What Is The Best Way To Make Real Use of A 5% Cash Back Card?

One of the most popular cash-back card types available today is that of the 5% rotating category. Popularized by cards from Discover and Chase, this card type offers rotating categories every quarter that offer a 5% boost in reward types over the more traditional 1% cashback bonus. 

As popular as this card type has become, one Quora poster is left asking how to use it best. With so many different cash-back card formats out in the wild right now, everyone should know how to take advantage of 5% cashback and maximize their reward values. 

Considering I have two of these card types in my wallet right now, I definitely understand the appeal of the 5% bonus, as it’s about as good as it gets in the cashback world right now. 

Higher Reward Rate

In no uncertain terms, the best way to use this card type is to follow the quarterly calendar and take advantage of the higher reward rate. The downside to 5% cards is that they generally offer a lower 1% cashback value on all other purchases, so tracking quarterly categories is the best way. 

It’s important to remember that no card gives you a flat-rate 5% cashback value on rewards, so you have to watch each calendar to know whether one quarter is for grocery stores. In comparison, another quarter might have home improvement stores or gas stations listed as the 5% cashback benefit. 

The caveat is that most cards of this type have a bonus cap, generally around $1,500 per quarter. This means you won’t receive 5% cash-back on anything spent over this amount purchased at one of the active categories. 

Check the Schedule

As long as you check which purchases qualify for 5%, you can activate the card for each quarter, which you must do four times a year. Unfortunately, this cashback reward amount isn’t automatic, as you have to manually inform your credit card holder that you want to activate this reward benefit to begin taking advantage of it. 

Align your Habits

The critical thing to remember about cashback cards is that many are out there, so a 5% card should only be one of a few or even many in your wallet. Another popular card type to consider is one that offers a higher flat-rate 2% cash-back amount, like the Fidelity or Wells Fargo Active card, which should work well alongside the 5% card type. 

You should also have a card that gives you increased perks in specific categories all year, like the Blue Cash Preferred from American Express, which provides 6% cashback on grocery and streaming services. Combining different card types will be the smartest and fastest way to maximize your reward balance. 

Pay Your Balance

Speaking of balances, the single worst way to negate your cashback earnings is not to pay your balance on time, or better yet, off every month. Think of your reward with this card type this way: if you spend $500 on purchases in active categories, the credit card company is handing over $25 to you in reward value. 

However, if you are not paying on time and have a 29% interest rate, you will owe an additional $145 next month. This is the worst-case scenario interest-rate-wise, but it’s something to consider so you don’t overspend trying to build up reward balances only to spend more trying to keep your credit balance down. 

Time Big Purchases

Another super-smart way to take full advantage of the 5% card type is to try timing your big purchases. If you know you are traveling or shopping for the holidays, try waiting until a 5% cashback category falls into your shopping window. 

Generally speaking, Chase and Discover both try to entice customers with this card type to shop at locations like Walmart or Target during the holidays. At these stores, you can take advantage of a 5% cashback bonus in a big way, as you can buy gifts for everyone in your life. 

Stack With Promotions 

Sometimes, you can even combine your 5% cash-back reward with store promotions, discounts, or even loyalty coupons. For example, Walgreens is notorious for handing out coupons that offer a few dollars off your next purchase, which, combined with its quarterly category, can help you maximize your overall perceived value of how much you are saving while also getting back from the credit card company.