If you’re new to cashback credit cards or wondering how to maximize your savings, understanding cashback categories is a crucial step in boosting your rewards. Many people have heard of cashback credit cards, but don’t fully grasp how cashback categories work or how they can save you money. If you’ve ever wondered how those rewards are earned or why certain purchases give you more cashback than others, this article will break it down.
Let’s dive into the details, so you can start making your money work for you by using cashback categories to your advantage.
What are Cashback Categories?
Cashback categories are specific types of purchases that earn you a higher percentage of cashback. While some credit cards offer a flat rate of cashback on all purchases, others reward you with varying cashback rates based on the category of the purchase. For example, you might get 5% cashback on groceries, 3% on dining, and 1% on everything else. These percentages can vary, depending on the credit card and the promotional periods they offer.
In most cases, these categories are predetermined by the credit card issuer, and they tend to rotate every quarter. Chase Freedom Flex, Discover it Cash Back, and Citi Dividend Card are just a few examples of cards that use rotating categories. For instance, one quarter you may earn 5% cashback on groceries and the next, it could switch to 5% on gas.
How Do Cashback Categories Work?
It’s pretty simple once you break it down. You earn cashback rewards based on how much you spend in the categories that offer higher rewards. Each card has its own rules, but here’s a general breakdown of how it works:
- Sign up for a card that offers rotating cashback categories.
- Activate the categories (typically, you’ll need to activate them online each quarter, so be sure to check).
- Spend in the eligible categories during the promotional period.
- Earn the cashback based on the spending you do in those categories.
- Redeem your cashback for statement credits, gift cards, or other rewards.
The key is knowing when and where to use your card to take advantage of those higher cashback percentages.
The Types of Cashback Categories You’ll See
There are many different categories you might encounter. Some of the most common ones include:
- Groceries: This is often a high-earning category, as most people buy groceries regularly. Some cards may give you 5% cashback on groceries, but you might need to be aware of certain limits on how much you can earn.
- Dining: Eating out or ordering in can quickly add up, and many credit cards offer 3% cashback on dining purchases. This can apply to restaurants, takeout, or even food delivery apps like Grubhub or UberEats.
- Gas: Gas stations are another common category that many cards reward. You could earn anywhere from 2% to 5% cashback on your fuel purchases, which can add up significantly over time, especially if you drive a lot.
- Online Shopping: More and more credit cards are adding online shopping as a category to take advantage of the e-commerce boom. These can include retailers like Amazon, Walmart, and other big-name online stores.
- Travel: If you’re someone who travels often, look for cards that offer high cashback rates on travel-related purchases, like hotels, flights, and car rentals.
- Streaming and Entertainment: As streaming services like Netflix, Disney+, and Spotify become more prevalent, certain cashback cards offer rewards on these subscriptions, too.
- Utilities: Paying your utility bills can often be done with a cashback card, and some cards reward you for it. Utility purchases may not always be the highest-earning category, but it’s still a nice way to earn a little cashback while taking care of your bills.
Why Do Categories Change?
If you’ve noticed that your cashback categories seem to change periodically, you’re not imagining things! Many cards offer rotating categories, which change every quarter. This system is meant to keep things fresh and ensure cardholders don’t get too comfortable with one specific set of categories. It also gives credit card issuers a way to promote new categories or seasonal spending trends.
For example, in one quarter, you may get 5% cashback on groceries, but in the next quarter, the 5% might shift to gas stations or online shopping. These rotating categories are typically announced a few months in advance, so it’s important to keep track of these changes to optimize your cashback earning potential.
How to Maximize Your Cashback
Understanding how to maximize your cashback involves a little strategy. Here are some tips to get the most out of your cashback categories:
- Keep track of activation dates: You can only earn cashback in a particular category if you’ve activated it. Make sure to mark your calendar for when the new categories go live, so you don’t miss out on maximizing your rewards.
- Time your purchases: Try to plan your big purchases during the quarters when those categories are earning the most. For example, if you’re planning a trip, it might be worth waiting until the travel category is active, or you might want to stock up on groceries when they offer 5% cashback.
- Stack rewards: Some credit cards allow you to stack their cashback categories with other rewards programs. For instance, using your cashback card alongside a retailer’s loyalty program can increase your savings significantly.
- Pay attention to limits: Many cards will set a cap on how much you can earn in a high-reward category. For instance, you may only earn 5% cashback on the first $1,500 spent in the category per quarter. After that, the rate drops to 1%. Knowing these limits helps you avoid spending more than necessary in that category.
- Use multiple cards: If you have multiple cards with different cashback categories, use the right card for the right purchase. For example, one card may offer more cashback on groceries, while another may offer more on dining.
- Consider cashback match programs: Some credit cards, like the Discover it Cash Back card, offer a cashback match program. This means that at the end of your first year, they’ll match all the cashback you’ve earned, which can essentially double your rewards.
Examples of Popular Cashback Credit Cards with Rotating Categories
To help you get a better idea of what’s out there, here are a few popular cashback credit cards with rotating categories:
- Chase Freedom Flex: This card offers 5% cashback on rotating categories each quarter (like groceries, gas, and streaming services). You must activate the categories to earn the 5% rate.
- Discover it Cash Back: With 5% cashback on rotating categories, Discover offers a great way to earn cashback on things like Amazon.com purchases or gas stations. Plus, they offer a cashback match at the end of the first year.
- Citi Custom Cash: This card offers 5% cashback on your highest spending category, which can change each month based on what you spend the most on (like restaurants, travel, or groceries).
Final Thoughts
Navigating cashback categories can feel overwhelming at first, but once you get the hang of it, you’ll see just how much extra value you can squeeze from your everyday purchases. The key to making it work for you is staying organized, keeping track of which categories are active, and planning your spending accordingly.
It’s all about knowing where to spend and when. Whether you’re looking to save on your grocery bill, earn cashback on gas, or take advantage of online shopping deals, cashback categories are a great tool to put more money back in your pocket. So, don’t let those rewards pass you by—start earning cashback today!