Looking ahead to credit card bonus categories in 2019

Now is a great time to re-evaluate 5 percent cash back bonuses from Chase and Discover

Wealth and Wants with Ted Rossman

Ted Rossman has seven years of experience in the credit card and personal finance industries as a member of the award-winning communications department at CreditCards.com and its sister sites The Points Guy and Bankrate.

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Two of the most popular cash back cards offer 5 percent bonus categories that rotate every quarter: the Chase Freedom and the Discover it® Cash Back. With the calendar soon to roll over into 2019, it’s a great time to re-examine these industry stalwarts.

Discover has already announced its 5 percent categories (up to $1,500 in purchases, after you activate) for next year: grocery stores in Q1; gas stations, Uber and Lyft in Q2; restaurants in Q3 and Amazon.com in Q4. This is similar to their 2018 calendar. The main changes are the additions of Uber and Lyft in Q2 and the removal of wholesale clubs (which were included in Q1 and Q4 this year).

Chase hasn’t announced its 5 percent categories for 2019 – the bank tends to roll them out quarter-by-quarter on much shorter notice. But here’s what they offered in 2018: Q1 was a mishmash of gas stations, internet, cable and phone services and mobile wallet payments. Q2 was grocery stores, PayPal and Chase Pay. Q3 was gas stations, Lyft and Walgreens. Q4 was department stores, wholesale clubs and Chase Pay. While we don’t know for sure, this list should be a good guide for 2019. Once the complete list is announced, don't forget to check out our running guide to Chase's 2019 cash back categories

Discover and Chase both cap the 5 percent categories at $1,500 of spending ($75 in rewards) each quarter. Users earn 1 percent on all other purchases. Discover’s sign-up bonus is unique because it matches all of the cash back new cardholders earned during their first year. That’s an effective 10 percent return on the quarterly bonus categories and 2 percent on everything else. Chase, meanwhile, pays $150 after consumers spend $500 in the first three months after signing up for the Freedom card.

See related: Chase Freedom vs. Discover it 

Which card should I get?

I believe the Discover it Cash Back is the most valuable for new cardholders, mostly because of the sign-up bonus. If you maxed out the 5 percent categories in all four quarters, you would earn a total of $600 in cash back ($300 in rewards plus a bonus $300). 

You’d get $450 from the Chase Freedom ($300 in rewards and the $150 sign-up bonus). I’m assuming that all spending is on the 5 percent categories, partly for simplicity’s sake and also because the baseline 1 percent offered by these cards isn’t very good. 

If you’re a serious cash back card user, you likely have a better option in your wallet, perhaps the Citi Double Cash Card, which earns 2 percent on everything (1 percent when you buy plus 1 percent as you pay). Although in year one, the Discover card would also yield a minimum of 2 percent on all spending.

Sign-up bonus aside, I actually prefer the Chase Freedom because its 5 percent categories – at least in 2018 – offered much more variety. Incentivizing mobile payments was genius and provided consumers with a ton of options. The way the Freedom categories were structured in 2018, three of the four quarters (all but Q3) were pretty easy to max out.

Accounting for the respective sign-up bonuses, the tipping point between the two cards is about $3,000 in 5 percent category spending per year. If you spend more than that, you’ll come out ahead with the Discover it Cash Back. Less and you should probably go with the Chase Freedom. But that’s just in year one. 

Beyond that, it’s all about how much you spend in the 5 percent categories. And the Chase Freedom has another trick up its sleeve because you can pair it with one of Chase’s transferable points cards (such as the Chase Sapphire Preferred Card or Chase Sapphire Reserve) and redeem your points for airline tickets or hotel stays, which could yield more than the standard 1 cent per point. 

That’s why I like the Discover it Cash Back in the short term and the Chase Freedom over the long haul.

Chase Freedom and Discover it: Back-to-Back

  Chase Freedom card
Chase Freedom card
Discover it card
Discover it card
Rewards rate
  • 5 percent cash back on rotating categories ($1,500 in purchases per quarter)
  • 1 percent cash back on general purchases
  • 5 percent cash back on rotating categories ($1,500 in purchases per quarter)
  • 1 percent cash back on general purchases
Sign-up bonus
  • $150 when you spend $500 in the first 3 months
  • 100% match of your cash back at the end of the card’s first year
Annual fee
$0 $0
Estimated yearly rewards value (for someone who spends $15,900) $239 $243
Pros
  • Good sign-up bonus for a no annual fee card
  • Generous 5% cash back rate for bonus categories
  • Bonus categories are broad and typically include popular spending categories, such as gas, restaurants and groceries
  • Can combine cash with other Chase card earnings
  • Can also redeem cash for gift cards, merchandise, experiences or travel
  • Cash back doesn’t expire
  • Exceptional sign-up bonus if you regularly spend more than $500 a month
  • Generous 5 percent cash back rate for bonus purchases
  • Bonus categories are broad and typically include popular spending categories, such as gas, restaurants and groceries
  • Can redeem rewards for cash back, gift cards, charity or Amazon.com purchases
  • Lower credit card APR and fees
Cons
  • Must opt in to receive a 5 percent bonus
  • Must track quarterly spending categories
  • You don’t get a rewards bonus when you book travel with Freedom card rewards
  • You can’t transfer your cash back to airline or hotel partners
  • Must opt in to receive a 5 percent bonus
  • Must track quarterly spending categories
  • You must spend a relatively large amount to receive a substantial bonus
  • You can’t transfer your cash back to airline or hotel partners
Who should get this card?
  • Occasional credit card users
  • Frequent travelers
  • Someone who wants just one credit card
  • Rewards maximizers who plan to use the card heavily during the first year
  • Someone who wants to limit credit card charges


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Updated: 12-15-2018