How you can maximize rotating category cash back cards

Credit cards can be a convenient way to earn cash back on your spending — especially if you use rotating category cash back cards. These cards offer elevated rates on specific spending categories that change throughout the year. By strategically using these cards, you can potentially boost your rewards.

Maximizing these cards does require some effort on your part. You’ll need to stay on top of current bonus categories and spend accordingly. But with some strategic planning, the extra rewards can be worth it.

What is a rotating rewards card?

A rotating rewards card offers bonus categories that change periodically. These categories provide higher cash back rates, allowing you to earn more on purchases within those selected areas.

Renee Jones, VP of Consumer Products at Georgia’s Own Credit Union, explains, "Card issuers will usually either offer cardholders the ability to pick their reward category or send notifications with opportunities to earn bonus cash/points for certain spend categories during set windows — generally quarterly."

These cards often offer up to 5% cash back in their bonus categories, up to a specified spending limit. Once you hit that limit or make purchases outside the bonus categories, you'll earn the card's standard rate, typically around 1%.

Bonus categories vary widely but often include everyday spending areas like restaurants, grocery stores, or gas stations. Some cards also feature specific retailers like Walmart, Amazon, or Target.

When used strategically, rotating rewards cards can outperform flat-rate or tiered rewards cards. For example, the Discover it® card offered 5% cash back at grocery stores from July through September 2024, potentially yielding higher rewards than other cards for those purchases.

For comparison, the Wells Fargo Active Cash® Card provides a flat 2% cash back on all purchases.

Strategies to maximize your rewards

To get the most out of a rotating cash back rewards card, consider these strategic approaches:

1. Activate your categories on time

Most cards require you to activate bonus categories before they start. Melissa Caro, certified financial planner and founder of My Retirement Network, advises, “Card companies usually announce their categories a few weeks in advance — but they won’t tell you about it; you have to know when to look.” Set reminders to check and activate your categories regularly.

2. Plan your spending around bonus categories

For large expenses, timing is key. A $2,000 TV could earn you $100 in rewards at a 5% rate, compared to just $20 at the standard 1% rate. Keep an eye on upcoming categories to maximize these opportunities. By timing your purchase right, you could earn substantially more cash back.

Caro adds, “Ironically enough, it can also help you avoid impulse purchases. Forcing yourself to wait can sometimes end up having you decide not to make the purchase at all. Maybe it doesn’t seem as important a few months later. And if it is, you will save some money — so it’s a win-win!”

3. Use multiple cards to cover more categories

Consider using cards from different issuers to maximize your cash back potential. For example, if one card offers a bonus on grocery store purchases and another on gas station spending, you could earn 5% back on two major expense categories simultaneously.

4. Combine with a flat-rate card for non-bonus spending

Some of the best credit card combinations involve covering your bases when it comes to cash back. To optimize your rewards across all purchases, you can pair your rotating category card with a flat-rate card that earns 1.5% or 2% on everything. This strategy ensures you’re always earning above the standard 1% rate.

Jones suggests, "An easier approach is to keep no more than three credit cards that meet different needs, such as one that strictly offers miles, one for pure cash back, and one with flexible reward categories."

Keeping track of rotating categories

Both Caro and Jones recommend apps like MaxRewards and AwardWallet to help track your credit card rewards and current rotating categories. MaxRewards shows you the highest cash back rates across multiple cards, while AwardWallet helps track loyalty programs and airline miles.

If you prefer a manual approach, Caro suggests, “Find out what the typical schedule is as to when they release these and then set yourself a simple calendar reminder accordingly. It is a little work, but for larger purchases, especially, it may be worth it.”

Consider keeping a note on your phone or in your wallet to remind you which card to use for each purchase category.

Potential pitfalls to avoid

While rotating category cards can be lucrative, be aware of these potential drawbacks:

1. Overspending: Don’t let high rewards tempt you into unnecessary purchases. Caro warns, “It’s similar to walking into a designer sale. You don’t really need anything, but you buy something because it was such a good deal.”
2. Interest charges: If you can’t pay your balance in full, interest charges can quickly negate your rewards. Jones illustrates, "If you have an $8,000 balance with an interest rate of 25%, you’re paying approximately $184 in interest each month. If the cash back earned on purchases is 1%, you earn just $80."
3. Forgetting to activate: Always remember to activate your bonus categories. Some issuers, like Chase, allow retroactive activation for a set period, while others, like Discover, don’t apply elevated rates to past purchases if you activate late.

Popular rotating category cash back cards

Some of the most popular rotating category cash back cards include the Discover it® Cash Back, Chase Freedom Flex®, and Citi Custom Cash® Card. These cards can be especially valuable if you pair them with one or more of the best cash back cards offering flat-rate or tiered rewards.

Discover it® Cash Back

The Discover it® Cash Back offers 5% cash back on up to $1,500 in purchases on rotating quarterly categories. That equates to up to $75 in cash back each quarter. If you spend more than $1,500 per quarter, you'll just earn 1% cash back.

Its quarterly categories are from January to March, April to June, July to September, and October to December. You can activate the bonus categories starting on the first day of the quarter.

Recent categories have included things like:

• Amazon.com
• Target
• Walmart
• Grocery stores
• Gas stations
• Home improvement stores
• Restaurants
• Drug stores

Chase Freedom Flex

The Chase Freedom Flex is strikingly similar to the Discover it® Cash Back. It also offers 5% cash back in categories that rotate quarterly, with a spending limit of $1,500 per quarter.

Because it operates quarterly, it also follows the same schedule as the Discover card. However, the activation deadlines are different. You can activate categories two weeks before the start of a given quarter.

Some of the recent bonus cash back categories have included:

• Hotels
• Restaurants
• Amazon.com
• Fitness clubs and gym memberships
• Grocery stores
• Self-care and spa services
• Gas stations
• Movie theaters

Citi Custom Cash® Card

The Citi Custom Cash® is slightly different because it doesn't follow a predetermined quarterly schedule. Instead, it calculates the category you spent the most in each billing cycle and automatically gives you 5% cash back. There is a spending limit of $500 — you'll get 1% cash back on purchases after you hit that amount.

Some of the eligible categories include:

• Restaurants
• Gas stations
• Grocery stores
• Select travel
• Select transit
• Select streaming services
• Drugstores
• Home improvement stores

The bottom line

Maximizing rotating category cash back cards takes a little work. But when you use them effectively, they're a great way to earn some extra cash.

“These cards offer a way to maximize savings for people who are already disciplined about their approach to spending and budgeting and who never carry a credit card balance,” says Caro.

Whether you use your extra rewards to boost your emergency fund or save for a dream vacation, rotating cash back categories can help you reach your goals faster. Just remember to use them responsibly, pay your balance in full each month, and stay within your budget.