Credit Card Rewards: A Simple Way to Save For Your Child’s College Education

Worried about how you’re going to save enough to cover the looming costs of your child’s college education? If so, you’re not alone. According to a 2019 Sambla Loans survey, 65% of parents share this concern.

One of the easiest ways to start saving for college is to sign up for credit cards that deposit your rewards directly into a 529 college savings account. Just use the credit card for purchases you’d make anyway, but instead of cashing in your rewards each month, funnel them into your child’s college fund. You’re unlikely to accumulate enough money to cover 100% of their college expenses with this method, but you can put a significant dent in it. The younger your child is when you start, and the more you charge each month, the more significant the dent. If grandparents or other loved ones sign up for one of these cards and contribute their rewards to your child’s 529 plan, your savings will grow even faster.

The following credit cards offer the best rewards programs for Virginia residents contributing to 529 plans. Neither has an annual fee.

Fidelity Rewards Visa Signature Card
Earn 2% cashback on purchases when you link your account to an eligible Fidelity-managed 529 College Savings Account.

Upromise Mastercard
Earn 1.25% cashback on purchases made with this card, and when you link your account to an eligible 529 college savings plan, you get a one-time 15% bonus. A nice feature of this card is that you can round up purchases to the nearest dollar to earn additional cashback. Even if you don’t sign up for this card, you might want to consider joining the free Upromise Shopping and Restaurant rewards programs. Participants in the Shopping program earn cashback on purchases made through links in the Upromise Shopping portal. Dining participants receive 2.5% back at more than 10,000 restaurants across the country when they pay with a linked card. All Upromise cash back rewards can be deposited into a 529 plan. Bonus: This card has no foreign transaction fee.

When using a rewards credit card, it’s wise to pay the balance on time and in full each month. Otherwise, the interest charged on your purchases will likely exceed the rewards you earn.

Here’s a simple example of how much you can expect to save by using one of these cards. If your credit card earns 2% back on all purchases, and you spend $20,000 annually on the card, you will receive $400 per year. If you start saving when your child is born, add $400 each year, and earn an annual 5% return, by the time your child is 18, you will have saved more than $13,000 by the time he turns 18. Not too shabby!

We’re advised to set up multi-income streams to finance our eventual retirement. Saving for college is no different. Credit card rewards should be just one piece of your overall savings strategy. If nothing else, setting up a dedicated 529 account to link to your credit card is an important first step. Building momentum from there will be a little easier than if you were starting from scratch.