | | encouragement to use the cards. |
| college reward credit cards by visiting | | | | Following this strategy a savvy, disciplined family |
| 2. Use the College Rewards Credit Card as Your | | | | can reap sizable rewards from college reward |
| Principal Method of Payment - Your aim should be | | | | loyalty programs with relatively little effort. As an |
| to keep spending at current levels (i.e. within your | | | | example, my middle-income family has generated |
| income) but to replace checks, cash, and other | | | | slightly over $1,000 in rewards in the last twelve |
| credit/debit cards with the rewards card as your | | | | months. Certainly you cannot expect to pay for a |
| principal method of payment. | | | | full college education with loyalty rewards alone, |
| 3. Maximize Use of the Credit Card But Always | | | | but savvy users can build a sizable nest egg to |
| With a Goal of Paying the Balance in Full Each | | | | help ease the burden of college costs. |