Understanding differences between [tag]529 college savings credit cards[/tag] and [tag]529 rebate[/tag] shopping clubs will help you maximize [tag]college savings[/tag]. Although many 529 credit cards are directly affiliated with a 529 savings club (see table), it does not follow that the best credit card is associated with the best savings club. Segregating the two program types and selecting the “best-of-breed” from each is the most beneficial strategy.

• A 529 college savings [tag]reward credit card[/tag] is a regular [tag]Mastercard[/tag] or [tag]Visa[/tag] card that – in lieu of frequent flier miles, cashback bonuses, or other rewards – makes a contribution to a 529 college savings account based on a percent of purchases made with the card. Some “college” savings cards included here (e.g. Savingforcollege, Baby Center) allow rewards to be directed to investments other than 529 plans.
• A 529 savings club (or loyalty program) is a membership club through which a club network of merchants offers members special rebates for buying their products or services. Rebates are directed to the member’s 529 college account. Some 529 savings clubs have membership fees or require that you have a special affiliated credit card to be a member. Others are free and permit the use of non-affiliated credit cards.

Typically, 529 credit cards will generate greater rewards than 529 savings club programs. This is because the rebate (1% or 2%) is paid on the value of all purchases made with the card (subject to the card’s limits). 529 savings club rebates, on the other hand, are paid only on the value of purchases from merchants who participate in the program (although typically at higher rates than the credit cards).