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COLLEGE SAVINGS 101

529 credit cards can boost college savings

Erin Peterson is a freelance writer in Minneapolis, Minn.

by Erin Peterson

Credit card companies are always trying to lure new card users with promises of free airfares, hotel rooms or gift cards. But some specialized cards are linked directly to 529 accounts and may offer an even sweeter reward: a chance to cut college costs.

Such cards can be a boon for users who pay their bills on time and in full, says Samir Kothari, cofounder of Billshrink.com. "The primary benefit of having this type of rewards card is that you're always saving without really thinking about it," he says. "It may not be much, but every day you're making a contribution, and at the end of the year, that may be several hundred dollars more than what you would do on a truly elective basis."

A 529 card differs from a registry program in key ways, though both are offered by several companies, such as Upromise, BabyMint and Futuretrust. In a registry program, users link any credit card to the service and earn cash from participating retailers. A 529 credit card allows users to earn money on every purchase, whether the retailer participates in a registry or not.

With everyone looking a little harder these days to find ways to save every dime, a 529 card could be a perfect fit, says David Rochon, president of Upromise. "We're trying to rally people around the need to save for college," he says. "These cards are one more way to accelerate your savings."

Compare the cards below to determine which will work best for your needs.

Name BabyMint Platinum Visa Fidelity Rewards American Express Futuretrust MasterCard Upromise World MasterCard(Gas and Grocery Rewards) Upromise World MasterCard(Dining and Grocery Rewards)
Introductory Offer $25 in BabyMint Bucks after first qualifying transaction 1.9% on balance transfers for first 6 months 0% on balance transfers for first 6 months $25 into a Upromise account after first qualifying transaction $25 into a Upromise account after first qualifying transaction
APR 10.24% or 16.24%, variable 16.99% 8.99%14.99%, variable 9.99%-13.99%, variable 9.99%-13.99%, variable
Grace Period 25 days 20 days 20 days 20 days 20 days
Annual Fee None None None None None
Rewards 1% on all purchases 2% on all purchases 1% on all purchases 1% on all purchases; 10% on qualifying grocery/drug store items; and 2% on gas purchases from Exxon or Mobile 1% on all purchases; 10% on qualifying grocery/drug store items; and 10% at participating restaurants
Bonus Rewards Up to 26% rebates from BabyMint merchants (more than 300). Referral program allows users to receive $5 in BabyMint bucks for new card users they refer to the program None Up to 26% rebates from Futuretrust merchants Purchases from Upromise participating companies can earn between 1% and 25% of the purchase price Purchases from Upromise participating companies can earn between 1% and 25% of the purchase price
Options None Rewards may also be put into retirement or brokerage accounts None Rewards may also be used to pay off Sallie Mae student loans or taken as cash. Rewards may also be used to pay off Sallie Mae student loans or taken as cash.
Limitations Works with any 529 program nationwide Must be invested in a Fidelity 529 account Works with any 529 program nationwide For rewards to be automatically swept into 529 or student loan accounts, users must have accounts with either Sallie Mae or Upromise For rewards to be automatically swept into 529 or student loan accounts, users must have accounts with either Sallie Mae or Upromise

Posted May 1, 2009