Using 529 Credit Cards For Maximum Rewards

July 5, 2008 By Debbie Dragon

A 529 plan is available in the United States to help families save for the higher education costs for a designated beneficiary.  It offers many tax advantages over other saving methods.  There is another way to increase contributions into your 529 plan that you may not be aware of yet, and that is with the use of 529 credit cards. 

The 529 credit card rewards program is linked to your 529 account, and as you earn rebates they are deposited into the 529 account and treated like a direct cash contribution.  When you file your taxes, you will count the contributions as a gift.  You are allowed to deposit $12,000 per year into a 529 plan, so having additional rebates from a 529 credit card rewards program isn’t a problem for most families since most deposit well under the maximum limit.

How to Benefit Most from a 529 Credit Card

As with most rewards credit cards, in order to really benefit from the rebates and rewards you earn, you need to be in the habit of paying your balance off each month.  Carrying a balance from one month to the next results in interest charges and various finance fees which will almost always offset any rewards that you’ve earned. 

Using the credit card for all of your monthly expenses will help you increase your benefits faster, and also help you earn more.  As long as you are able to budget for this type of credit card use (using the card all month and then paying it off at the end of the month in full!) you will have no problem earning maximum rewards for your 529 plan.

Fidelity 529 College Rewards Card

One of the most popular 529 credit cards, the Fidelity 529 College Rewards Card is available to individuals living in New Hampshire, Arizona, Massachusetts and Delaware, currently.  It’s a credit card issued through MBNA, and it offers a 2% rebate on everything you purchase with the card, up to an annual limit of $1,500.  Your rebates can be automatically deposited into a Fidelity 529 plan.

Citi UPromise Credit Card Linked to 529 Plan

Another popular 529 credit card option is the Citi Upromise card issued through Citibank.  You earn a 1% rebate on all purchases, with a maximum annual amount of $300.  Certain purchases will earn you 2% rebates, with no annual maximum, including Mobile and Exxon.  Using the card at grocery and drug stores can result in 10% rebates, also without annual maximum contributions.  Your card can be linked to any 529 plan managed by Upromise Investments, Inc. 

Most families use credit cards at some point.  If you are going to use a credit card, you may as well use one that will help you contribute money into a college savings plan. 

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