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Discover offers one of the highest cash back rewards rates you can get — if you’re willing to jump through a few hoops.
Here’s how it works: You’ll earn 5% cash back on everyday purchases you make within Discover’s rotating schedule of cash back categories (on up to $1,500 in purchases each quarter, then 1%). This rewards rate applies for Discover it® Cash Back and Discover it® Student Cash Back cardholders, and categories change quarterly. If you’re willing to plan your spending in advance to maximize these quarterly categories, you can save big on everyday spending throughout the year, from online shopping to drugstore purchases.
You have to activate the bonus categories on your Discover credit card every quarter to be eligible to earn 5% cash back. You can do this through your online account management page, or by calling 1-800-DISCOVER.
While we love flat cash back credit cards for their simplicity, the extra work rotating cash back cards require can be worth the value you’ll gain. Here’s what you need to know about Discover’s cash back calendar for 2021 and how you can maximize bonus categories this year.
Discover 5% Cash Back Calendar for 2021
If you have an eligible Discover credit card, you can earn 5% back on up to $1,500 in combined spending in bonus categories each quarter you activate. That’s up to $75 in bonus rewards per quarter, or $300 in bonus rewards per year. You’ll still earn 1% cash back in those bonus categories after meeting the cap, plus 1% on all purchases outside bonus categories.
Because Discover announces its full list of annual categories early in the year, you can plan future spending around your rewards goals. However, you must activate your 5% rewards every quarter to be eligible. You can log into your Discover credit card account and follow the prompts to activate the 5% bonus category or check to see if you’ve already activated.
These are Discover’s 5% back categories for 2021:
|Q1: January – March||Grocery stores, Walgreens and CVS|
|Q2: April – June||Gas stations, wholesale clubs and select streaming services|
|Q3: July – September||Restaurants and PayPal|
|Q4: October – December||Amazon.com, Walmart.com, and Target.com|
Tips for Maximizing Your 5% Bonus Rewards
If you’re a new Discover credit cardholder, Discover will automatically double all the cash back you earn throughout your first year through its Cashback Match offer. That means you can boost your $300 annual max cash back in 5% bonus categories to $600, and double any additional rewards you earn at the 1% rate on all other spending.
Then, continue to maximize 5% bonus rewards every year by paying special attention to each quarter’s bonus categories and planning your spending accordingly.
If other cards in your wallet earn rewards in this quarter’s bonus categories, determine whether the 5% cash back rate is higher than you’d otherwise earn. For example, if you already earn 3% cash back on dining with the Capital One SavorOne Cash Rewards Credit Card, you can get a 2% boost by making restaurant purchases with your Discover card during Q3 instead, until you meet the $1,500 spending cap or the quarter ends.
Also look for ways to maximize purchases you plan to make anyway. April through June is a great time to stock up on household essentials at wholesale clubs like Costco or Sam’s Club, for instance, and you can save on year-end holiday shopping with 5% back on purchases at Amazon.com, Walmart.com, and Target.com.
Discover Cash Back Calendar vs. Chase Cash Back Calendar
Discover isn’t the only issuer with 5% cash back rewards in revolving categories.
The Chase Freedom Flex card offers the same 5% rate on up to $1,500 spent in Chase’s quarterly bonus categories (then 1% back), plus at least 1% back on all non-bonus spending. But with this card, you’ll also earn 3% back on dining and drugstore purchases and 5% back on travel purchases through Chase Ultimate Rewards.
Unlike Discover, Chase only reveals its bonus categories one quarter at a time. For the current quarter lasting through June 2021, cardholders can earn 5% back at gas stations and home improvement stores.
You’ll still have to activate the bonus rewards to earn 5% cash back each quarter with the Freedom Flex card. As long as you activate your Chase bonus categories anytime before the deadline (also announced quarterly), any eligible purchases you made throughout the quarter can retroactively earn the bonus rate. But with Discover, it’s important to activate early; you’ll only earn Discover’s 5% bonus rate on eligible purchases you make after activation.
Which card offers the best deal?
|Chase Freedom Flex||Discover it Cash Back|
|Welcome offer||$200 when you spend $500 within three months of account opening||Cashback Match on total first-year rewards at the end of the first year|
|5% back categories||Announced individually throughout the year||Announced at the beginning of the year|
|Other bonus categories||5% back on travel booked through Chase|
3% back on dining and drugstore purchases
|Redemption options||Cash back, statement credits, gift cards, merchandise, and travel||Cash back, gift cards, charitable donations, and purchases through Amazon.com or PayPal|
How 5% Cash Back Credit Cards Work
A rotating cash back credit card with 5% rewards in quarterly bonus categories can be a great way to save on everyday spending. But these cards often require more planning than other cash back cards. There are two major caveats to rotating cash back cards to keep in mind:
- Bonus rewards are capped. With popular cash-back credit cards that offer 5% back in quarterly bonus categories, you’ll only earn 5% back on up to $1,500 in combined spending each quarter. After that, you’ll earn 1% back.
- You have to activate bonus categories. You won’t automatically earn 5% back in quarterly bonus categories. You have to take steps to activate your bonus rewards each quarter.
As a result, 5% cash back credit cards require a bit more work to maximize value than other cash back cards, including cards with ongoing tiered rewards categories or flat cash back options. The Citi Double Cash Card, for example, offers a flat 2% back on all regular purchases — 1% when you make a purchase and another 1% when you pay it off — with no activation or planning required.
If you’re eager to earn 5% back in bonus categories, the Discover it Cash Back is a good rewards credit card to consider. And if you’re a student, the Discover it Student Cash Back can help you earn great rewards while building credit. With either card, you can plan your spending throughout the year around upcoming bonus categories and double all the rewards you earn after the first year.
But before you apply, consider how your spending habits align with Discover’s categories as opposed to Chase’s 5% bonus rewards, and make sure you’re willing to commit to the planning required to maximize quarterly bonus categories throughout the year.