Upromise program offers parents help in paying for college

USA Today

When it comes to saving for college, cash-strapped parents need all the help they can get.

But just how much you can expect to save through the program depends on a number of variables. Among them: how many friends and family members join, how many children you have, how old they are, and the rate of return on your investments.

And, as with any rewards program, consumers need to be smart shoppers, comparing prices and not buying costlier products just to get the rewards, experts say.

Here's how the it works:

• You enroll online by going to www.upromise.com.

• You register your credit card account numbers, debit cards and some store loyalty cards. The rewards automatically will be credited to your college savings account.

• Upromise encourages parents to set up a state-sponsored 529 college plan. It is working with plans managed by Salomon Smith Barney and Fidelity. Eventually more plans will be added.

A 529 plan lets investors put away more than $100,000 for college and defer taxes on the gains until the money is withdrawn. Then it is taxed at the student's rate. The money is invested into professionally managed accounts with a mix of stocks, bonds and other investments.

Dan and Kari Schriver participate in a pilot program. About three months ago, the Reston, Va., couple set up Upromise accounts for their children, Sophie, two years old, and Clio, four months.

The parents estimated that on average they spend about $30 a month in AT&T long-distance. That would generate $14.40 a year in rewards, which is divided between the two accounts.

Their Citibank credit card charges usually total $2,000 a month. That would amount to $215.01 a year in rewards, after a $24.99 Citibank annual fee for the rewards program is deducted.

From those two Upromise partners alone, the family would earn $228.41 a year. If half of that amount goes into Clio's account, by the time she is 21, it will be worth $6,612, according to a Upromise calculator, which assumes an 8 percent annual return on investments.

Double dipping is allowed. If you pay for a $40 purchase at Toys R Us with a Citibank card, you'll earn 80 cents from Toys R Us and an additional 40 cents from Citibank.

"I'm not going to spend more to get the points," said Dan Schriver, a financial analyst. "But I will funnel more spending through my Citibank card."

He does not carry a balance on his card, so there is no downside. But for families who do, it may not be a good idea to switch to a Citibank card just to get the points, experts caution.

Say, for example, that a family has a credit card balance of $8,000 — the average per U.S. household, according to credit card tracker CardWeb.com. With good credit, they may qualify for a card with a 10 percent rate, resulting in about $800 a year in interest charges.

But switch to a Citibank card with a 13.99 percent interest rate — a rate Citibank commonly offers to new customers, according to CardWeb — and the family would pay an extra $320 in interest a year.

What's more, some rewards programs are more generous. CardWeb calculated how a family that charges $12,000 a year would fare:

• Citibank's Upromise program would pay $95.05 a year in rewards.
• Discover Card's Platinum Bonus Cashback program would pay $105.
• The American Express Platinum Cash Rebate would pay $125.
• The General Motors MasterCard program would give the family a $500 rebate toward the purchase of a GM car or truck.

"The real savvy consumers will charge everything to a rewards or rebate card and pay off the balance or transfer the balance to a low rate card to get the best of both worlds," said Robert McKinley, CEO of CardWeb.com.

Former senator Bill Bradley, a member of Upromise's board, has this advice: Save early, save regularly and make full use of tax incentives, such as 529 plans.