Saving for College with a Credit Card (And Other Oxymorons)

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<![endif]–>Double-Edged Sword (noun): something that has or can have both favorable and unfavorable consequences
(Source: Merriam-Webster Online)

With that in mind, I present to you the Upromise World Mastercard by Bank of America.

On one hand, it’s a credit card — an unfortunate accomplice in creating all-too-high debt levels for far too many families. On the other hand, it’s an easy tool to save for college. Moreover, it’s a way to stash money (that, well, the cardholder didn’t previously have) tax-free into an account.

What’s a policy blogger to think?

It’s certainly more appealing than a credit card that gives free gas, airline tickets, or 10% off at a department store. And a responsible cardholder who pays the balance each month could really walk away a winner. Yet I can’t seem to shake the fact that for many, it would be working at cross purposes — higher personal debt levels in exchange for a drop in the bucket for college (that doesn’t accumulate interest, I might add). And moreover, families are beginning to reduce their debt levels, bringing into question the effectiveness of this type of program in the first place.

Better to consider tax-free college savings in a 529 savings plan I say, and let it earn interest. And if we want to give folks “free money” to save for college, maybe states (and the feds) could provide a small match for contributions, or seed the accounts, or incentivize employers to contribute on behalf of employees? Any number of policy levers could be tugged to greater effect than this card — despite its good and novel intentions.