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Discover it Cash Back review: Earn 5% cash back for a limited time at grocery stores and Walgreens, CVS
The Discover it Cash Back card lets you earn 5% cash back on a revolving roster of bonus categories offered each quarter. CNBC Select reviews its benefits so you can decide if it's the right credit card for you.

Twenty/20

If you are looking to maximize your rewards, a 5% cash-back card can be a smart addition to your wallet. Oftentimes, they have standard interest rates and no annual fee.

Discover offers four different credit cards that provide 5% cash back on the first $1,500 in purchases made each quarter in select categories (then 1%). Consumers can choose from the following cards: Discover it® Cash Back, NHL® Discover it®, Discover it® Balance Transfer and Discover it® Student Cash Back (CNBC Select's pick for best college student cash-back credit card).

Discover's 5% cash-back calendar for 2020 includes grocery stores, gas stations, select ride-shares, restaurants, PayPal and online shopping sites like Amazon.com and Target.com. These eligible merchants rotate quarterly, and cardholders must enroll each quarter to receive the benefit at select merchants.

Below, CNBC Select breaks down Discover it® Cash Back's rewards, benefits and fees to help you decide if it's the right card for you.

Discover it Cash Back review

  • Rewards
  • Additional benefits
  • Fees
  • Bottom line

Discover it® Cash Back

  • Rewards

    5% cash back at different places each quarter after you activate bonus categories (on up to $1,500 in purchases, then 1%). Plus, unlimited 1% cash back on all other purchases.

  • Welcome bonus

    At the end of your first year, Discover automatically matches all the cash back you earned

  • Annual fee

    $0

  • Intro APR

    0% for the first 14 months on purchases and balance transfers

  • Regular APR

    13.49% to 24.49% variable on purchases and balance transfers

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    Excellent/Good

  • *See rates and fees and our methodology, terms apply.

Pros

  • Cash-back program
  • No annual fee
  • No fee charged on purchases made outside the U.S.
  • Generous welcome bonus

Cons

  • Bonus categories must be activated each quarter
  • Cash-back program limits 5% cash-back earnings to $1,500 a quarter
  • Fee charged on balance transfers
  • Estimated rewards earned after 1 year: $707
  • Estimated rewards earned after 5 years: $2,120

Rewards totals incorporate the cash back earned from the welcome bonus

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On Discover's secure site

Rewards

Like the Chase Freedom®, the Discover it® Cash Back offers 5% cash back in rotating categories on up to $1,500 in combined purchases after you activate the bonus every quarter. After you reach the limit, it's 1% on all purchases. If you maximize your spending in these categories, you could earn $75 cash back each quarter on top of the 1% cash back you earn in all the other categories.

Now until March, you can earn 5% cash back at grocery stores (excluding Target and Walmart), Walgreens and CVS. Activation for the next quarter's bonus categories starts Feb. 1, 2020.

This card has a unique welcome bonus where Discover automatically matches all the cash back you earned at the end of your first year. There is no limit to how much Discover will match.

CNBC Select calculated how many rewards the average American can earn if they optimize the way they use their Citi® Double Cash Card. We worked with the location intelligence firm Esri, who provided us with a sample annual spending budget of $22,126.

The budget includes six main categories: groceries ($5,174), gas ($2,218), dining out ($3,675), travel ($2,244), utilities ($4,862) and general purchases ($3,953).

Here's a breakdown of how much cash back you can roughly earn in each category, annually:

  • Groceries: $103
  • Gas: $44
  • Dining out: $73
  • Travel: $22
  • Utilities: $49
  • General purchases: $62
  • Total: $353

Cardholders can earn an estimated $707 in cash back the first year (including the cash back from the welcome bonus) and a total of $2,120 over five years.

The cash back doesn't expire and you can redeem your rewards at any time for statement credits, gift cards, merchandise and more.

Additional benefits

The Discover it® Cash Back offers a competitive 0% APR for the first 14 months on purchases and balance transfers (then 13.49% to 24.49% variable APR). Its contactless tap-to-pay technology makes it fast and easy to pay at millions of places.

This card also automatically waives your first late payment fee but don't make missing payments a habit. Beyond the additional fees, you risk damaging your credit score and potentially paying a higher penalty interest rate. (Check out CNBC Select's steps you can take to prevent late payments.)

Fees

The Discover it® Cash Back card has no annual fee and no foreign transaction fee. There is a 3% intro balance transfer fee and up to 5% fee on future balance transfers (see terms).

Bottom line

Trying to optimize your quarterly credit card usage can be a lot of work, so it is worth it to do the research to make sure a 5% cash-back credit card is right for you.

However, using a cash-back card on a daily basis can save you money, and if you don't mind rotating your rewards each quarter, the Discover it® Cash Back may be great for your spending habits.

For other options, CNBC Select's top pick for cash-back card, the Alliant Cashback Visa® Signature Credit Card, offers 2.5% cash back on all purchases (up to $250 in cash back rewards per billing cycle). It does have a $99 annual fee, which is waived the first year.

Never had a credit card before? Here's the best starter card for your wallet

Our methodology

To determine which credit cards offer the best value, CNBC Select analyzed 234 of the most popular credit cards available in the U.S. We compared each card on a range of features, including rewards, welcome bonus, introductory and standard APR, balance transfer fee and foreign transaction fees, as well as factors such as required credit and customer reviews when available. We also considered additional perks, the application process and how easy it is for the consumer to redeem points.

CNBC Select teamed up with location intelligence firm Esri. The company's data development team provided the most up-to-date and comprehensive consumer spending data based on the 2019 Consumer Expenditure Surveys from the Bureau of Labor Statistics. You can read more about their methodology here.

Esri's data team created a sample annual budget of approximately $22,126 in retail spending. The budget includes six main categories: groceries ($5,174), gas ($2,218), dining out ($3,675), travel ($2,244), utilities ($4,862) and general purchases ($3,953). General purchases include items such as housekeeping supplies, clothing, personal care products, prescription drugs and vitamins, and other vehicle expenses.

CNBC Select used this budget to estimate how much the average consumer would save over the course of a year, two years and five years, assuming they would attempt to maximize their rewards potential by earning all welcome bonuses offered and using the card for all applicable purchases. All rewards total estimations are net the annual fee.

While the five-year estimates we've included are derived from a budget similar to the average American's spending, you may earn a higher or lower return depending on your shopping habits.

Information about the Chase Freedom® and Alliant Cashback Visa® Signature Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the cards prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.