College rewards programs are used by one in five families to help pay for college. The dollar amounts may not be huge, but these programs are easy to use.
FinAid gives us an overview of college rewards programs, also known as loyalty programs.
Loyalty programs, also known as affinity programs, provide a rebate to the consumer in exchange for shopping at particular retailers or purchasing particular products or services. This section of FinAid provides information about loyalty programs that provide a reward in the form of tuition benefits, such as credits to a section 529 plan for your children. They are similar in nature to airline frequent flyer programs.
Typically, such programs do not require you to show a membership card to get the rebates. Instead, you register your credit cards with them and they track the purchases you make at participating merchants using the cards. You can also earn rebates by shopping online through the company web sites. This makes the programs a painless way to earn a little extra money for college.
Affinity programs with a college savings emphasis include:
… The Upromise credit card enables people to earn cash back for everyday purchases. With the credit card, members get 5% cash back on all purchases and 10% cash back when they buy things in the Upromise shopping portal, explains Condon. Members can have the cash earned deposited directly in a Upromise 529 college savings account, in a Sallie Mae savings account or request a check whenever they are ready to cash in.
The amount saved is a small percentage of the amount spent, but with the magic of compound interest, small amounts grow exponentially larger over the years. For instance, if you spend $1,500 a month for 30 years and receive 1 percent back on your purchases, you would have more than $18,000 if you averaged a 7 percent return per year.
“I wouldn’t use this as a substitute for having a good investment strategy, but it might be a substitute for having to transfer $100 to your investment account every month,” says financial adviser Will Ertel, president of Tassel Capital Management in Matthews, N.C. “It can be a way to supplement or create some savings you aren’t otherwise building.”
Cash generated by any rewards program can also be designated to pay for college costs. It seems like a no-brainer, unless you rely on credit card reward points to defray the cost of vacations or other purchases.