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Credit Cards

You can make 3 times the rewards on common purchases with a 5% cash-back card—but there's a catch

A 5% cash-back card is a great asset for consumers looking to maximize rewards. Check out the bonus cash-back categories that allow you to earn up to 5% back each quarter.

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The Chase Freedom is not currently available to new cardholders. Please visit our list of the best cash-back cards for alternative options.

As credit card issuers compete for your business, many cash-back rates have risen above 1%. Today, there are cards that offer a whopping 5% cash back in rotating categories, allowing savvy spenders to maximize their earnings.

Of course, there's a bit of a catch. In order to earn 5% cash back, you have to manually activate the offer each quarter, and there's a limit to how many points you can earn.

Ahead, Select breaks down how these cards work, how to maximize your rewards, plus we look at three of the most popular 5% cash-backs cards out there so you can determine if one is right for your spending needs.

How 5% cash-back credit cards work

Each quarter, there are new bonus categories, like gas or groceries, that earn 5% cash back, up to a quarterly maximum (typically $1,500). Once you hit the cap, you earn 1% cash back on the rest of your spending.

These categories are typically pre-selected by the card issuer and released up to a year in advance via an annual cash-back calendar.

You have to activate each quarter's bonus categories in order to get the 5% cash back. This can be done online by using your card issuer's mobile app or over the phone. If you don't activate, all purchases will earn 1% cash back.

If the bonus categories are in line with your spending, it can be smart to take advantage of a 5% cash-back card. The bonus rewards you earn during those periods could outweigh what you'd get using a flat-rate card that only earns 1% to 2% cash-back year-round.

How to maximize your rewards

While a 5% cash-back card can be beneficial on its own, you can earn even more by pairing it with a flat-rate cash-back card.

For example, for everyday purchases you could use the Citi® Double Cash Card, one of Select's top choices for best cash-back cards, which earns an effective 2% cash back: 1% when you buy and 1% when you pay for purchases. Then, you could use a 5% cash-back card, like Discover it® Cash Back or Chase Freedom Flex℠, for bonus category purchases.

Here are three popular 5% cash-back cards and their bonus categories, to help you decide which card might be right for your lifestyle.

Discover it 5% cash-back categories

Discover offers four different credit cards that allow cardholders to enroll every quarter to earn 5% cash back in various categories, up to a $1,500 quarterly maximum (then 1% cash back). Consumers can choose from the following cards: Discover it® Cash Back, Discover it® Student Cash Back, NHL® Discover it® and Discover it® Balance Transfer.

Here's the Discover cash-back calendar for 2022:

  • January to March (activation closed): Grocery stores and fitness club & gym memberships (excludes Walmart and Target purchases)
  • April to June (activation closed): Gas stations and Target
  • July to September (activate starting May 1): Restaurants and PayPal
  • October to December (activate starting Aug. 1): Amazon.com and digital wallets*

*Digital wallets includes Apple Pay, Google Pay, Samsung Pay and Garmin Pay.

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. Bonus category purchases that exceed the $1,500 quarterly maximum, as well as all other purchases, earn unlimited 1% cash back automatically.

Chase Freedom 5% cash-back categories

Cardholders who use the Chase Freedom Flex℠ or Chase Freedom® credit card (closed to new applicants) earn 5% cash back on up to $1,500 across all of that quarter's categories.

Bonus categories are revealed each quarter, so there's always something new to explore. This may be a setback for consumers who like to plan out their spending, but here is what we know so far.

Here's the Chase Freedom cash-back calendar for 2022:

  • January to March (activation closed): Grocery stores (excludes Walmart and Target purchases)* and eBay
  • April to June (activation closed): Amazon.com and select streaming services**
  • July to September (activate now): Gas stations, car rentals, movie theaters and select live entertainment

*The Chase Freedom Flex℠ is a Mastercard, which is only accepted online at Costco.com, not in-warehouse. Learn more about what credit cards Costco accepts.

**Eligible streaming services include: Disney+, Hulu, ESPN+, Netflix, Sling, Vudu, Fubo TV, Apple Music, SiriusXM, Pandora, Spotify and YouTube TV.

Bonus category purchases that exceed the $1,500 quarterly maximum, as well as all other purchases, earn 1% cash back. 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.

Chase Freedom Flex℠

On Chase's secure site
  • Rewards

    5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate (then 1%), 5% cash back on travel booked through the Chase Ultimate Rewards®, 3% on drugstore purchases and on dining (including takeout and eligible delivery services), 1% cash back on all other purchases

  • Welcome bonus

    $200 cash back after you spend $500 on purchases in your first three months from account opening

  • Annual fee

    $0

  • Intro APR

    0% for the first 15 months from account opening on purchases and balance transfers

  • Regular APR

    16.49% - 25.24% variable

  • Balance transfer fee

    Intro fee of either $5 or 3% of the amount of each transfer, whichever is greater, on transfers made within 60 days of account opening. After that, either $5 or 5% of the amount of each transfer, whichever is greater.

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

Terms apply.

U.S. Bank Cash+® Visa Signature® Card 5% cash-back categories

The U.S. Bank Cash+® Visa Signature® Card is a flexible 5% cash-back card that lets you choose two categories each quarter to earn 5% cash back on up to your first $2,000 in combined eligible purchases. This is a helpful feature for consumers who want control over the bonus categories.

You can select two of these 5% cash-back categories:

  • TV, internet and streaming services
  • Fast food
  • Cell phone providers
  • Department stores
  • Home utilities
  • Select clothing stores
  • Electronics stores
  • Sporting goods stores
  • Movie theaters
  • Gyms/fitness centers
  • Furniture stores
  • Ground transportation

You also can choose one of three categories to earn an unlimited 2% cash back: grocery stores, gas stations or restaurants. Bonus categories need to be selected every quarter, even if you want to keep the same selections.

All other purchases earn a standard 1% cash back.

If you maximize your spending in your chosen 5% rewards categories, you could potentially earn $100 cash back each quarter on top of the unlimited 2% cash back you earn on either grocery store, gas station or restaurant spending, plus 1% in all the other categories.

U.S. Bank Cash+® Visa Signature® Card

On U.S. Bank's secure site
  • Rewards

    5% cash back on your first $2,000 in combined eligible purchases each quarter on two categories you choose; 5% cash back on prepaid air, hotel, and car reservations booked directly in the Rewards Travel Center; 2% cash back on one everyday category; 1% cash back on all other eligible purchases

  • Welcome bonus

    $200 bonus after spending $1,000 in eligible purchases within the first 120 days of account opening

  • Annual fee

    $0

  • Intro APR

    0% for the first 15 billing cycles on purchases and balance transfers

  • Regular APR

    16.74% - 26.74% (Variable)

  • Balance transfer fee

    3%, minimum $5

  • Foreign transaction fee

    2% to 3%

  • Credit needed

    Good/Excellent

See rates and fees, terms apply.

Is a 5% cash-back credit card right for you?

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

However, these rotating category cards aren't for everyone. Trying to optimize your usage can be a lot of work, and many people don't want the hassle.

Further, because these cards typically have spending limits on their 5% back categories, you can often earn more in total cash-back rewards with a flat-rate cash-back credit card. With these cards, all purchases earn the same amount and you don't have to worry about rotating bonus categories, activation or quarterly caps.

For example, the Discover it® credit cards offer 5% cash back on select purchases in rotating categories upon activation, up to $1,500 in combined spending each quarter (then 1%), while 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.

Based on our calculations, Discover it® cardholders would earn an estimated average of $696 in cash back after the first year, while Alliant Cashback Visa® Signature Credit Card users could earn $546. The savings grow the longer you use the cards: Discover it® cardholders would earn an estimated $2,088 in cash back after five years, while Alliant Cashback Visa® Signature Credit Card users could earn up to $2,335.

At the end of the day, the best cash-back card for you is the one that fits your spending habits and allows you to maximize desired rewards.

Information about the NHL® Discover it®, Chase Freedom® and Alliant Cashback Visa® Signature has been collected independently by Select and has not been reviewed or provided by the issuer of the cards prior to publication.

For rates and fees of the Discover it® Cash Back, click here.

For rates and fees of the Discover it® Student Cash Back, click here.

For rates and fees of the Discover it® Balance Transfer, click here.

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