While other 529 providers are seeking to differentiate their offerings with higher contribution limits and state tax breaks, to of the leading providers are taking the road less traveled. This month Fidelity cut a partnership deal with credit card issuer MBNA America to offer "cash-back" to investors in its New Hampshire college savings program. Meanwhile, Merrill Lynch is reportedly working on a similar deal with Visa.

No other firms offers this type of feature in their 529 programs. The most similar is a college tuition reward offered by North Track Funds. BabyMint also lets investors deposits rewards into 529 accounts, but in those cases the rewards can also be directed to other accounts and the rebates are only paid when goods are purchased from a select list of merchants signed up with the program.

Investors in the Fidelity program will get payments equal to two percent on eligible purchases made with the credit card with no limit on the amount of the awards they can earn. There is no annual the card. The two percent limit is twice what credit card issuers normally pay. Industry sources have suggested that Fidelity is kicking in the extra percent on the card, although that is not confirmed.

"The Fidelity 529 College Rewards card gives investors an opportunity to add to their savings simply by making it the card of choice for family expenses - from gas fill-ups and groceries to vacations and day-care," Scott Gilmour, senior vice president, Fidelity Brokerage Products.

The College Rewards Card grew out of an existing relationship between the two firms. Fidelity will distribute the cards both directly and through financial advisors. To get the awards, investors link the MBNA card to a Fidelity 529 account. Fidelity is encouraging extended family members, including grandparents, aunts and uncles to also link cards to the accounts.

Investors in the Merrill Lynch NextGen 529 program will receive the more typical one percent reward for their purchases with the designated Visa card. Merrill paired up with Visa after kicking the tires on the Upromise program.  

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE