'Loyalty' Programs Can Help Build Savings for College Costs

By KATHY M. KRISTOF

Sept. 1, 2002 12 AM PT

TIMES STAFF WRITER

Jennifer Piponnian’s relatives are spending her way to college.

Her parents, grandparents and an aunt have all signed on to a “loyalty” buying program called Upromise that rebates a small percentage of their purchases and sweeps them into a college savings account for the La Habra Heights teen. In less than a year, more than $400 in rebates has been deposited into the account.

Of course, the rebates won’t be nearly enough to finance four years of higher education. But it’s a start--or, rather, a supplement to the savings that her family already has started.

“I think this is something that every person who has a child who is dear to them ought to do,” said Jennifer’s father, Pierre Piponnian, a financial consultant with Salomon Smith Barney in Pasadena. “It’s not a huge amount, but it makes a difference.”

Massachusetts-based Upromise is just one of three companies that offer rebate programs to help parents pay for college. BabyMint, headquartered in Atlanta, and Plano, Texas-based EdExpress offer similar, yet slightly different, programs.

All three are so-called loyalty programs, which operate much like airline frequent-flier plans. When participating consumers shop with participating merchants or buy certain brands of merchandise--such as Kellogg’s cereal--they get a cash rebate that can range from 1% to 20% of the purchase price. Instead of getting a check or credits toward a free airline ticket, the cardholder directs the rebates into a college fund for a designated beneficiary.

Two of the three companies--BabyMint and Upromise--also offer credit cards that are similar to the frequent-flier cards available through MasterCard, Visa and other issuers. No matter where the cards are used, 1% of the charges is rebated to a college savings account. If you charge $18,000 a year, for instance, you’ll get $180 in rebates.

Neither Upromise nor BabyMint charge an annual fee for the cards--a nice contrast to frequent-flier cards, for which annual fees can run as high as $75. The interest rates and credit limits on the cards vary, depending on the borrower’s credit standing.

Beneficiaries of the savings generated from loyalty and credit card purchases can be either the participant, the participant’s child, a relative or a friend--or, in some cases, a university or charity that the participant would like to help. Participants can switch beneficiaries at any time.

An unlimited number of participants can sign up to help a single beneficiary, which can turbo-charge the savings prospect for a youth with lots of friends with rebate accounts.

“I have always been a proponent of getting something for nothing,” said Ilyce Glink, a financial columnist and author of “50 Simple Things You Can Do To Improve Your Personal Finances.” “If you are going to make the purchases to begin with, this is just an extension of that.”

The danger, said Glink, is if consumers buy things they ordinarily wouldn’t--picking up the brand-name cereal rather than the cheaper plain-wrap version, for example--just to get the rebate.

“We go for the cheapest price always,” said Glink, who has hooked her credit cards into the Upromise program to benefit her two sons. “It’s much better for you to save $50 on your own than to spend extra money on their [branded] products and have them kick some of it back to you.”

For those who can use them without altering their normal spending patterns, these loyalty programs are an almost pain-free way to help someone pay for college, proponents say.

“No one is going to pay the entire tuition check through gas purchases and buying Kellogg’s cereal,” acknowledged Jeff Bussgang, co-founder of Upromise. “But we are going to supplement your savings with free money from America’s best brands.”

The rebates are paid by the retailers and manufacturers that are linked to the three programs or, in the case of the branded credit cards, by the card issuer.

Participating companies--which include Gap Inc., Amazon.com Inc. and Sharper Image Corp.--provide the rebates as a gimmick to differentiate one retailer from the next.

Participating retailers are betting that if you’re walking through the mall and can choose among four big department stores that offer much the same merchandise, you will shop at the one that will put money in your child’s pocket, said Allen Greenly, chief executive of EdExpress.

Although all three rebate programs employ the same basic concept, they aren’t identical.

Upromise has, by far, the most participating retail locations, including a list of 7,500 restaurants that give diners rebates on meals. To find a participating restaurant, program members can go to the Upromise Web site and enter the name of the city where they’d like to dine. The site provides a list of dining locations and the percentage return that they will earn on the bill.

For people who don’t mind shopping online, BabyMint has worked out cooperative arrangements with about 150 private colleges that have agreed to match any amount parents save in their BabyMint accounts with college-based scholarships--effectively doubling the value of the savings when students attend partnering universities.

EdExpress is the rebate program that charges an annual membership fee. But it says the $24.95 fee gets you better prices--or in this case, bigger rebates. BabyMint offers a 4% rebate on household products purchased at Domestications.com, for example, while EdExpress offers an 8% rebate on those purchases.

The programs also differ in how they transfer customer rebates into designated college accounts.

But consumers don’t necessarily have to choose one program. There’s nothing to stop them from signing up for all three--or at least for the two that don’t charge annual fees, experts said.

“The smartest thing to do is join all the programs,” said EdExpress’ Greenly. “It gives consumers a wider variety of vendors to choose from and a wider venue for saving.”

Times staff writer Kathy M. Kristof, author of “Investing 101” (Bloomberg Press, 2000), welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail [email protected]. For past Personal Finance columns, visit The Times’ Web site at www.latimes .com/perfin.

(BEGIN TEXT OF INFOBOX)

Getting More Information

Sources of information about the three major providers of rebate programs for college savers:

Upromise

HQ: Needham, Mass. (after Sept. 10)

Web: www.upromise.com

E-mail: [email protected]

Phone: (888) 434-9111

BabyMint

HQ: Atlanta

Web: www.babymint.com

E-mail: [email protected]