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How to spend your way to a college education


CAN YOU spend your way into building a college-savings account? A new company called Upromise thinks the answer is yes.

Upromise's idea sounds good. Every time you buy certain goods or services, or shop at certain stores, a small portion of your purchase can be funneled into a college account. You'll save money without even thinking about it.

To build a tidy sum, however, you have to patronize the sponsoring merchants - not just now but for years into the future. Will you buy books at Borders rather than Amazon? Choose AT&T; over WorldCom? Do all your toy shopping at Toys 'R' Us? Use a Citibank credit card rather than one from Fleet or American Express?

If the answer is yes, you'll earn rebates linked to the amount you spend. Your rebates go into a non-interest-bearing Upromise brokerage account at Citibank. From there, you can move them into what's known as a 529 college-savings plan.

A 529 plan invests in stocks and bonds, and earns money tax-deferred. When cash is withdrawn for higher education, the earnings are taxed in your child's bracket, not yours. Your can use the money at any accredited U.S. school.

Please note - you do not have to belong to Upromise to contribute to a 529. These savings plans are established by the states. If you save through your own state's plan, you generally get breaks on any state income tax you owe.

Many 529 plans accept savers who live in other states (although non-residents don't qualify for state income-tax breaks). For details on 529s, see www.savingfor college.com.

Upromise links your everyday spending to a 529 plan, provided that you spend in a certain way. Here's how you participate:

1. Sign up by Web at www.upro mise.com. Telephone or paper registration may come later. Right now, the service is for Netniks only.

2. Open a 529 college savings account. By the end of June, Upromise will offer the state plans managed by Salomon Smith Barney for Colorado and Illinois, and by Fidelity Investments for New Hampshire, Massachusetts and Delaware.

Residents of any state can join these plans. Everyone gets the federal tax benefits. But you get state tax benefits only if you're a resident of the state. Upromise Chief Executive Officer Michael Bronner says that other state plans are in the works.

3. Register the numbers on your credit cards. Anytime you use those cards at various sponsoring merchants, a small portion of the payment will be sent to a Upromise account at Citibank. The money should arrive within 60 days.

You need to build $50 in rebates to finance a Fidelity or Smith Barney 529 plan. After that, your rebates move into your 529 plan quarterly, provided they equal at least $50 at Fidelity and $15 at Smith Barney. You could also skip the 529 and take cash from your Upromise account.

Read the details of the offers, so you know what to expect. For example:

AT&T; currently rebates 4 percent of the charges for up to two residential lines.

General Motors offers $150 on most new GM cars, as long as you register your purchase or lease at Upromise within six months of the transaction.

CVS/pharmacy rebates $1 for every $25 you spend during certain price promotions (not counting tobacco, alcohol or prescription drugs). You'll need a special CVS card.

More than 7,000 restaurants will contribute as often as once a month, if you pay with a registered card.

Citibank will rebate 1 percent of your charges on a Citibank card.

4. Shop online through the Upro mise Web site. For this, you don't have to register your credit cards. You go to the Upromise site and click on one of the participating merchants. Your purchases earn rebates for you and fees for Upro mise, too.

5. Tell relatives. They could register their credit cards and direct rebates to your child's account.

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