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Is Upromise a Scam?

There are a lot of programs out there, and you might be worried about which programs are legitimate, and which really will help you earn rewards and save money. One of the more popular programs out there is Upromise [3], acquired by Sallie Mae in August of 2006.

Upromise is a program designed to help you save up for college. The idea is that every day purchases can add up over time so that your child has enough to go to college. Upromise comes with the added benefit of allowing you invest your rewards money into a 529 college savings plan and help pay down your student loans.

How Does Upromise Work?

Upromise works by helping you earn money for college. You don’t need a credit card to participate. You sign up, and then you can register different shopper loyalty cards at different grocery stores, as well as debit cards. When you buy certain items (not all items will provide you with money), a few cents are put into your Upromise account.

You can speed up the process with the help of a Upromise branded credit card (currently through Bank of America) and by shopping with particular partners online. If you shop through the Upromise site, a percentage of purchases at various retailers, from Wal-Mart to Amazon, and travel sites, from airlines to aggregators like Expedia, goes into the Upromise account. If you use your credit card, you get 1% cash back into the account, plus you get the percentage of the purchase from the merchant in question.

The money accumulates over time, and you can use it for your child’s education. It’s possible to split your contributions as well; my parents split their Upromise rewards cash between their six grandchildren. It’s also possible to choose from a limited number of 529 college savings plans. You can invest the money you get from the program to help it work a little better.

The Reality of Upromise

It sounds promising, but in reality your money will add up slowly. Unless you have a strategy that involves purchasing everything with your Upromise card, and conscientiously doing most of your shopping through the Upromise web site (or using the browser plug-in to help you shop better), the amount you end up with will be quite small.

Also, you have to realize that you can lose the money you invest in the 529 plan if the markets go south. I’ve been doing Upromise since my nine-year-old son was two or three, without really thinking about it. Since I don’t have a plan, and I often use another rewards card instead of the Upromise card, in the last few years we’ve managed to save up enough to probably cover two semesters’ worth of books. But it’s better than nothing (I have a separate 529 plan, though).

Bottom Line

Upromise isn’t a scam. It’s a rewards program that can help you save up for your child’s education. However, the cash back you get for that purpose, even if you invest it in a 529 plan, isn’t likely to build to the point where you can cover four years of undergraduate education. While it might amount to a small bonus later on, you’re better off making a better plan to help your child pay for college.