Student loan giant Sallie Mae unveiled a new credit card that will allow consumers to use their cash back rewards to save for college.
The new card will be issued by the U.S. arm of British bank Barclay’s and will allow registered users of Sallie Mae’s Upromise subsidiary to earn 5% cash back on eligible purchases made through the Upromise website.
Consumers who use the Upromise World MasterCard will also be able to receive 4% cash back from dining at restaurants that have partnered with Upromise, 3% cash back at Exxon or Mobil gas stations, 2% cash back at participating movie theatres and 1% cash back on everything else.
As a way to attract new accounts Sallie Mae has stated that eligible purchases made by new cardholders through Upromise can receive 10% or more in cash back rewards. While the ability to immediately have cash back reward funds transferred directly into a college savings account sounds appealing, the privacy concerns that have dogged Upromise since its 2001 launch may discourage some parents from participating.
In order to receive the advertised cash back rewards, Upromise requires participants to register any grocery store and drug store club cards with the company’s database and download a tracking application that monitors web activity. Upromise then shares this “360-degree view” data with partner companies, which allows them to create highly customized marketing campaigns. In April, the Federal Trade Commission charged that Upromise did not adequately disclose the extent of the information being collected from program participants.
Upromise will not disclose how much it makes from the consumer data it collects. The only mention of the collected data in Sallie Mae’s 2011 statement to shareholders was a brief acknowledgement that the company received a fee for marketing and administering data for Upromise program partners. Sallie Mae did state that, overall, the Upromise program generated $70 million in revenue from the program’s partners—most of which was transaction fees—and that Upromise’s revenue stream is experiencing consistent growth, up from $31 million in 2007.
In addition to the privacy issues raised by Upromise, there are also complaints from consumers that the program doesn’t deliver as advertised. One of the main issues seems to be the way that Upromise handles the deposits of the cash back reward funds into the savings accounts.
Derek Williams, a blogger for education website go4learning.com, wrote that “after a purchase is made from a qualifying retailer, it may take several weeks before the funds show up” and that funds can remain pending for months before being deposited.
While Sallie Mae does say that Upromise participants have been able to earn over $675 million since the program was founded in 2001, they don’t mention that the average account holder had only earned $47.
Follow Alex Wukman on Twitter @AlexWukmanCMN