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Update: Some offers mentioned below are no longer available – Discover it® Cash Back, Discover it® Miles
TPG reader Zach messaged me to ask about cash-back credit cards:
“Should I sign-up for the Discover It card since it has a new offer?”
I don’t talk a lot about Discover cards because generally cash back isn’t my main priority. I prefer to earn points and miles to redeem for airfare and hotels instead of a few dollars here and there. However, there is a need for cash back cards, especially these days when it can be tough to extract a lot of value from airline miles, so I do understand why people like them. At a certain point, cash is king!
The Discover it® Cash Back and the Discover it® Miles card never seemed that interesting to me because they rarely offer a sign-up bonus. However, Discover rolled out a promotion that matches your cash back after your first year as a cardholder, which is intriguing. Discover it Miles earns a consistent 1.5% miles back on all purchases, so with this promotion it gets matched to 3% for the first year. Discover it normally earns 1% cash back, but you can also earn 5% in rotating categories. Here are the bonus categories for the remainder of 2015:
- Quarter 2 (April 1 – June 30): Restaurants and Movie Theaters
- Quarter 3 (July 1 – September 30): Home Improvement Stores, Department Stores, and Amazon.com
- Quarter 4 (October 1 – December 31): Holiday Shopping & More
Keep in mind that the 5% categories are capped at $1,500 of spending for each quarter. If you maximize the bonus each quarter, you’ll spend a total of $6,000, which normally equates to $300 when you’re earning 5% cash back. However, your cash back is doubled with the current promotion, so you could actually get 10% or $600 in the first year. Discover it also has no annual fee, which makes it somewhat more attractive. Depending on how much money you spend and in what categories, this double cash back opportunity could be very lucrative for you.
Another option is the Chase Freedom card, which also has rotating 5X bonus categories, but currently offers a sign-up bonus of 10,000 points when you spend $500 in the first 3 months. If consistent 2% cash back sounds good, you could go with the Fidelity Investment Rewards American Express, which is very straightforward and has no rotating categories. There’s also the (still fairly new) Citi Double Cash Card, which earns 1% cash back plus another 1% when you pay your bill. This is another good option assuming you always pay your bills on time (which you should be doing anyway, because any rewards you earn will be wiped out if you’re accruing interest by paying late or maintaining a balance).
For more info on cash back cards, check out these posts:
- Which Card for Cash Back: Citi Double Cash or Fidelity Amex?
- Ranking the Top Cash Back Credit Cards
- Top Cards for Cash Back Rewards and Statement Credits
If you have any other questions, please tweet me @thepointsguy, message me on Facebook or send me an email at firstname.lastname@example.org.