Want to turbo boost your 529 savings plan by thousands of dollars in the next few years?

The Fidelity Rewards Visa Signature credit card can help.

For the first time ever, you can save 2% cash back with the Fidelity Rewards Visa Signature card. That’s the highest cash-back rate of any credit card in the United States. What’s even better: you get your savings tax-free.

Here’s how it works. The Fidelity Rewards Visa Signature awards an unlimited flat rate of 2% cash back on all purchases you make with your Fidelity credit card. There are no limits, no exceptions. All of your cash back rewards go straight into your 529 savings account, where they can grow tax-free.

So what kind of impact can 2% cash-back savings have on your 529 savings plan? Check out the chart below:

Monthly Card ExpensesCash Back 1-Year 5-Year10-Year
$500 /$6,000$10/$120$127 $717 $1,677
$1,000/$12,000 $20/$240$254$1,434$3,353
$5,000/$60,000 $100/$1,200$1,272$7,170$16,766

How to redeem your cash-back rewards

There are a few different ways to redeem the cash-back rewards, but for college savings, you can get the cash-back deposited directly into a Fidelity-managed 529 savings plan. The amount you earn from a 529 savings plan is dependent on your plan’s state, with some averaging around 2% up to 6% and higher. When you compare that amount to most savings accounts that only earn less than 1%, the Fidelity card is clearly a better option.

Tax-free contributions and withdrawals

Cash back rewards from the Fidelity Rewards Visa Signature card are not taxable by the IRS. They are considered rebates on your credit card spending. Therefore, your contributions into the 529 savings plans are tax-free.

Furthermore, money in a 529 savings plan can be spent tax-free for college expenses.

Essentially, you don’t pay any taxes while using the card to build college savings for your child.

How cash back rewards can increase college savings

Let’s look at the chart below one more time to see the amount of savings potential you have:

Monthly Card ExpensesCash Back 1-Year 5-Year10-Year
$500 /$6,000$10/$120$127 $717 $1,677
$1,000/$12,000 $20/$240$254$1,434$3,353
$5,000/$60,000 $100/$1,200$1,272$7,170$16,766

As you can see, you don’t have to use your card much to earn a good-sized monthly contribution. Just using your card for your everyday purchases like gas and groceries every month (don’t forget to pay the balance before the end of the billing cycle), you can build a significant savings account for your child. Your future checking account – and your child! – will thank you.

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