65. Earning Points for Paying Student Loans or 529 Plans with Dr. Andrea Mabry

Welcome to Point Me to First Class, the only show for employed professionals, entrepreneurs, and business owners who are looking to optimize their higher-than-average expenses to travel the world. I'm your host, Devon Gimbel, and I believe that your expenses are your greatest untapped asset if you know how to leverage them. Ready to dive into the world of credit card points and miles so you can travel more, travel better, and travel often? Let's get started.

Welcome back to the podcast everybody. Today, I am really excited to dive into a topic that I think is going to be relevant to a lot of you listening, and that is how to earn credit card points specifically for paying off student loans and for contributing to 529 college savings plans. 

Now, I think one of the biggest misconceptions about folks who have high expenses is that they don't care about earning or using points to subsidize their travel budgets or defray the cost of traveling because they do have disposable income. But from my own personal experience, that could not be farther from the truth because for pretty much all of us, money is not an endless resource. So we're constantly making decisions about where to allocate our money based on our personal and financial priorities. 

One of those priorities might be paying off your own educational loan debt or saving for the future educational expenses of your kids, nieces or nephews or other loved ones. Especially if you are carrying high student loans from undergraduate or graduate school, prioritizing contributing to a 529 educational fund for your kids or other family members, or are in the not so enviable position of paying off your own student loans while simultaneously also trying to save for the educational future of others. The truth is that these financial priorities can and often do take precedence over using disposable income for travel. 

Now, as someone who attended a private medical school entirely on loans and has had the pleasure of paying back every single one of those multiple six figures of loan dollars plus interest, believe me when I say that I know what it's like. A dollar or a thousand dollars or ten thousand dollars or multiple six figures of dollars that you put toward paying down your own student loans or saving in a 529 plan for someone else are dollars that you don't have to book a flight or a hotel stay.

But I do not look at making financially responsible decisions as a zero-sum game. Rather by strategically leveraging as many of our expenses as possible to earn points, we can have our proverbial cake and eat it too. 

Today I'm joined by my friend and points earning expert Dr. Andrea Mabry to show you exactly what that looks like by breaking down for you all how to take what can be one of your biggest expenses, paying down student loans or saving for college, and leverage it to earn lots and lots of credit card points.

Devon: Welcome back to the podcast, Andrea. Thank you so much for joining me today. I'm so excited to dive into this.

Dr. Mabry: Thank you so much for having me back on the podcast. It's always a pleasure to discuss the exciting world of points and miles. I often also see this topic asked online on various online groups because student loans are such a major expense for so many Americans.

For me, repaying student loans has always been somewhat of a stressor until I started earning points for travel from this expense. Just the other day, I was talking to my husband while looking online at our Gift of College account and said oh no, we're going to pay off our student loans next year. How are we going to generate all these points? Of course he looked at me like I was absolutely insane. 

But the reason I felt almost disappointed is because since starting to pay student loans and fund 529 accounts with credit cards, I feel like I've had a points windfall, and I enjoy getting to take vacation with the hundreds of thousands of points per year these payments are now earning me. 

I also love the mindset shift it gave me. Instead of seeing these expenses as a burden to bear, I'm now viewing them kind of as a game of chess and one that I can strategically plan out and try to win. It almost makes paying student loans fun if that were a thing. I maybe wouldn't go so far as to say that, but it does gamify paying student loans. So I enjoyed that part of it. 

Devon: Yeah. Andrea, I don't know about you, but one of the most common questions that I get asked by people wanting to earn points for their expenses is how can they use a rewards credit card to pay their own student loans, or to contribute to a 529 college savings plan? The short answer is that right now, at least the time that we're recording, you can't, at least not directly.

So let's explain this a little bit more. In general, you cannot pay debt, like student loans, car loans, or a mortgage with debt, which is what credit cards are considered. So currently, there is no way to just log on to your student loan payment website and make your payments directly with a points earning credit card. Similarly, there's currently no way to log into your 529 plan and directly make contributions to your account using a points earning credit card. 

Now you used to be able to make contributions to certain state’s 529 plans using a rewards credit card through PayPal's bill pay function, but that method is now expired and is no longer an option, unfortunately. But what is an option is a little bit of a workaround that allows you to make payments on your student loans and make contributions to a 529 plan and still earn credit card points. That is by purchasing Gift of College gift cards, and then using those gift cards for your student loan payments or to fund your 529 plan contributions. 

Now, Andrea, for people who are not familiar with Gift of College gift cards, maybe have never heard of these before, can you really quickly explain what they are and how they work? 

Dr. Mabry: Yeah, absolutely. So Gift of College is a platform that precisely lives up to its name. It's a gift registry website where you can contribute a monetary amount, typically ranging from about 50 to 500 dollars, toward someone's past, current, or future educational expenses. You can leverage it for credit card points by basically purchasing Gift of College gift cards for yourself or loved ones.

Most everyone in the points and miles world is already very familiar with purchasing gift cards for expenses. The process is very similar. You start by creating an account on the Gift of College website, which can be set as either public or private. If you set it as public, then other people can log in and contribute to your accounts. 

You then link your 529 accounts or your children's 529 accounts or your loved one’s 529 accounts and student loan servicing accounts to the account that you created on the Gift of College website. Here, I'm going to highlight my own incorrect assumption which led me to miss out on a ton of points last year. I incorrectly assumed that only direct fed loan servicing student loans were eligible on the Gift of College website. However, refinance student loan servicers, including Earnest, MOHELA, and SoFi are also available on this platform. 

So you have three options for funding Gift of College account. You can purchase physical gift cards in stores, you can purchase digital gift cards online, and you can directly apply funds with a credit card to a Gift of College account on their website. When you redeem the physical or digital gift cards on your account, you simply log in, click redeem, enter the gift card number, pin and expiration date, and apply it to your linked account where you want the funds transferred.

Once it's set up, it's a fairly easy process. I usually sit down on my laptop once a month, and it takes me less than five minutes to redeem enough gift cards to cover student loan payments each month in $200 increments. I'm going to make a note right here and say though it does take 14 business days for the funds to post. So if you have a payment due date about a week from when you're applying the gift cards, it probably won't get applied to that month's payment. 

You can also use this method for kindergarten through 12 tuition payments since the 2017 Tax Cuts and Job Act took effect, which redefined eligible expenses to include K through 12 educational expenses. This option may or may not make sense for you. Many private schools have payment portals set up that accept credit cards with around a 3% fee. However, if your child's school does not accept credit cards, this could be an option.

If you plan to pursue this option for K through 12 expenses, I should note here that each 529 account varies and how long payments must remain within the plan before withdrawing without a fee. So you'll need to check your 529 account specifically. 

Devon: Yeah, that's really good to know. I think that one of the things that makes this such an appealing potential way to earn points is that if you are someone who is really currently or planning to max out the contribution of a 529 plan, we are talking about not insignificant numbers here in terms of the amount of money that you may be investing in one of these plans and therefore the amount of points that you could be earning off of those contributions.

So, again, at the time of recording, these numbers may be different if you're listening to this podcast a year or two years down the line because maximum contribution limits can and do change sometimes. But right now, at the time that we're recording, the maximum contribution limit for 529 plans is $18,000 per donor per beneficiary. So what this means is that each person who is contributing to a 529 plan, you can contribute up to $18,000 per year per beneficiary, so per person who's receiving those funds.

So I'm going to give you a basic example. If you have a two person adult household that has one minor child in the household, each one of those adults is allowed to contribute $18,000 each into the 529 plan of that beneficiary each year. So, again, if you are in the position where you are trying to max out some of these contributions, and you have more than one adult in your household or more than one adult who's contributing to these 529 plans, these numbers can get very, very high, very, very quickly.

Now, you, of course, will want to check the specifics of your own 529 plan because varying states have aggregate contribution limits, typically between $235,000 and $550,000 per beneficiary. So at some point, you can actually be locked out of continuing to contribute to a 529 plan. But you have a lot of room to put a lot of contributions in these types of plans.

But let's talk about what this actually looks like now in terms of the options that Andrea mentioned are available for either contributing to 529 plans using Gift of College gift cards, or paying down your own student loans. 

Now, I mentioned before that there's no option to just directly pay down your student loan or directly make a 529 contribution with your points earning credit cards in order to earn points. So as of right now, the best option that we have available to us are specifically purchasing these Gift of College gift cards.

So let's talk about kind of what that looks like, Andrea, can you tell us a little bit more about how we can go about getting these Gift of College gift cards, or an overview of the denominations and the fees that these cards carry because this is a really important thing to know about purchasing Gift of College gift cards and take into consideration in order to decide whether or not this is an avenue that actually is going to be a good fit for you.

Dr. Mabry: Absolutely. They do come with activation fees, same as Visa and MasterCard gift cards do. Unfortunately, you cannot find them on sale at Office Max, or Depot, or Staples, a zero activation fee sale, or that would be great if they one day do. That would be awesome. So your activation fees are going to range from $5.95 to $6.95. Your best option is to find the $500 denomination gift cards at $5.95 activation fee, and that makes the fee 1.19%. So for every $500 you're buying and contributing to a 529 or a student loan, you're only paying a 1.19% fee. 

Another option is $200 gift cards, which also have a $5.95 to $6.95 activation fee, and this comes to a 3 to 3.5% fee. Then the least notable option here is a $100 gift card, which also comes with a $5.95 to $6.95 activation fee, which comes to 3 to 7%. So not usually worth it at a 7% fee.

Now, I will note that online when you click on the Gift of College, you can go to gift, and you can contribute directly on Gift of College $500 at a time at a 3% fee. Now, the great part is you don't have to go to a store to get a physical gift card. You can just apply funds online. The downside of doing this is that it basically shows up as uncategorized spend. Whereas if you can physically go to a store that you have a category multiplier, then you get more points for the same $500. 

So, again, ideally, find the $500 gift cards in person at stores that sell them. But here's where certain people in the country are very much able to do this easily, and some people are a little more challenged. Participating stores on the Gift of College website include grocery stores and CVS pharmacies and some gas stations. 

You have HEB in Texas, Brookshire Brothers in Texas, and one in Lake Charles, Louisiana. You have Cumberland Farm stores in New England and off the east coast of Florida, FoodMaxx in California and western Nevada, and then Lucky grocery stores, which are in Utah, and SaveMore in northern California, and SaveMore also in western Nevada. So, basically, you're looking at Texas, Nevada, Utah, New England, and east coast of Florida having access to these $500 denomination gift cards. 

Devon: Yeah, so I think this is one of the really important things for folks to really understand about this potential method for using points earning credit cards to be able to pay down student loans and fund their 529 accounts is that, number one, in order to access physical Gift of College gift cards, like you mentioned, is that these are very, very geographically limited. I live in the middle of the country, and I think I have to take probably a two or three hour plane ride to get to the closest place where I could actually find a store that has those $500 Gift of College gift cards.

Again, as a recap, the reason that that's really important is because the three different denominations of the Gift of College gift cards that you can purchase in physical stores are $100, $200, and $500. The reason that this matters is because each one of these Gift of College gift cards, it has a fixed activation fee that's somewhere between $5.95 and $6.95. 

So obviously, in order to minimize the amount of fee you're paying for the amount of value of money that you're getting of the Gift of College gift card, you really want to get that highest denomination $500 Gift of College gift card if you can. It's this denomination that specifically is a little bit more challenging to find.

The $200 Gift of College gift cards are much more widely available. We do have these in my area at Walgreens and CVS drugstores. But, again, for the $200 Gift of College gift card, you're still going to be paying between $5.95 and $6.95 as an activation fee, which is coming out to a higher percentage effective fee than if you're able to secure a $500 Gift of College gift card for the same exact activation fee. 

So it's really, really important not only that you understand kind of what the math is on the percentage of fee that you are effectively going to be paying if you do purchase one of these physical Gift of College gift cards, but also that you feel really confident calculating the cost on the other end of what can you potentially get in terms of the number of points that you could earn if you were to go ahead and purchase one of these gift cards.

Because I think what happens to so many people, and I see this as all sorts of expenses. This is not limited to just purchasing this specific type of gift card. That anytime someone is faced with that opportunity to use a point turning credit card to pay for an expense but that comes along with paying a processing fee, whether that is to pay your quarterly tax payment, whether it's to make a payment to your daycare or a tuition payment. 

I think it's a very, very reasonable question for people to ask is this worth it at all? Is it ever worth it to pay a fee, an activation fee, a processing fee in order to be able to earn points using a points earning credit card for this expense? I do not believe in binaries. Yes, this is always a good idea. No, this is never a good idea.

I think what's more important is that folks understand how they can pretty easily walk themselves through the math so that they can see for themselves what would I have to get out of the points I earn for paying a processing fee, and in my situation is what I'm going to be able to get with the points earned outweigh the cost of that processing fee so much that this becomes an easy decision for me. 

So that is what we're going to break down now and walk through a couple of different scenarios of what it might look like to purchase these Gift of College gift cards or to directly fund a Gift of College account like Andrea was mentioning directly through the Gift of College website if you're like me and you live in an area of the country where you're probably never going to find one of the $500 Gift of College gift cards very easily around you.

So, Andrea, why don't you start walking us through sort of the first one or two potential scenarios of what it could look like to purchase some of these Gift of College gift cards and the amount of points that you could theoretically earn from that purchase?

Dr. Mabry: Absolutely. Okay, so let's look at just the average medical school graduate because a lot of the people who are in your Facebook group and listen to the podcast are physicians, and most of us owe a lot of medical school debt. In fact, the average medical school graduate owes $250,995 in student loan debt when they finish.

A standard repayment plan for federal student loans is 10 years and at 4.66% interest, that is a $2,621 monthly student loan payment, or $31,425 annually. So I am going to throw it back to a episode that I've listened to probably 15 times. Your episode number six of the podcast that goes through the calculation of how to basically determine if it's worth paying the fee for a tax payment because it's applicable to anything that you're looking at paying and if the fee is worth it.

Basically you calculate the cost of the fee which is the payment times the percent fee. You calculate how many points you would earn from the payment, so the multiplier times the total payment plus any sign up bonus that you would earn. Then you calculate how much value you'll need to get from the points that you earn, which is the cost of the fee divided by the points that you would earn times 100.

So if we take that same calculation and apply it to say an example of your geographically in an area, you're the lucky duck who can find these Gift of College gift cards at a grocery store. That makes me think like we should do a follow-up episode where basically we take the store locations around the country and superimpose them on a map of available Hyatts. 

Devon: You can combine your Hyatt matches running with your Gift of College gift card acquisition. Maybe we should turn this into appointment a first-class challenge and involve a couple of people doing this. But yeah a lot of things that we could, a lot of places we could go with this.

Dr. Mabry: I know you could then you know say well how many Southwest flights go there? Can I use my companion pass and really get some anyway? Okay either we're doing a mattress run to Hyatt, or we actually live in like California or Utah or Florida and we have access to the $500 gift cards from a grocery store, and we have an Amex Gold that earns us four times points at grocery stores. Okay.

So if we're looking at making $31,000 of payment over the course of the year with our Gift of College gift cards that we purchased from a grocery store at a 1.19% fee, that's $369 in fees. Okay and if we're not even considering that we might get a sign-up bonus out of our Amex Gold. We're just saying we have our Amex Gold. We're going to earn 4x.

We earn 4x points on $31,369 because we're including our fees into that payment. That's 125,476 points that we earn from picking up these gift cards while we're at the grocery store. If you divide the $369 in fees by the 125,476 points you to earn multiplied by 100, that means you need to earn or you need to redeem at 0.29 cents per point to break even, which is not hard at all. You can use Amex points at cash-back for 0.6 cents per point. Not that you should, but you could. 

So even using a card that earns 1.5x, you're earning 47,053 points, and you would need to redeem at 0.8 cents per point to get the same value from the points as the cost of the fee. If you redeem at 2 cents per point, that 125,476 points earns you $2,509 in travel.

Devon: Yeah so Andrea I just want to jump in here a second just to highlight a couple of things, which is that I think this really highlights the importance of being able to kind of evaluate for yourself what is your personal comfort level in terms of redeeming points. Because people are going to be on all ends of the spectrum, right? They're going to be people who have only ever experienced redeeming their points directly through a credit card account credit card travel portal, which, of course, we don't tend to love only because you do end up getting a lower value of cents per point from your points when you use it that way.

But even in that scenario, this is what I want to highlight. Even if you are only ever going to use your points directly through a credit card travel portal, you're still going to get anywhere from like one to one and a half cents per point in value from those points. Even in that scenario, I would say that the math here still argues that it is favorable to go ahead and do this.

Because, like Andrea mentioned, for this one specific scenario, you only have to get about 0.3 cents per point in value in order for you to totally break even on the cost of those activation fees on the gift cards. So if you're getting anything more than 0.3 cents per point in value from the points you earned from doing this, you've already broken even. 

You actually try really, really hard to only get 0.3 cents per point in value from your gift cards. Certainly as your redemption skills increase, this is something that you've probably heard me talk about on the podcast before. We try to give examples of many different ways that this can look is that you're not always going to get outrageous redemptions. You're not always going to get 10, 15, 20 cents per point out of your points but sometimes you can.

Thinking about averages because I spend a lot of time on spreadsheets, more than probably the typical person, I tend to look at and track at over time you know on a yearly basis about how much value am I getting from my points across all the travel that I book in one calendar year because I don't want to just be using you know credit cards especially for expenses that have processing fees without really being sure of am I getting you know way more value from these points than the cost of these fees that I'm potentially paying.

I think my average across an entire year of booking travel that's solo travel, family travel, hotels, flights, the whole thing is I tend to get four and a half, almost five cents per point at a value across all of my points. Again that doesn't mean that everybody's going to want to do that same exact thing. 

But it's really just to illustrate here that when you get really comfortable redeeming your points and when you have a good sort of sense or expectation of how often do you tend to get a certain amount of value from your points to me it makes it much easier to make decisions around these types of scenarios. 

Where it's very, very easy for me, personally, to say, again, as long as I can completely fund these expenses you know out of my liquid accounts that I have, it is definitely worth it for me personally to potentially earn you know 125,000 points in this first scenario even with a processing fee of 369 dollars. Because if I'm even getting two cents per point out of all those points, that's $2,500 worth in travel. So, for me, that math makes sense. I will gladly pay $369 in processing fees or activation fees knowing that I'm going to get $2,500 in travel.

But, again, that may not be true for everyone across the board, which is why we really wanted to deliberately walk through some of these scenarios so that you can make a decision that is the best one for you. The last thing I will note about this specific example before we head into the next example is that we were joking about you know the HEB locations and planning your travel.

I actually did go out of my way to look up that there is a there's a Miraval location in Austin, which is my favorite Miraval location. I recently did a podcast episode that should have aired by the time you listen to this episode about the three different Miraval locations and breaking down what's amazing about all of them.

But the last time I went to the mirror of all that's in Austin, I actually did look up on the Gift of College website. They have a geographic locator where you can look up you know where all of the stores nationally in the continental US, where you can get these stores. There's an HEB that's literally like a mile away from the Miraval in Austin.

Dr. Mabry: Oh, that's awesome.

Devon: I very, very seriously considered should I like get an Uber you know or a Lyft from the Miraval Austin location to take me down to HEB to pick up some of these gift cards. I didn't end up doing it, but I did want to tell you that if you want to schedule yourself for a relaxing sole location a little bit of a break, and you decide to go to Miraval Austin, don't sleep on the fact that there are tons of HEBs in Texas in general, but there is one, at least there was the last time I checked, very close to that location. So just keep that in mind.

But for those of you who are not interested in doing that, that's totally fine. Andrea, can you give us another example of what it might look like, another scenario where it could make sense to potentially pay these activation fees on the Gift of College gift cards, especially in a scenario where you can leverage a brand new points earning credit card and use these expenses to earn the welcome bonus on that card.

Dr. Mabry: Absolutely. Sure. I think a Miraval mattress run to buy gift cards sounds absolutely fabulous. But let's look at okay let's say you get an Amex Business Platinum, a brand new, and you want to fund 529 contributions over three months to earn the sign up bonus on the Amex Business Platinum. Let's look at this example as a normal Amex Business Platinum sign up bonus and not the crazy ones that have been going around lately of like 250 to 300,000 points. 

Let's look at a standard typical one of like a hundred ninety thousand dollar, or a 190,000 point sign up bonus to see if it makes sense because who knows how long the crazy elevated offers are going to be around and if you have to like VPN to China to get them or something.

So you're going to pay $15,000. In this scenario, we're going to go directly on the Gift of College website, and we're going to click gift instead of redeem. When you click gift, you can directly click that you want to fund with a credit card, and it's a 3% flat fee. So for $15,000 at 3% fee, that's $450, okay. So we spend $15,450. 

That's a 1x because it does code as schools and educational services. I have gone on and done this. It does not code as gift cards therefore I don't think that you should be worried about the Amex claw back of a sign up bonus for gift card purchases because this doesn't code as gift card. It does code one Amex as schools and educational services. 

So you'll earn 15,450 points from the spend. You'll earn the 190,000 point sign up bonus, which comes to 205,450 points total. You spent $450 to earn that 205,000 points. So, you divide the 450 by the 205,000, and it comes to right at 0.2, two cents per point that you would have to redeem these points in order to cover your cost or the $450. 

So, same example. If you redeem those 205,000 points at two cents per point, which is very easy to do. You've spent $450 to redeem those points and get $4,109 in travel.

Devon: Yeah, and I think the moral of this story or this example is that especially if you have a new rewards credit card where putting these expenses or these charges on the card is going to enable you to earn the sign up bonus, whether it's this specific card. 

Almost any card that I can think of where you can earn the initial welcome bonus by purchasing these Gift of College gift cards, I think the math is going to more than justify the cost of the activation fee of these gift cards simply because you're just earning so many points not only from the cost of the purchases themselves but also by adding in that welcome bonus.

I still think it's worth it to walk yourself through the math every single time just so that you can make a very educated decision. But, again, basically anytime you can earn the welcome bonus, I think that it almost always justifies even having to pay the activation fee or the processing fee for a certain expense given the numbers that we're talking about here. No higher than about 3.5% of an overall fee total.

But let's look at one last example. This is one that I think will be relevant to a certain number of people. So there was a really, really fantastic special promotion on a specific Chase card towards the end of last year, so towards the end of 2023. This was the Chase Freedom Unlimited card that I think in general is really a points earning powerhouse for most people who have significant non-category or non-bonus spend kind of expenses because ordinarily it earns one and a half times points on just all spend across the board that's non-category, but it also earns, regularly, usually three times points at drugstores.

So with this specific Chase Freedom Unlimited double cash-back offer, for the 12 months following your approval for this card, all of those bonus categories, there's also a dining bonus category that's not really relevant in this scenario. But all of its bonus categories were doubled for one year. There was a specific promotion where there was no cap on the amount of extra bonus points you could earn.

So even though this card is not available under that same exact promotion anymore. I don't know if Chase is ever going to bring it back. Let's see how many points they have to pay out to people at the end of this calendar year, this rolling 12 months after people applied for this card. But the whole point is that if you were able to snag the Chase Freedom Unlimited with the double cash-back offer specifically then for 12 months following your approval for that card, you're going to be able to earn six times points at drugstores. 

This is really, really relevant because, again, there are a lot of drug stores like CVS and Walgreens that carry the Gift of College gift cards. Especially, again, in my location, we don't have access to the $500 denomination Gift of College gift cards at our drugstores, but we do have access to the $200 Gift of College gift cards.

Now depending on which drug store you buy them at, again, those $200 gift cards are going to have an activation fee of anywhere between $5.95 up to $6.95. So especially if you are paying that $6.95 activation fee, that's effectively a 3.5% fee on the cost of this card. So that is not small.

But that's why I wanted to walk through this specific example and why it is so important to do this math that don't just write that off because 3.5% sounds really high. Walk yourself through the math to say oh is there still a scenario in which this could make sense for me? 

So, let's just pretend that you are someone who is fully funding to 529 accounts annually. So each one of those accounts can be funded with $18,000. So that's $36,000 in contributions to a 529 account. Let's say you're also paying down your own student loans, and you have $31,000 total over the course of a year that you're going to pay down in student loan payments. So all combined over that course of the year between the 529 contributions and your own student loan payments, that is going to be around $67,000 paid out to these various institutions and platforms.

So, let's say that you are like me, and you are limited to the $200 increment Gift of College gift cards, but you can get those at a local drug store, and you also have this amazing Chase Freedom Unlimited with double cash-back offer. So you're going to be able to earn six times points on that expense. So let's say over the course of that year, again, you end up purchasing $67,000 of these $200 Gift of College gift cards. Even at that $6.95 activation fee or 3.5% activation fee, you're going to be paying $2,345 all in in terms of the activation fees alone.

But the number of points that you're going to earn for that, a total expense of $69,345, earning six times points on that is going to get you 416,000 points, again, across that entire year. Now the cost of that activation fee, again all told, that was $2,345. When you divide that by the total number of points that you'd be earning, a little over 416,000 points, multiply that by a hundred. What that tells you is that you're going to need to have to get at least 0.56 cents per point in value from your points in order to offset or equalize or justify that $2,345 activation fee.

Now, again, let's bring it back to the scenario where you feel comfortable or confident that you can get two cents per point from all of your points. If you can get two cents per point from 416,000 points, that's going to be worth a little over $8,300 worth in travel. So, again, the total cost of all the activation fees would be about $2,300. Even at two cents per point redemption, you're going to get $8,300 worth in travel. So you get to decide whether or not that justifies the activation fee for you.

I think there are probably some people who say I would never want to pay $2,300 even to net out around $6,000 worth in travel. But I think there's a fair number of people who would say wow that seems actually like a really great deal to me. But if you're someone who, again, has a little bit more skill, a little bit more comfortable and confident in using your points. If you can get four cents per point in value from your 416,000 points, now we're talking over $16,000 worth in travel. 

This is where I think the math really, really, really starts to math. Again, especially if you're someone who is making significant 529 plan contributions, if you have your own high student loans that you are paying off diligently month after month after month, and, again, if you're in the scenario where you have the ability to earn a good amount of points based on the points earning cards you have available to you, and you have a good sense of how to use these points. I think that's when all of these conditions come together for a really, really ideal scenario.

Because, again, if you're someone who really loves traveling, if you're used to earning and using points, for me, personally, again, the assumption is always that you have the liquid funds to you know pay off all of your credit cards fully every single month. This is not putting you into any financial distress. Under that scenario, I personally would think it's a deal every day of the week to pay $2,300 to be able to get over $16,000 worth in travel.

Again that doesn't mean that that's has to make sense for every single person listening to this episode. You're free to disagree with me, but this is where I think we can really, really start to leverage this potential points earning opportunity, especially if you're someone who, unfortunately like me, paid off, again, multiple six figures of student loan debt before they ever realized that there was an opportunity to earn points.

One of the things that I am most grateful for in my life is that I’m no longer carrying that huge burden of student loan debt. I love that I own my brain and all the education in my brain. So I sleep happily at night knowing that. Would I also have loved to earn potentially millions of points for doing that? Yes. So I don't want you to be in the same position of me that you just didn't even know that this was an option or a potential for you to earn lots and lots of points.

So those are just a couple of different scenarios or examples using the different types of Gift of College gift card denominations that you can buy or just directly funding your Gift of College account online using a credit card. What we hope to have shown you is that, again, it can sometimes still, number one, make sense to pay any type of activation fee in order to use a points earning credit card to fund your 529 accounts or pay down your student loans.

But that it can also make sense sometimes to purchase these lower denomination cards if that's all that's available to you or directly fund your Gift of College account even at these 3 or 3% activation fee rates, again, depending on the card that you're going to be using in order to earn points, and your confidence when it comes to using the points that you have earned for travel.

So before we wrap it up today, we just wanted to, again, review for you or break down for you all the best credit cards that we think that you should consider for purchasing Gift of College gift cards. So, here's kind of the order that I think about it in, and then Andrea, I'll throw it back to you. Tell me if you disagree with me or if you think about this you know in any other sort of way.

But I think that if you're someone who has access to the physical $500 denomination Gift of College gift cards at a grocery store or a gas station in your geographic location, I think those are the most ideal gift cards to get because those have the lowest effective activation fee at just 1.19 percent. So if you have those available to you, that is where I would start. In order to maximize your points earning, I would want to prioritize using a credit card that is going to give you the highest number of bonus points possible for the location that you can potentially purchase these cards. 

So that's going to look like, again, a drug store if you specifically have the Chase Freedom Unlimited double cash-back card that's going to earn you six times points, at least for your promotional period, or a card that bonuses grocery store spend if you can buy these five hundred dollar Gift of College gift cards at a grocery store. Cards like the Citi Premiere, which is now the Citi Strata Premiere, I think, as of this week that earns three times points.

We mentioned the Amex Gold card that earns four times points at grocery stores. Then usually at least one quarter of the year, the Chase Freedom Flex will have grocery stores as its bonus category where you can earn 5x, but, again, remember only on up to $1,500 spent per quarter for that bonus category.

Now if you just have a regular Chase Freedom Unlimited card with no double cash-back promotion or your Chase Freedom Flex card, remember that those cards always earn three times points at drug stores. So that can be a good option for you. Or if you have a card that bonuses gas station spend, like the Wyndham Rewards Earner Business card that earns eight times points at gas stations, the Amex Business Gold that earns four times points at gas stations, or the Chase Ink Business Cash card that earns two times points at gas stations, those can all be great considerations as well.

But if you are someone who does not have access to the $500 denomination Gift of College gift cards in person, I think the next best kind of funding option would be funding the Gift of College account directly online through the Gift of College website. Again, I would do this at the highest denomination possible, the five hundred dollar denomination, probably just to minimize the number of contributions that you're making. 

If you're doing that directly online, again, for the five hundred dollar denomination, you're going to be paying a 3% fee, and this is going to code as non-bonus or non-category spend on your credit card. So I think the scenarios where this makes sense is any credit card where you're working to earn that initial welcome bonus, I think, justifies paying that 3% fee. Of course, always walk yourself through the math so that you can feel confident with that decision. But in my mind, that would still be a pretty easy decision for me.

Then as well if you have any cards that bonus non-category spend, those are the cards you're going to want to be pulling out to directly fund your Gift of College account through the Gift of College website. 

So cards that that bonus non-category spend, I'm not going to go through the entire list, but the ones that come to the top of my mind are cards like the Amex Blue Business Plus card where you get two times points on any spend up to $50,000 spent annually. One of the Capital One Venture cards or a Chase Freedom Unlimited or Chase Ink Business Unlimited card that earns one and a half times points on all spend.

Now assuming those options don't appeal to you, I think the next best option would be to purchase the $200 Gift of College gift card physical gift cards in person, again, most likely at a drug store but potentially at a gas station or a grocery store. That is, again, going to come out to an activation fee of around 3.5%. But, again, using a credit card that is going to bonus the type of spend for the location that you're at. So a credit card that's going to bonus drug store spend at a drug store, that's going to bonus grocery spend at a grocery store, or bonus gas spend at a gas station.

But no matter what, I think regardless of any of these options that you choose to do, I just want to reiterate that before you do this, I would always encourage you to walk yourself through the math so that you completely understand what is the cost of the processing or the activation fee that you're going to be paying, how many points total are you going to be earning from that purchase, and are you confident that you are easily going to be able to get value at least equal to the amount of the processing fee and ideally much, much greater from the points that you are going to be earning from this purchase?

So, Andrea, before we just review quickly the implementation steps and wrap up this episode, would you disagree with sort of the cards that I prioritized in terms of what I would do in purchasing these Gift of College gift cards?

Dr. Mabry: Oh, no, I absolutely agree. I mean obviously the most fun you could have is getting a sign-up bonus with a card that also has a multiplier. I mean my husband, I finally, finally got him out of Amex pop up jail during that 48 hour amnesty day that they had and finally got one. So it would be great if we could go to a grocery store and not only get 4x points on these gift card purchases but also work towards the sub.

Then I agree with your lineup. There's also a whole separate layer that is way beyond what we can put in one podcast episode of stacking and stacking grocery store bonuses and fuel point bonuses and all this other stuff onto what you're purchasing at the grocery store. So that although you may be paying 3.5 or 2% or an activation fee, you may be getting a free tank of gas, which pretty much covers the fee anyway.

Devon: Yeah, that's such a great point. Like you said, we could probably have like 19 episodes about all of the different stacking opportunities. So if you are a little bit more advanced in your points earning, of course, incorporate in those additional points earning opportunities. I think that's a fantastic point to make. 

Now before we wrap up today, Andrea, did you want to, again, just briefly review for everybody what are the basic implementation steps if they want to go ahead and set up a Gift of College account so that they can fund a 529 college savings plan or pay down student loans using Gift of College gift cards?

Dr. Mabry: Absolutely. It is fairly simple, okay. First you're going to want to verify that your student loan servicer or 529 plan is serviced on the Gift of College website, and you can just do that by going to the website. Second you're going to create a Gift of College account. Then third, you're going to link your student loan and 529 accounts to your Gift of College account. That's where they will show up. You basically just need your loan number.

I always, always, always then perform a test payment. I never make my first transaction, $500 or $1,000 or go buy $5,000 of gift cards from Gift of College. I want to make sure this works before I really put skin in the game to make it happen. So, I’ll do like a five dollar test payment, make sure that actually went to my 529 account or got applied to my student loan. Then once I know that this is set up and this works then I just go with it.

Devon: Perfect. Yes let me just reiterate that is such a fantastic point to make. Whether it is Gift of College gift cards to fund your 529 accounts, pay down your student loans, any other scenario where we are talking about potentially over time significant amounts of money or expenses that are going on these cards, I am a huge proponent of starting very slow and starting very small. So thank you for being explicit about that.

I don't think there's ever any reason to just dive in head first, like you said, and go out and get your ten thousand dollars of Gift of College gift cards as your first try. Go ahead, set up your accounts, make small contributions, verify that you understand the entire process from start to finish, that everything is connected, that everything is depositing correctly. There's always time for you to increase your speed, your velocity, or your complexity. So that's a great reminder start small and start slow.

Now last thing that we do want to mention before we wrap up today's episode is that, of course, any time that we are talking about anything that is financial related, we do recommend that you go ahead and consult with your own tax professionals, especially when it comes to ensuring tax deductibility of 529 contributions funded through Gift of College gift cards in your state. So please always do your own due diligence, consult with your tax and financial professionals so that you can make sure that you are doing things that make sense for you and your scenario and your circumstances.

So, everybody, I hope that you enjoyed this episode. I hope that we've given you something to think about if you are one of the millions of people who have the lovely situation you know of still continuing to pay for your educational student loan debt, or if you are thinking ahead and trying to set up folks in your life to not have educational student loan debt through 529 plans. 

This is, again, a points earning opportunity that I think is very, very unique, and I hope that for those of you who have walked the math for yourself and decided that this makes sense for you that you enjoy this avenue to earn potentially lots and lots of points for, again, what can be an incredibly high and significant expense for so many of us.

So, Andrea, thank you so much for joining me again today, for walking through this episode with me, and for doing a lot of the educational and teaching experience that I had. I, again, was not familiar with this points earning method, and I feel like you have spent a lot of time really teaching and educating me about it. I want to acknowledge you and thank you for that and for the opportunity to share this with, again, so many people that I think are going to benefit so enormously from this information.

Thank you for all of the very rudimentary education you've done for me, and thank you for walking us all through this amazing points earning opportunity. I really appreciate you.

Dr. Mabry: No, thank you. I always have fun coming on talking with you. It's fun to talk about something that you're passionate about with someone who's also passionate about it. It's just a great conversation always to be had. 

Devon: All right everybody, that is it for today. I hope you all have a fantastic week, and I will see you again same time, same place next week.

Thank you for joining me for this week's episode of Point Me to First Class. If you want more tips on turning your expenses into travel, visit pointmetofirstclass.com to learn more. See you next week.