Difference between revisions of "Advanced bonus category optimization"
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With several credit cards, such as the {{Card|CashPlus|only}} and the {{Card|BOACash|only}}, you get to choose your own bonus category(s) from a set of options and earn reward rates as high as 5%. These cards often include bonus categories, such as Online Shopping, Home Utilities, Fitness Centers, or Clothing Stores, which aren't available from other cards. | With several credit cards, such as the {{Card|CashPlus|only}} and the {{Card|BOACash|only}}, you get to choose your own bonus category(s) from a set of options and earn reward rates as high as 5%. These cards often include bonus categories, such as Online Shopping, Home Utilities, Fitness Centers, or Clothing Stores, which aren't available from other cards. | ||
Revision as of 22:33, 10 January 2021
Intro
By taking advantage of "pick your own category" cards, "rotating category" cards, and gift cards, you can earn 5-10% rewards on a chunk of your credit card spending. But it will take more effort than simply using a small collection of credit cards for different types of purchases.
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"Pick a category" cards
With several credit cards, such as the U.S. Bank Cash+ Card and the BOA Cash Rewards Card, you get to choose your own bonus category(s) from a set of options and earn reward rates as high as 5%. These cards often include bonus categories, such as Online Shopping, Home Utilities, Fitness Centers, or Clothing Stores, which aren't available from other cards.
These cards are a little more complicated and less valuable than the first appear because rewards are capped at $1,500, $2,000, or $2,500 of bonus category per quarter. This places a cap on the upside of any of these cards.
For example, the U.S. Bank Cash Plus card offers 5% cashback and has a limit of $2,000 per quarter. If you spend exactly $2,000 each quarter, you'd earn $400 in rewards each year. But that is only $200 more than what you would have earned by making these same purchases with a good general-purpose reward card.
To earn those extra rewards, you'll have to spend extra effort to make sure you don't spend too much in any quarter (when the reward rate would drop to only 1%). You may also feel compelled to take extra steps to make sure you don't spend too little. For example, if you simply use the card to pay a few hundred a month in some otherwise un-bonused category, the extra rewards might only add up to something like $75 per year.
Available "Pick your category" cards
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The U.S. Bank Cash Plus Card is the "standard" pick your own category card. It has been around for the longest, is available throughout the whole country, and unlike the other cards, it allows you to choose two categories, instead of one. It earns 5% cash back, capped to $2,000 of bonus category spending each quarter. Inconveniently, U.S. Bank forces you to re-select your categories every quarter and you won't earn bonus rewards on those categories until you do so. No annual fee. | |
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The Citi Custom Cash Card has the highest potential reward rate of any pick your own category card. It earns 5x ThankYou points which normally would only be worth 5%. However, if you also have the Citi Premier or Prestige Card, you can convert the points to airline miles. In that case, we value the points at 1.5 cents each, which works out to 7.5%. And if you have the Citi Rewards+ Card, you'll get a 10% boost on your redemptions, making the points worth even more. Unlike most of the other cards, you don't need to choose a category each billing period. Instead, your top eligible category is chosen automatically. Bonus rewards are capped to $500 spending per statement period and it is hard to use less common categories to maximize your rewards. | |
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If you can keep $100,000 of investment or retirement money at Merrill Lynch, the Bank of America Cash Rewards Card is another good option. Normally, it earns 3% on your choice of categories. But, if you have a total of $100,000 or more in combined assets at Merrill Lynch and Bank of America, you'll receive "Platinum Honors" status in their Preferred Rewards program and get a 75% bonus on your credit card reward points. This increases the effective reward rate to 5.25%. The Cash Rewards Card has a higher quarterly limit ($2,500 of spending) and is the only "pick your own category card" that lets you change your category every month, instead of every quarter. But many people just keep it locked to "online shopping" to earn bonus points on everything they buy online. No annual fee. | |
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The Venmo Card earns 3% back on whichever of its categories you use the most each month. Unlike the other pick-your-own-category cards, you don't need to choose the category ahead of time. But since the earning rate is lower on your other categories, the ideal way to use the card is to only spend on a single category in any given statement period. Rewards are capped at $10,000 per year in spending in your top two categories each statement. | |
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The Vantage West Connect Card is available to people who live in certain parts of Arizona. It earns 5% in a single category of your choice but is capped at only $1,500 of spending each quarter. No annual fee. | |
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The Huntington Voice Cards are lower value options and require you to live near a branch. The personal version earns 3% in one category (up to $2,000 per quarter) and the business version earns 4% in one category (on up to $7,000 per quarter). But you can only apply in one of their branches located in Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, West Virginia, and Wisconsin. No annual fee. | |
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The Synovus cards are similar to the Huntington Voice cards, but for people in the Southeast. Cards are only available in branches located in Alabama, Florida, Georgia, South Carolina, and Tennessee. Depending on the card, you'll earn 3x points or 3% cash back and rewards are capped at $3,000 per quarter. The cashback and point-based reward versions have no annual fees. The Synovus Travel version has a $50 annual fee, but gives you a 20% rebate on travel purchase with points (3.6% cash-back rate), and earns 5x points (6% cash-back rate) on travel purchases as well. No annual fee. |
Available categories
| U.S. Bank Cash+ (Choose Two) |
Citi Cash (Choose One) |
BOA Cash (Choose One) |
Venmo {Focus on One) |
|---|---|---|---|
| Ground transportation
TV, Internet, and Streaming Sporting goods stores Select Clothing stores Gym / Fitness centers Department stores Cellphone service Home utilities Furniture stores Electronic stores Fast food Movie theaters |
Restaurants
Gas Stations Grocery Stores Select Travel Select Transit Select Streaming Services Drugstores Home Improvement Stores Fitness Clubs Live Entertainment |
Online shopping
Travel (includes rent!) Home improvements & Furnishings Drug stores Dining Gas |
Telecom, Streaming, Subscriptions & Utilities
Health & Beauty Transportation Travel Grocery Entertainment Dining & Nightlife Gas |
| Vantage West (Choose One) |
Huntington Voice (Choose One) |
Synovus (Choose One) |
|---|---|---|
| Travel
Restaurants Utilities In-store warehouse purchases Department stores Hardware & home improvement stores Charitable organizations Pharmacies & drug stores Amazon.com |
Gas
Travel & entertainment Restaurants Discount & warehouse stores Grocery stores Utilities & office supplies Electronics, computers & camera stores Department, apparel & sporting goods stores Auto parts & service Home improvement stores |
Business services
Entertainment Dining Gas Grocery Healthcare Maintenance Retail Travel Utilities |
"Pick your own category" card tips
- You are usually better off choosing more unique categories like the Cash+ Card's "Clothing Stores" or "Fitness Centers" or the BOA Cash Card's "Online Shopping".
- You can change your bonus categories every quarter (or every month). This allows you to plan out your purchases to maximize the quarterly caps. For example, if you are planning to purchase some furniture, you can wait until the following quarter or month, switch your category to "Furniture Stores", and earn around 5% in rewards on your purchase.
- It is often possible to get more than one copy of these cards. This allows you to earn the higher reward rate on a broader set of categories or an increased amount of quarterly spending within the same category.
Rotating category cards
With rotating category cards, the categories change every three months , not based on your choice, but on a schedule determined by the credit card company.
Earn 5-10% in Rewards with Rotating Category Cards.
Like the "Pick Your Category" cards, the amount of bonus rewards you can earn each quarter is capped, typically on $1,500 on spending. Reward rates can be very high. For example, the Freedom Flex Card earns 5x Ultimate Rewards points and the Discover it Card earns 10% (during the first year).
Since you don't get to choose your own categories, you're likely to wind up with some quarters where you won't naturally spend very much money on the supported categories or where you already have cards that earn high rewards on most of your qualifying spend.
While you can use Rotating Category cards to boost your rewards, they require extra effort. You have to remember the current set of categories and work it into your shopping routine, and you need to register for the bonus categories each quarter. You need to make sure you don't spend more than the capped amount and you may feel compelled to find ways to spend up to the cap by shifting around purchases or using gift cards.
Maximizing high reward rates with gift cards
There are a several credit cards that earn reward rates of 5% or higher on different bonus categories. But not all of your spending will naturally fit into these categories. Gift cards provide a way to boost your rewards on purchases where you earn a lower reward rate.
- You can buy gift cards at stores where you earn high bonus category reward rates and then use them to make a purchase where you would normally get a lower rate. You are effectively converting the purchase into a higher reward rate category. For example, if you spent $500 at BestBuy with a 2% general purpose reward card, you earn $10 in rewards. But if you bought it with $500 worth of gift cards you purchased at the grocery store with an Amex Blue Preferred card, you'd earn $30 for the same purchase.
- You can extend this approach to almost any type of purchase by buying Visa or Mastercard gift cards—but they come with extra fees. Unlike gift cards that are limited to specific merchants, general purpose gift cards have an activation fee. Fees are extremely high on smaller denomination cards but can drop to as little as .75 - 1.5% when you buy cards with a $500 balance. This drops the effective reward rate but still typically provides a better return than using your general purpose card.
- While gift cards can boost your rewards, they take extra effort to use. It is simpler to just go into a store, or go online, and buy stuff with your credit card, instead of stockpiling gift cards, making sure to bring them to the store, and redeeming them when you check out. In addition, you’ll need to pay money ahead-of-time for things that you won’t be buying until later.
- Gift cards sometimes go on sale. This especially happens during the Christmas season. This can be an excellent time to stock up on cards that you can use throughout the year.
- Grocery stores aren't the only good option for earning high rates on gift card purchases. With the right card, you can earn high bonus reward rates buying gift cards at office supply stores, many gas stations, and home improvement stores. For example, the Ink Cash card earns 5x Ultimate Reward points, valued at 8.5 cents per dollar, on gift cards bought at Office supply stores.
- With some cards, you can maximize your rewards by using gift cards to shift your spending to another part of the year. For example, rotating category cards earn very high reward rates, but change their bonus categories every quarter. If you aren't going to naturally hit one quarter's spending cap, you can often purchase buy cards for the remaining amount. Then, you can spend the gift cards for your purchases during the rest of the year.
- If you can take advantage of a lot of gift cards, it changes the credit cards you might want to get. For example, we often recommend getting the Amex Everyday Preferred Card for grocery store (and gas) spending. Assuming you hit 30 transactions per month, it earns 4.5x Membership Rewards points on groceries and has a $95 annual fee. In contrast, the Amex Gold Card "only" offers 4x Membership Rewards points on groceries and has a $250 annual fee. But the Amex Gold Card has a $25,000 per year cap and the Everyday Preferred Card has a $6,000 cap. For many people, that difference is irrelevant. But, if you have the ability to use the entire capped amount via gift cards, the Gold Card is the better deal. To increase your total cap even further, you may even want to get both cards plus potentially other cards that offer high bonus rewards at supermarkets.
- Be careful with American Express cards. They don't allow gift card purchases to be used to meet the minimum spending requirements to earn signup bonuses. In addition, most of their interesting cards also include terms that exclude the ability to earn any reward points on gift card purchases at any time. These terms are not currently being enforced (except for signup bonuses and purchases from Simon Malls), but Amex may start enforcing them at any time. If they do, they could conceivably take back points that already posted to your account.
Similarly, many people may not be particularly interested in a card that earns high bonus rewards at office supply stores. Their normal amount of office supply spending isn't enough to make it very interesting. But, if you have no problem using gift cards, earning 5x Ultimate Rewards with the Ink Cash Card is an incredible deal.
If you are willing to take the time, you can combine several approaches to earn 4-5% on all your spending.
