A 529 plan is a savings plan that is used for saving towards future college costs, and offers a variety of tax-advantages over other forms of savings. It makes sense then, that families with children are opting to use credit cards with rewards that are tied into 529 plans. This style of rewards credit card is best used when the card owner uses the 529 rewards card to make all of their purchases, and then watches as the rebates drop into the 529-college savings account.
Considerations for 529 Rewards Credit Cards
If you are unable to pay off your entire monthly balance each month, you will not benefit from a 529 rewards credit card. The interest you pay on the card will almost always be higher than the amount of rebates you earn if you carry a balance from one month to the next.
While some 529 rewards credit cards require that you link your credit card account with a specific 529 plan, others allow cardholders to designate any investment account to have rebates deposited. If you don’t have children or are unsure if your child will want to attend college, you might decide to have rebates deposited into another form of investment account.
Most Popular 529 Rewards Credit Cards With No Annual Fees
Fidelity 529 College Rewards Card: issued through MBNA, this credit card provides a 2% rebate on all purchases. The maximum you can earn each year with this card is $1,500. Your card rebates will automatically be deposited into a 529 plan that is managed by Fidelity. People living in New Hampshire, Delaware, Arizona and Massachusetts are currently eligible for the Fidelity 529 College Rewards Card.
Citi Upromise Credit Card: issued through Citi Bank, this credit card provides a 1% rebate on all general purchases. The maximum you can earn each year with this card is $300. When you use the Citi Upromise card at specific locations, including Mobil and Exxon, you’ll get 2% of your purchases in rebates, with no annual maximum; and a full 10% on grocery and drug store purchases without annual maximum rebates. You can link your Citi Upromise credit card to any 529 plan that is managed by Upromise Investments Inc.
GHESP/Futuretrust MasterCard: issued through Juniper Bank and managed by TIAA-CREF, this credit card offers 1% rebates on all general purchases with no annual maximum rebates. Most people link their cards to a Georgia 529 plan, but you can also use Futuretrust’s self branded credit card and link it to almost any investment or bank account to receive your rebates.
BabyMint College Savings Card: issued from MBNA, this credit card provides a 1% rebate and no maximum limits. You can link your credit card with any 529 plan or investment account and have the rebates automatically deposited.
Using credit cards is almost a necessity in today’s economy. If you have discipline and can pay your balance off in full each month, it is a great idea to use one of these 529 or investment plan rebate credit cards to help your spending work for you. If you have to spend money, you may as well use a credit card that’s going to help you deposit money into an investment or 529 plan as well.
Rebates from credit cards that are placed in your 529 plans are treated the same as a direct cash contribution, meaning you will count them as a gift when it comes to taxes. You can deposit $12,000 annually into a 529 plan, so having the rebates from credit cards deposited doesn’t pose a problem for most families.