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“Reader Questions” are answered twice a week — Mondays and Fridays — by TPG Senior Writer Julian Mark Kheel.

Any parent will tell you that while sometimes challenging, having a child is an amazingly rewarding, life-altering, heart-warming experience. And also enormously expensive. So TPG reader Chris wants to know if he should try to earn credit card rewards on a common child care expense, even if it comes with a fee

If a day care charges 2% for using a credit card, which card should I use? Or should I just use a check?!

TPG Reader Chris

When it comes to using a credit card at a merchant who charges a fee for doing so, it’s important to do the math to determine whether the cost outweighs the rewards. In this case, you’ll need the points or cash back you earn to be worth more than 2% — and ideally significantly more than 2% to make the cost worth it.

So let’s take a look at the options. First, it’s unlikely that your day care provider is going to fall into any of the more common credit card bonus categories like travel, dining or groceries. That means when doing our calculations, we should assume that you’ll be earning at the basic “everyday spend” rate of your card and not earning any extra rewards.

For most of the best cash-back cards, the maximum return is 2%, which means you’d just be breaking even against the 2% fee. But there’s one exception, and that’s the Bank of America Premium Rewards credit card, which will get you 2.625% on all purchases if you also have Platinum Honors status with Bank of America’s separate Preferred Rewards banking program. So that’s one card that would get you a 0.625% net return by using a credit card, which is fairly small but better than nothing.

However, if you prefer points and miles instead of cash back, there are a couple other options with even more upside. An easy play would be to use the Starwood Preferred Guest® Credit Card from American Express. The card only earns 1 Starpoint per dollar spent on everyday purchases, but Starpoints are one of the most valuable loyalty currencies around, thanks to the fact that they can be transferred to over 30 different airline partners, and if you transfer them in blocks of 20,000 points, you’ll get a 5,000-mile bonus. That’s why in TPG’s most recent monthly point valuations, he estimates Starpoints are worth 2.7 cents apiece, and it’s possible to get even more value than that from time to time.

This pair of cards might be your best option for an everyday expense like day care.

But perhaps the very best choice for an everyday expense like day care is to use a Chase Freedom Unlimited card. All purchases on that card earn 1.5x Ultimate Rewards points, and TPG values UR points at 2.2 cents each, so you’re getting 3.3 cents of value for every dollar you spend on the card. That’s a pretty impressive return, and it more than offsets the 2% fee in this case.

Keep in mind that in order to fully realize the value of points earned with the Freedom Unlimited, you’ll need to pair it with another Ultimate Rewards card like the Chase Sapphire Reserve or the Chase Sapphire Preferred. Otherwise you won’t be able to transfer your points out to Chase’s airline and hotel partners, which is how you get top value for your points.

So while day care may be expensive, at least now you know how to get a little something back from it, Chris, and thanks for the question. If you’re a TPG reader who’d like us to answer a question of your own, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.

Featured image by Zero Creatives/Getty Images.

Chase Freedom Unlimited®
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More Things to Know
  • 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.99-25.74%. Balance transfer fee is 5% of the amount transferred, $5 minimum
  • Unlimited 1.5% cash back on every purchase - it's automatic
  • Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening
  • No minimum to redeem for cash back
  • Cash Back rewards do not expire as long as your account is open
  • Free credit score, updated weekly with Credit Journey℠
  • No annual fee
Intro APR on Purchases
0% Intro APR on Purchases for 15 months
Regular APR
16.99% - 25.74% Variable
Annual Fee
$0
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater
Recommended Credit
Excellent/Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.