I recently got this email from a reader:

I would like to obtain a credit card to be used to pay for my child’s college. i figured if i am paying anyways, i might as well receive a reward for using a credit card. i will pay off when bills come. I have excellent credit and not worrying about any transfer amounts.

Your site is easy to read and has a lot of good information.

Reader wants to remain anonymous

However, I felt that I needed more information from Karen to answer her question. So I replied to her email with more questions and I got some answers.

To Anonymous Reader

what type of rewards are you looking for? airline tickets, merchandise, gift cards, cash rebates, online shopping? Does your child drive?

Mr Credit Card

Mr Credit Card

Thank you for replying to me. Most of my travel lately has been driving, with hotel stays. Gas, hotel, and cash rewards would probably be the best for us. I don’t do a lot of online shopping. My daughter has just started driving, but won’t have a car the first year. We want to get her a credit card to help her build her credit also. We are just trying to find the right match.

Thanks,
Anonymous

Answer – Anonymous – In your situation, it is clear that you will be the main cardholder and that your daughter will be an authorized user. Hence, it makes no sense looking for a specific student credit card. Having said that, this is how I will look at this.

Hotel Stays – You do not specifically say if you stays at just one particular hotel. But the tone I get is that you travel by driving and you would stay at a convenient hotel. Based on this, I would be looking for a reward program that allows you to redeem points for hotel stays. Actually most programs do that, so this should be the easy part.

Travel by Driving – You also mention that you travel by driving and that though your daughter has her driving license, she will only get a car next year. In my opinion, you would want a credit card that pays you more than the standard 1 point for every $1 you spend or 1% cash back when you use your card for gasoline.

Looking for cash back – You also mentioned that you were looking also for a card that gives you cash rebate. That in my opinion, will leave out most “regular” reward programs because their cash rebate formula is not good.

So what is the ideal card? Well, based on the above information, I think you can consider the following 2 cards.

The first card I would suggest is the American Express Costco Credit Card. Reason is because you can earn 3% for Annual Gasoline Purchases of Up To $3000 (1% Thereafter), 3% for Restaurants, 2% for Travel, 1% Everywhere Else. The rebate profile seems to suit what Karen is looking for. She will get able to get more than 1% rebates (3% in this case) in gasoline, 2% on travel, 3% for restaurants (important when she and her daughter are eating out). The only caveat to this recommendation is that they have to be costco members ($40 annual fee). The rebates are given once a year and have to be redeemed in costco for either cash or discount coupons.

The second card I would suggest is the Discover® Open Road(SM) Card. Here are the key features:

– Great for Karen

The advantage of the Discover card is that you can redeem your cash rebates once you have earned enough to redeem for any items. It also pays 5% on gasoline and travel (during the first quarter of the year) versus the Costco Card, which pays 3% and 2% respectively.

I would avoid the usual reward programs like Citi’s ThankYou or Capital One’s No Hassle or even Bank of America’s WorldPoints program because they none of their cards allow you to earn more than 1 point for every dollar you spend on gasoline (equal to 1% rebate). Yes, you can redeem points for hotel stays, but their cash rebate formula leaves much to be desired.

Hope that helps.

This entry was posted on Wednesday, July 1st, 2009 at 12:07 and is filed under Credit Cards FAQ. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.