Loyalty programs, also known as affinity programs, provide a rebate to the consumer in exchange for shopping at particular retailers or purchasing particular products or services.

Typically, such programs do not require you to show a membership card to get the rebates. Instead, you register your credit cards with them and they track the purchases you make at participating merchants using the cards. You can also earn rebates by shopping online through the company web sites. This makes the programs a painless way to earn a little extra money for college.

Affinity programs with a college savings emphasis include:

Of these, Upromise has the largest retailer network, followed by BabyMint. LittleGrad has the largest online retailer network, and all programs listed are completely free to the user.

A key benefit of all of these programs is that you do not need to change your purchasing habits to earn rebates for college savings. The retailer networks associated with these programs are large enough that most families will earn some rebates without altering their spending patterns. Of course, by carefully targeting your purchases, you can maximize your rebates.

Some of the loyalty programs allow one to redeem the rebates as cash instead of investing them in a section 529 college savings plan. Some also allow one to transfer the rebates to repay student loans.

The rebates received from a loyalty program are not subject to income tax or sales tax. (Many states charge sales taxes on all gross receipts from sales, including rebates for which the retailer is reimbursed. However, the consumer already paid sales tax on the amount of the rebate when they purchased the product or service that generated the loyalty program rebate, so no additional sales tax is due when the rebate is received.)

We do not recommend spending more money just to earn a rebate. If two products provide equivalent value, but the more expensive item offers a rebate, sometimes it is better to buy the less expensive item. Compare net prices after subtracting the amount of the rebate. The average rebate is between 4% and 5%.

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