When it comes to earning credit card rewards, there are two main strategies to consider. You can focus on signing up for new cards to earn signup bonuses regularly, or you can do your best to maximize earnings on the cards you have.
That second strategy — maximizing earnings — tends to be popular with people who don’t want to sign up for new cards all the time. The problem is, earnings on typical rewards and cash-back credit cards are typically limited to 1-3% back, and it takes a lot of spending to earn meaningful sums of points and miles.
Start Paying for Daycare with a Credit Card
Whether you pursue a lot of signup bonuses or not, this is why it’s important to pay all your big expenses with a rewards credit card each month. The more regular bills you can funnel through a rewards card, the more points and miles you can earn over time.
Childcare can be an especially lucrative bill to cover with plastic due to how much it costs over the course of a year. According to the 2018 Care.com Cost of Care Survey, the average weekly cost for an infant child is $211 in a daycare center, $195 for a family care center, and $580 for a nanny. Further, 33 percent of families are spending 20 percent or more of their annual household income on childcare this year.
These costs are exorbitant, but families could parlay them into meaningful rewards with the right card. Imagine for a moment a family with two small children in daycare at a total cost of $300 per week. That’s a total cost of $15,600 for the year, a sum that could help them earn $312 in cash-back if they paid with a cash-back credit card that offered 2% back.
If they signed up for a card that let them earn 3% back, on the other hand, they could earn $468 the first year. And this doesn’t take into account any signup bonuses they earned by choosing the optimal card for daycare expenses.
Also note that there are other ongoing bills you can cover with a rewards card to earn more cash-back, airline miles, or flexible travel credit each year. Bills you may be able to pay with credit include:
- Utility bills
- College tuition
- Health insurance
- Auto insurance
- Homeowners insurance
- Cable television
- Internet and phone
- Car payment
- Subscription services
Pros and Cons of Paying Bills with a Credit Card
While covering daycare and other expenses with your favorite rewards card could be a lucrative move, there are pitfalls to be aware of. Consider both the pros and cons before you pay for childcare and other expenses with credit to earn points and miles:
- Earn cash-back, airline miles, flexible travel credit, or hotel points on regular spending
- Setting up bills on autopay can help you streamline your finances
- Using credit is convenient
- Regular expenses can help you meet a minimum spending requirement for a signup bonus
- If you don’t pay your bill in full each month, you will rack up interest on your bills and expenses
- Potential for long-term debt
- Credit card fees if you choose a card with an annual fee or rack up other fees
As you can see, there are both advantages and disadvantages that come with paying bills with a credit card. The pros can outweigh the cons, but only if you’re disciplined to pay your credit card bill in full each month. Since the average credit card interest rate is over 17%, you will not do yourself any favors if you pay bills with credit but also carry a balance each month.
Credit Cards to Use for Daycare and Other Expenses
If you ultimately decide you have the discipline to use credit for daycare and other expenses without spiraling into debt, it’s important to sign up for the right rewards card. After all, not all cards are created equal and some offer a considerably higher rate of return on regular purchases.
As you look for cards that will help you maximize childcare bills, here a few to consider:
Discover it® Miles
If you prefer to earn flexible travel credit you can use for airfare, hotels, and other travel expenses, the Discover it® Miles is a smart option. This card lets you earn 1.5 miles for each dollar you spend. However, Discover will double all the miles you earn the first year for a total earnings rate of 3% back. Also note that the Discover it® Miles doesn’t charge an annual fee, and that you can redeem your points at any time for statement credits to cover any travel expense.
Capital One® Venture® Rewards Credit Card
If you’re looking for a way to earn a big rush of points right away, you can also consider the Capital One® Venture® Rewards Credit Card. This card doles 100,000 bonus miles when you spend $20,000 on purchases in the first 12 months from account opening, or still earn 50,000 miles if you spend $3,000 on purchases in the first 3 months. You also earn 2x miles for each dollar you spend, making this a card you’ll want to keep. There is a annual fee of $95.
The best part about this card is how easy it is to redeem your miles. Once you make a travel purchase and it posts to your account, you simply “cash in” your miles to cover all or part of the expense.
Chase Sapphire Preferred® Card
Finally, don’t forget to consider one of the top travel credit cards in the business — the Chase Sapphire Preferred® Card
. This card is one of the most flexible options due to the wide range of ways you can redeem points. Not only can you cash in points for cash-back and gift cards at a rate of one cent per point, but you can also redeem them for travel directly through the Chase Ultimate Rewards® portal. As an added bonus, you can transfer Chase Ultimate Rewards® points to hotel and airline partners such as Marriott Rewards, World of Hyatt, IHG Rewards, British Airways, Southwest Airlines, and United MileagePlus at a rate of 1:1.
The Chase Sapphire Preferred® Card will also start you off with plenty of points if you sign up now. This card offers 60,000 bonus points after you use it for $4,000 in spending within three months of account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®. You’ll also earn 2X points on travel and dining at restaurants worldwide and 1 point per dollar spent on all other purchases. There is a $95 annual fee with this card.
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