Over the last few years a handful of companies have emerged which offer consumers a way to contribute a portion of their spending into college savings accounts. The programs work much like the loyalty or frequent-flier programs. Members shop for services or products from participating merchants and receive a percentage of their total dollar purchase back. The money is then deposited into the benefactor's educational account.
Three of the most known companies, and Upromise out of Massachusetts, Babymint of Atlanta, and EdExpress, of Plano, are all designed under the same basic principles but do offer different options to their members.
Upromise and Babymint are free services and provide their members with the loyalty plan and also free credit cards. Regardless of where the cards are used, they receive a 1% cash rebate which is directed back into their college fund. Interest rates and card limits vary depending on the consumer’s credit history.
Upromise has partnered with the most restaurants, now topping 10,000 restaurants nationwide. This along with their extensive grocery store and drug programs and online merchant partners allows members to capture even more rebates for their spending.
BabyMint's Tuition Rewards program offers members the chance to have their dollars earned matched by a dollar off of tuition at more nearly 150 colleges and universities across the U.S. There is no cost to participate in this program.
EdExpress, although they charge an annual rate of (currently) $24.95 per year, they say they have larger rebate percentages from participating merchants. They state that members earn 100% of their rebate whereas other companies may take a portion of that in lieu of a membership fee. This means more money back into their member’s accounts.
All three plans offer programs that allow for multiple members to assign their rebates for automatic transfer into your account. This means that family members, friends, or groups can contribute to your fund. This program is particularly appealing to grandparents.
Unless you are a huge spender, the money saved through these programs is not going to be enough to send your child through college. What it can do though is offer a good supplement towards that goal. Since this is money spent and not saved basically you are getting something back for nothing.
Ilyce Glink, a financial columnist and the author of 50 Simple Things You Can Do to Improve Your Personal Finances, is quoted in the Philadelphia Inquirer as saying, "I have always been a proponent of getting something for nothing. If you are going to make the purchases to begin with, this is just an extension of that."
The Drawbacks
So far the only negative viewpoint noted is the extensive personal information that the companies require for membership and the temptation to buy products that may not be the best deal but that are participants of the program. Also, warnings are given to members that these programs act only as supplements and should not be relied on 100% for college funding.
What People are Saying
Richard Flaherty, president of the College Parents of America, is quoted by KansasCity.com, that "Upromise, as been very helpful in raising the national awareness of the need to start saving for college early."
