Rotating cashback categories can feel like a game of financial strategy. One quarter it’s gas, the next it’s groceries, forcing you to constantly re-evaluate where you’re swiping your credit card. While it might seem like extra work, mastering the art of rotating cashback categories can significantly boost your rewards earnings. This blog post will delve into the ins and outs of these cards, providing you with the knowledge to maximize your cashback and make informed decisions.
Understanding Rotating Cashback Categories
What are Rotating Cashback Categories?
Rotating cashback category credit cards offer bonus rewards, typically 5%, on specific spending categories that change periodically, usually quarterly. Outside of these bonus categories, you’ll generally earn a standard cashback rate, often 1% or 1.5%. The appeal lies in the potential for high rewards on everyday purchases, but it requires active management and awareness of the current categories.
- Example: A card might offer 5% cashback on gas stations, grocery stores, and wholesale clubs during one quarter, and then switch to restaurants, Amazon.com, and home improvement stores the next.
How Do They Work?
The process typically involves activating the bonus categories each quarter, either online or through a mobile app. It’s crucial to remember to activate, as you usually won’t receive the bonus rewards automatically. There’s also often a spending cap on the bonus categories, such as $1,500 per quarter. Any spending beyond that cap earns the standard cashback rate. Credit card companies like Chase (with the Chase Freedom Flex card) and Discover (with the Discover it card) are popular examples of cards that offer rotating categories.
Key Features to Consider
When evaluating rotating cashback category cards, consider these factors:
- Cashback percentage: What’s the bonus rate offered on the rotating categories?
- Rotating categories: Are the categories relevant to your spending habits?
- Spending caps: What’s the maximum spending that qualifies for the bonus rate each quarter?
- Standard cashback rate: What’s the cashback rate on purchases outside the bonus categories?
- Other perks: Does the card offer other benefits like travel insurance, purchase protection, or introductory APR offers?
- Annual fee: Is there an annual fee, and if so, does the cashback potential outweigh the cost?
Benefits of Using Rotating Cashback Category Cards
Maximizing Cashback Rewards
The primary benefit is the potential to earn significantly more cashback than with a flat-rate rewards card. By strategically using the card for purchases within the bonus categories, you can substantially increase your rewards earnings.
- Example: If you spend $1,000 in a quarter on gas stations with a 5% cashback rate, you’ll earn $50 in cashback. With a 1.5% flat-rate card, you’d only earn $15 on the same spending.
Strategic Spending and Budgeting
These cards encourage mindful spending. You’re more likely to plan your purchases around the bonus categories, potentially leading to better budgeting habits and cost savings. For instance, if home improvement stores are a bonus category, you might postpone DIY projects until that quarter to maximize your cashback.
Earning Rewards on Everyday Spending
Rotating categories often include common spending areas such as gas, groceries, restaurants, and online shopping. This allows you to earn bonus rewards on everyday purchases you’d likely make anyway.
- Tip: Analyze your spending habits to identify which rotating category cards align best with your typical expenses.
Strategies for Maximizing Your Rewards
Planning and Tracking Categories
The key to success is planning. Mark your calendar with reminders to activate the bonus categories each quarter. Track your spending within each category to ensure you don’t exceed the spending cap.
- Tools: Use a spreadsheet or budgeting app to monitor your spending and cashback earnings.
Combining with Other Rewards Programs
Consider pairing your rotating cashback category card with other rewards programs. For example, use the card at a restaurant that also offers its own loyalty program to earn both cashback and loyalty points. Stack online shopping portals with the appropriate cashback category for multiplied rewards.
Optimizing Spending Habits
Adjust your spending habits to take advantage of the bonus categories. Consider consolidating your purchases into the bonus categories whenever possible. For example, buy gas at a gas station that also sells groceries if both categories are active during the same quarter.
- Example: If the current category is “online shopping”, plan your large online purchases (electronics, clothing, gifts) for that period.
Potential Drawbacks and How to Overcome Them
Category Management Required
The biggest drawback is the need to actively manage the categories. It requires remembering to activate the categories each quarter and tracking your spending. If you forget, you’ll miss out on the bonus rewards.
- Solution: Set reminders on your phone or calendar to activate the categories and review your spending periodically.
Spending Caps Can Limit Rewards
The spending caps can limit the amount of bonus cashback you can earn. Once you reach the cap, you’ll earn the standard cashback rate.
- Solution: If you consistently reach the spending cap, consider using a different rewards card for purchases beyond the cap.
Categories May Not Align with Your Spending
The rotating categories may not always align with your spending habits. If the categories are irrelevant to your purchases, you won’t be able to maximize the rewards.
- Solution: Choose a card with rotating categories that align with your typical spending patterns. Also, consider having a flat-rate rewards card as a backup for purchases outside the bonus categories.
Comparing Popular Rotating Cashback Category Cards
Discover it Cash Back
The Discover it Cash Back card offers 5% cashback on rotating categories each quarter (on up to $1,500 in purchases, then 1%). Discover also matches all the cashback you’ve earned at the end of your first year. It has no annual fee.
Chase Freedom Flex
The Chase Freedom Flex card offers 5% cashback on rotating categories each quarter (on up to $1,500 in purchases, then 1%). It also offers 5% on travel purchased through Chase Ultimate Rewards, 3% on dining and drugstores, and 1% on all other purchases. It has no annual fee. Chase also occasionally offers bonus categories or promotions that can further increase your rewards earnings. Chase’s travel portal can sometimes offer higher redemption values for your earned points when compared to simple cash back.
How to Choose the Right Card for You
Consider your spending habits, lifestyle, and desired level of involvement in managing the card. Compare the rotating categories of different cards to see which ones align best with your regular purchases. Also, consider any other perks or benefits that the card offers, such as travel insurance or purchase protection.
Conclusion
Mastering rotating cashback categories takes a bit of effort, but the rewards can be substantial. By understanding how these cards work, strategically planning your spending, and actively managing your categories, you can significantly boost your cashback earnings. Evaluate your spending habits, compare different card options, and choose the card that best aligns with your financial goals. With a little diligence, you can turn rotating cashback categories into a valuable tool for maximizing your rewards and achieving your financial objectives.