Posted by William Charles on March 16, 2015
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Published on March 16th, 2015 | by William Charles

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Does It Make Sense To Utilize Discover’s 5% Categories?

The Discover it credit card offers 5% cash back on $1,500 in purchases each quarter in rotating categories. Most people will put as much spending in those categories as possible (obviously without spending more than they normally would unless it’s for manufactured spending purchases). This makes sense as 5% cash back is more than you’d get on non bonus spending, but one thing that this doesn’t take into account is that Discover often sends out targeted spending bonuses.

Discover Targeted Spending Bonuses

Discover often sends out targeted spending bonuses, typically you need to spend over a certain threshold each month for more than four months in a row. The bonus used to be as follows (slightly reworded):

  • Spend $500-$1,500 or more each month for the next three-five months and receive a $250 cash bonus

It looks like most people are now only receiving offers for a $200 cash bonus. Now obviously how good this deal is will depend on how much the spend requirement is and how many months this spend requirement needs to be reached.

Triggering The Deal

If you’re anything like me then chances are you’ve never received an offer like this and you’re also probably wondering what this has to do with the 5% categories. Discover and other credit card issuers use deals like this to make sure their credit card is “front of wallet” meaning that it’s the card you use for the majority of if not all of your purchases.

If you’re already using your Discover card, they can safely assume the card is already at the front of your wallet or it’s at least being used in regular rotation. If you’re not using your card, they know it’s not at the front of your wallet and they will be desperate to change this.

That basically means that you need to put no spend on your Discover card to get targeted for offers like this. The spend requirements and length of promotion will usually be tied to your credit limit and how much you’ve spent with Discover in the past. For example, if you’ve regularly spent $1,000 a month in the past then chances are your offer would require a spend of $1,000+ a month for three-five months.

5% vs Spending Bonuses

This means you have a decision to make, should you continue to maximize the 5% cash back categories or should you forgo them in the hopes of getting a spend bonus? That really depends on how valuable you find each quarters categories and how much you’d spend. Here are the 5% categories for this year:

Q1Q2Q3Q4
Gas & Ground TransportationFood and FunSummer Spruce Up & MoreHoliday Shopping & More

It’ll also depend on what other cards you have, for example if you have a credit card that earns 5% cash back at gas stations year round then Q1 probably wasn’t that useful for you. I spend a lot at Restaurants (reimbursable business lunches and dinners mostly) so I’d easily max out the quarter 2 promotion which would net me $75 (although I would have earned $30 with a 2% cash back card and $45 with a 3% cash back card). Also keep in mind overlap with other 5% cash back cards like the Chase Freedom.

In addition to all this, it depends what type of offer you’re likely to receive. Let’s have a look at the best and worst options:

  • Spend $500 or more for three months and receive $200: effective cash back rate of 13.33%
  • Spend $1,500 or more for five months and receive $200: effective cash back rate of 2.67%

In the worst case scenario you’d actually be better off with the Discover it miles card.

Final Thoughts

I did a little testing with a few friends to try and work out how long you needed to put no spending on a card before Discover would target you and honestly the results were pretty much random. Nobody received an offer unless they had no (or very little) spending in the last six months, so you’d really need to forgo at least two full quarters of cash back categories.

I’m personally not going to bother trying to get targeted for the spending bonuses, as I’ve put a lot of spending on my card in the past so I’d need to spend a lot each month to actually receive the bonus. But others might find that they are able to get targeted for bonuses with much lower spending requirements.

What are your experiences with these Discover spending bonuses? Let us know what bonuses you’ve received and what your spending patterns have been in the past. Maybe we can find out what rules Discover uses to target these bonuses and use this information to our advantage.



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JB
JB

Interesting post! Like always 😉
The funny thing is the only such offer I’ve ever received from Discover was when I wound down the use of this card due to my shifting to better (MS friendly) cards. Since I’ve SD’d this card I haven’t received any of these specials…

LiteSalt
LiteSalt

During Q2 last year, I was unable to do much with the Home Improvement category, so I didn’t use it at all. I was able to find One Vanillas in a gas station to take care of Q3’s gas station requirement, but I didn’t do that spend until late in the quarter.

I received a targeted promotion around October-November to get 5% in for a selected retailer of my choice (I remember Staples and Walgreens specifically) up to $1,000 of spend. I selected Walgreens and, needless to say, hit my $1,000 fairly easily.

I just wonder if I was targeted because there was about a five month stretch where I didn’t use my Discover It. At the time, I thought a lot of people got that targeted bonus. Perhaps not?

Chris F.
Chris F.

As a counterpoint, I used my Discover It quite a bit in China during Q1-Q2 last year, and then met the Q3 spend pretty early in Q3. I also was targeted for that promotion, but it’s the only one I’ve ever been targeted for. Perhaps that was different from the “Spend $X, get $Y” bonuses.

Vdebs
Vdebs

I’ll likely try this, I don’t use my Discover card outside of the Gas/ground transport quarter and the online shopping quarter, which are back to back this year. The latter I max out on x-mas gifts, the former I use to buy up my commuter rail tickets for the next six months. Locking in %5 there really adds up. I guess Discover deals can occasionally lure you back, but I’m normally trying to hit min spends anyway, so it’s not super appealing.

Fiby

This is really interesting info doc, thanks. I don’t have a Discover card yet, but I’m planning on getting one at the end of the year (I’m hoping for the $150 or whatever signup bonus).

Looks like I should prioritize spending on my other cards when I have overlapping categories. I’ll be sure to do this.

Yeshu
Yeshu

I never receive such offers..probably because I use the card to maximize on quarterly bonuses

Chris
Chris

I just received a “Spend $2000 March through July and receive a $300 bonus” So $10k spend gives me $400 after bonus and all unbonused spend.

Glenn
Glenn

Got the Discover Card mid-October last year. Never used it (decided I’m mostly a points & miles guy mostly, and wasn’t quite maxing our my URs). In January they bumped my credit limit. But no special offers yet.

The Dessert Engineer

My husband’s old Discover card just got a bonus offer in the mail today. Spend at least $500 per month from April 1 – Aug. 31 to receive an additional $75. Usually I assumed that we got this type of offer when the card hasn’t been used in a long time. But he actually has been using the card the past few months to take advantage of the 5% gas this quarter, plus some online purchases at the end of last year. His old Discover card is the only one that receives bonus offers regularly. We have two other Discover It cards and so far we never get targeted offers on those two.

Anon
Anon

I’m currently on a promo of spend $3k+ per month Feb-July and get a $500 bonus. I’m using it to add to the roi on liquid GC’s I already buy.

David
David

I’m currently on a spend $2500+ per month Feb-July to get a $400 bonus. $2500 is a number I probably hit about 1/3 of the time in the last 12 months with Discover, but I was probably regularly about $1,500 per month. It gets a bit tricky because my billing cycle is runs to the 10th of each month, and I really try to avoid Credit Card bills over $3000/month just from a cashflow standpoint. I may start charging my utilities to the card, and I do like the idea of buying GCs for places I regularly frequent, especially if it’s just to make up a couple hundred dollars one month.

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