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Discover It Review: Rotating 5% Categories

by on February 21, 2014 · 21 comments

in Discover

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Earlier this week I wrote about the top 5 credit card deals out there and while some have huge bonuses of up to 100,000 miles, they also all have annual fees ranging up to $450 a year. Today I’m taking a closer look at the Discover It card, which is a no-annual fee product that offers rotating 5% cash back categories. While there is no signup bonus at present, getting up to 5% cash back in popular categories can be a smart play to build up cash to put towards the ancillary costs of your next trip (or even paying for award ticket fuel surcharges or hotel resort fees that are sadly becoming more prevalent).

I’m Still a Transferrable Points Guy
While I generally prefer to rack up valuable points that can be transferred into frequent flyer/guest programs, I understand that in this world of fuel surcharges, resort fees and loyalty program devaluations, traditional miles can only get you so far in reducing the cost of travel. I know family members and friends who are switching to cash back cards because in order to get the most value per mile/point, you often need to be flexible and that isn’t n option for a lot of travelers.  This is especially true for those traveling with a family- when you have a family and need to take vacation when the kids are out of school- and you need multiple seats on the same flights it can be hard to book saver flights and when you get into peak award territory, you might be better off using credit card points/cash back cards to pay for flights.

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I still consider cards like the Arrival as well as those like the Chase Freedom and Sapphire Preferred among the top options when you want to accrue points specifically for travel redemptions, I thought I’d take another look at the Discover It card, which has great potential to earn a decent return on your spending, and you can redeem your points for cash back on pretty much any purchase. Let me be clear – the Discover card is not meant to replace these others, I am just putting it out there as a great option for folks looking for a solid cash back card.

I usually prefer to earn airline miles and hotel points – and above all transferable points like Chase Ultimate Rewards or Amex Membership Rewards because they allow me the maximum flexibility to transfer to a number of airlines and hotels – but I’ve been considering getting another cash back card to round out my credit card portfolio and be able to redeem points for various incidentals that other points and miles might not cover.

Now, I already have the Chase Freedom card and I maximize it by taking advantage of its quarterly rotating 5X categories, but those are capped at $1,500 per quarter for a total potential of 30,000 points per year. I also usually leverage my Freedom points by transferring to my premium Ultimate Rewards accounts linked to my Sapphire Preferred and Ink Plus cards so that I can transfer them to Chase’s 10 travel transfer partners. You can also redeem your Freedom Ultimate Rewards points for 1 cent per point towards travel, though you can actually get a value of up to 1.34 cents per mile with this feature.

The Discover It card currently comes with no signup bonus, which looks bad at face value compared to other cards, but it isn’t terrible considering there’s no annual fee. 

However, Discover also added some great new features to the card back in August including waiving foreign transaction fees, no annual fee, no over limit fee, and no fees on your first late payment. Plus, like Barclaycard also announced as a cardholder benefit recently, you get a free FICO Credit Score on your monthly statement to help you stay on top of your credit, which is a really valuable benefit and one that makes it easy to keep an eye on your financial wellbeing.

Discover It cardholders get their FICO score on their monthly statement.

Discover It cardholders get their FICO score on their monthly statement.

Like the Freedom card, the Discover It also has quarterly 5% cash back categories where you can earn 5X points per $1 on up to $1,500 of purchases per quarter at a rotating selection of merchants. For this year, they include:

Quarter 1, January – March: Restaurants and Movies
Quarter 2, April – June: Home Improvement Stores (including furniture stores and Bed, Bath & Beyond)
Quarter 3, July – September: Summer Break (details to come, but this usually includes amusement parks and gas stations)
Quarter 4, October – December: Holiday Shopping (details to come, but this usually includes pretty much all online shopping)

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You can earn up to 5 points per $1 at a rotating selection of merchants throughout the year.

So those bonus categories can be pretty broad, making hitting those bonus caps quick and easy. Also contributing to the lucrative points-earning structure of the Discover It is its ShopDiscover online shopping portal, where you can browse over 200 merchants and earn 5-20% cash back bonuses at retailers such as Apple, Best Buy, Macy’s and Nike.

Get bonus cash back for referring friends.

Get bonus cash back for referring friends.

Discover also has a referral program where, when you refer friends who then sign up for the card, you get $50 in cash back for up to 10 friends per year, and they get $50 cash back with their first purchase. You can refer them on Facebook, LinkedIn, Twitter or via e-mail.

The one downside is that Discover isn’t accepted in as many places as some of the other major issuers like Visa or Mastercard, but it’s still pretty widely accepted, and one savvy strategy I’d encourage cardholders to use is to max out the quarterly, online shopping portal and referral bonuses rather than using it on everyday purchases.

Then once you earn those points, you can then redeem them for cash back in the following ways:

So in that way, Discover points are a bit more flexible than other kinds of cash back since you’re getting a straight-up 1 cent per point rate and you can redeem for pretty much any purchase you put on your card, meaning you can use it to pay for all kinds of travel expenses like taxis, parking, ski lift tickets, award ticket fees, etc., that you might not otherwise be able to use points for, and you’re getting at least a 1% return on your spending – and potentially much higher if you max out the ShopDiscover portal and the quarterly 5X categories.

All in all, the Discover It card and its convenient new features like the FICO score and waived forex fees has given me a lot to think about and it might just be the next new card in my wallet for strictly cash back purposes. As I said, I don’t have the card yet personally, but if any of you do, let me know if there are other features about it that you personally like and why.

For more information, see these posts:

Comparing the 5% Categories on the Chase Freedom and Discover It Cards

Maximizing Cash Back Credit Cards

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • jlgctm

    Isn’t the 5% cash back on up to $1500, meaning a total possible rebate of $75 per quarter, rather than that you can earn up to $1500 a quarter?

  • thiseye

    Yup!

  • CVG_Traveler

    Correct. This card is really useful around Christmas, thanks to the online shopping bonus category and a lot of additional bonuses for going thru ShopDiscover

  • Stvr

    So how many fuel surcharges is that?

  • Derek Li

    In additinonal to the regular 5%, you can get 5% cash back on Chevron gas by signing up at discover.com/chevron

  • Mr. Cool

    its actually widely accepted in china & japan & east asia in general through discover’s partnership with china union pay & jcb

  • BN126

    I am having trouble confining the referral link with the $150 cash back offer after $750 spend. My father sent me a referral link and when I use the link I see no mention of the offer. Can you advise if that means you can’t combine the offers or I should go ahead and apply even though the cash back offer isn’t stated via the referral link?

  • FlyingJoey

    I really wish that discover would offer points or miles. Yes, the cash is nice, I’m not going to lie, but I’m racking 10k + miles a month through my AA card.

    Simple math: 10k AA Miles = $331.70 [275+35 fee+ 7%tax] – 10k spend on Discover = $100.00 [with 100 bucks I could only buy less than 3000 miles).

  • josefismael

    This is on my list for my next churn, if for no other reason than the consistent 5-10% back you can get through ShopDiscover. Way better than any other portals I’ve seen. Anyone know if there is a cap with ShopDiscover points?

  • karen

    The holiday bonuses through ShopDiscover were great last quarter. I ultimately ended up using the 5% online shopping category for my charitable contributions, though. Since PayPal was included as online shopping, I found most of my charities were listed on PayPal’s charity site.

  • Marlene

    No cap on ShopDiscover, and at the holidays the bonuses are double for the most part. Redeem for gift cards to maximize the cash back bonus if possible.

  • pwbalbuena

    Three things to note about the DiscoverIT Card not listed above:
    #1 – Price Protection – If you find a lower price on a recently purchased item at any store within 90 days of purchasing the item with your Discover card, you are automatically eligible for a reimbursement of the price difference up to $500
    #2 – Cash Over – Getting the cash you need without taking a trip to the ATM, and its counted as a Charge in addition to your purchase, rather than a higher APR/ Bank Fee
    #3 – 100% US Based Customer Service 24/7/365 – I’m sure a few people complain about this, but its nice to know you are being directed to their Utah/Delaware Call Center

    My favorite is the Price Protection. Has saved me lots of $$$, as they can price-match to online retailers with a simple call. Funds are refunded back to the card within 48hrs

  • KL

    I dont see the $150 sign up bonus on the link. Is it still available?

  • Sanders

    BN–I talked to Discover and you can either get the $150 sign up bonus through their site OR get the $50 referral from a friend or family member, you can’t get both. BTW I love the Discover It card, especially their customer service and their app is very good.

    One thing to also note Brian, you can redeem for a gift card for good value– say a $75 Chipotle gift card for only $70 or a $300 Carnival Cruise gift card for 100 actual dollars.

  • FormerlyLivedinChina

    Also, works excellently in China. They have a partnership with China UnionPay, and so it works like a domestic card anywhere that takes UnionPay, which is pretty much EVERYWHERE.

  • http://www.doctorofcredit.com/ doctorofcredit

    Not possible, it’s one or the other. The referral offer is for a different card essentially (it has 0% apr for the first 14 months).

  • Matt

    What about redeeming the discover cash back for Cruise gift cards? Assuming the mileage redemption for Cruises isn’t great, you’re essentially getting double points to redeem for cruises. Carnival, Celebrity, Holland, Norwegian, Princess, Royal Caribbean, and even Sandals are all redeemable $20 for $40 / $60 for $120 or the like. I would think at that point if you’re using shopdiscover and/or rotating categories, you’re out earning the Barclay’s Arrival and the like.

  • bif

    Is $150 bonus still on? When clicking to signup, I see no mention of $150 signup bonus

  • bob

    when clicking link, no sign of $150 bonus offer. deal still on?

  • Larry Kreitman

    As of April 25, 2014, Discover has no knowledge of this link and is not honoring this $150 sign-up offer with $750 spend.

  • Kayla Ercolano

    I’ve had this card for a few months now and I absolutely love it. I was approved right away with 1500$ limit. The cash back deals are great too.

    If you’re thinking about applying for this card, just email me at [email protected] and I’ll send you a link that, if you’re approved, you’ll receive 50$ cash back! It’s really great!

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