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On money

With caution, using your charge card could add to college savings

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times, published March 16, 2003

What could be better than frequent flier miles? A growing number of credit card marketers now offer the chance to spend money and save for college at the same time. Every time you use the card, you earn a cash rebate for the college savings account of a favorite child.

None of the programs is likely to generate enough money to put a child through the University of South Florida, much less Harvard, but they are still worth a look. The card's interest rate is the most important consideration if you carry a balance. But if you're like me and pay your cards in full each month, you might as well get a card that offers some type of rebate or reward you can use (although preferably a card with no annual fee).

One big advantage of college savings cards is that you can multiply your savings by convincing other people to sign up for cards that pay rebates to your child's account.

Here are highlights of three of the deals available:

* BabyMint ( 1 percent rebate on purchases with BabyMint MBNA MasterCard plus varying percentages on purchases from participating retailers. You can get the rebates by check if you don't want to save them for college.

* UPromise ( 1 percent rebate on purchases with the Citi UPromise MasterCard. Additional rebates on specific products purchased with registered customer loyalty cards (Albertsons, CVS, Winn Dixie) and on some restaurant bills and retail purchases paid for with registered credit cards.

* Fidelity Investments ( 2 percent rebate on purchases with Fidelity Investments College Rewards Master Card.

Don't sign up unless you are prepared to make additional savings contributions to your child's accounts and you've read the fine print. At UPromise, signing up to earn rebates is free, but opening a college savings account where they can be deposited entails at least a $250 lump sum or a $50 monthly contribution. Then there is a $20 annual fee for each savings account.

Just remember that spending less is still the best way to save.

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Q. My uncle passed away last year and I have been trying to help my aunt with her investments. I noticed that my uncle recorded all the dividends their stocks paid each year and divided that by the year-end value of the stocks. Is this a good way to check performance? Or should you check the year-end value against the previous year or the dividends against the previous dividends?

The best measure of investment performance is total return, which includes the change in market value and the dividends received. If your aunt took her dividends in cash, add their total to the change in value and divide the answer by the starting value to get your investment return. If your aunt reinvested her dividends, they are already reflected in the market value.

Comparing dividends from year to year tells you if the dividends are growing. Dividing the dividends by the market value tells you the yield of the portfolio. Yield might go up because the dividends went up, a good thing, or because the value of the holdings went down, a bad thing.

* * *

Q. When we sold our house in 1999, the real estate agent said he had a client willing to meet our price, but that the mortgage lender demanded more than $3,000 in "points." No one explained to me what points are, but we paid the money and apparently the bank got it. Will we ever see that money? Can we declare it anywhere on our income tax? You are out of luck. "Points" are generally considered prepaid mortgage interest. The reason to pay points is to get a lower interest rate over the term of the loan. Unfortunately for you, it is the buyer who gets the income tax deduction for points even when they are paid by the seller.

Real estate transactions can be very confusing. It is important to ask your agent questions about things you do not understand. Whether the buyer or the seller pays for points and other closing costs is negotiable. The buyer asked you to pay the points and you apparently agreed to that as part of your sales contract. Fretting about it now is a waste of energy.

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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