An innovative breed of cash back credit card and linked savings account is being launched to help pay for children's higher education costs.
Called iPledge, the scheme is designed with the support of Accucard – a credit company owned by Lloyds TSB – and the Children's Mutual to encourage better planning for children's long-term savings needs by offering up to 0.8% back on every transaction.
Rates of cash back will depend on the low, medium or higher rate of interest individuals pay on their credit card, but at the higher rate of credit interest, every £100 spent will receive 80p – paid every six months - into a Children’s Mutual deposit account sourced by the Bank of Scotland, alongside the 4% gross interest the account already delivers.
According to the Children's Mutual:
- Two people using the iPledge credit card could save £3,323 over 21 years;
- Four people using the card – for example both parents and one set of grandparents - could save £6,645 over 21 years, and
- Six people using the iPledge card – both parents and both sets of grandparents – could save £9,968 over 21 years.
The Children’s Mutual is currently setting up links with the new scheme to hopefully encourage parents into longer-term savings towards education costs and later allowing transfer of deposit account funds into Child Trust Funds and other children’s products.
Anyone who spends around £1000 a month on their credit card will then receive £96 a year into a deposit account for simply using the card.
And from next month, iPledge cardholders will also be able to pick up additional cash back by shopping online through ipledge’s Shop and Save with well-known online retailers such as Boots, Dixons and Currys, followed by special deals for cars, holidays, personal loans, utility rates and cars later in the year.
David Halliday, marketing director at the Children’s Mutual, recognises while the deposits will not pay for a child’s education on its own, but can at least contribute and perhaps encourage take-up of savings plans.
"It won’t fund the whole education process, but it helps where people are spending on other frivolous goods. Once the accounts have been set up, we will then encourage people to set up long-term savings which can help to pay for their child’s education," says Halliday.
iPledge has also agreed to contribute 10% of its annual profits and allocated by a groups of academics to "help students make the most of the opportunities available through higher education" whether or not they are currently able to study.IFAonline
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