College degrees have now become very expensive and many parents are wondering how they can afford to send their kids to college. Many students are forced to take out student loans. While these loans allow people to go to college they can also be a tremendous financial strain when the student graduates. Sometimes it takes decades for students to pay off their student loans. Some students are lucky enough to receive scholarships, but these financial gifts are usually only awarded to the brightest or most talented.
A solution to this problem has now come about that can make college affordable for the average individual. There are now credit cards on the market that are linked to a 529 plan. This is a great way for parents to start saving for their children`s college education. It is a very popular option to start a 529 savings plan for the future education of children. The money in these plans allows the funds to accrue tax-free. The money that is accumulated in this fund can be withdrawn tax-free when it is withdrawn to be used at an accredited college, trade school, or university. This money can be used for tuition, books, room and board, as well as all school-related costs.
The new credit cards on the market that are linked to 529 plans function like cash-back cards that are already on the market. The difference is that instead of rebates coming back to the cardholder they go directly into the 529 savings plan. Most of these cards have no annual fee and they usually come with 0% interest for the first few months. Once the no interest period is up there is a regular monthly interest charge.
When selecting a card it is important to note how much the regular interest rate is. Cards can vary over several percentage points and this will make a difference in the balance owing. Some cards have an annual contribution limit and this can vary depending on the card company. Certain cards allow unlimited contributions per year while others put a cap on the amount. This is something to be aware of when applying for a card. It is possible for family and friends to link to the 529 plan card and help contribute to the college fund. In this way it is possible to accumulate a substantial amount of money by the time the student is ready for college.
Not all credit card companies immediately transfer the cash-back money into the 529 plan. Some only do this on a quarterly basis and then charge a fee for this every time. This fee can range from $15 to $50. These fees can really add up and might make it not worth it if the credit card is not used for major purchases. It is important to do the math and make sure that the savings outweigh the amount being charged for the fees. Depending on the situation it may be a good idea to go with a company that does not charge these fees every time a transfer takes place. Having most of the college fees paid for can make a big difference in the quality of life the student will enjoy as an adult. When there is no student loan burden it is much easier to obtain Mortgages and other loans that are needed to make major purchases.