Citigroup Inc. has found a way to turn credit card marketing dollars into assets under management.The New York banking company said it has joined forces with UPromise Inc., a start-up in Brookline, Mass., that will direct money rebated on consumer purchases into tax-deferred college savings plans.Citi's credit card division is to donate the equivalent of 1% of the value of participating cardholders' net purchases to an escrow account held by UPromise. UPromise is then to transfer the funds into a Section 529 college savings plan of the cardholder's choice; these include plans overseen by Citi's asset management division.Andrea Feirstein, director of college savings at Citi, said the program is a big cross-selling opportunity. Citi has promoted its Section 529 plans by sending statement stuffers to card holders. But UPromise will be more than an advertising outlet, Ms. Feirstein said. "We look at UPromise as a distribution channel, like we would another broker-dealer," she said.Citi is both the only credit card issuer and the only mutual fund manager to sign on with UPromise, which will begin doing business in April, according to a spokeswoman.She said the credit card relationship will remain exclusive for the near future but that UPromise is negotiating with other asset managers, including Fidelity Investments. Customers who get rebates through UPromise can direct their money to any college savings plan with which UPromise has an alliance. Ms. Feirstein said that Citi will look for ways to direct customers to plans that it manages - for instance, through targeted marketing such as mailers. She did not rule out offering Citi cardholders additional financial incentives for directing their money to a Citi-managed plan.Section 529 plans - named for the provision of the Internal Revenue Code that governs them - let families save for children's and grandchildren's college tuition.As with 401(k) plans, assets are contributed to Section 529 plans pretax, then grow tax-deferred until withdrawal. Withdrawals, which must be used to pay college tuition, are taxed at the student's rate, typically far lower than the parents' or grandparents'.Citi manages more than $100 million of assets in college savings plans sponsored by Colorado and Illinois.

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