New Credit Card Trend: Rotating Rewards, Swiss Army Style
When you charge something on your credit card, the merchant usually pays about 2-3% in transaction fees for the convenience and benefit of accepting these cards (it makes it easier for people to spend money with them). In order to get their specific card “in your wallet”, issuers often rebate part of these fees in the form of % cashback rewards or frequent flier miles. This makes sense, because many people with good credit and/or higher spending don’t carry balances so that the primary source of profits is from these transaction fees.
The trick for issuing banks, of course, is to offer as little rewards as possible yet still convince enough people as a group to use the card. The newest trend is to offer a high 3% to 5% back (more than they take in!) but only on a specific group of rotating purchases. Usually the rest earn 1% cashback. If you pay attention to the rules, this can make for some significant savings. I think of it as a swiss army knife of credit cards; you just need to pick the right one for the job. 
It might even be time to dust off an old card you don’t use anymore.
Here are some popular cards and their current rotating categories. Also, new cardholders can combine with current sign-up bonuses of up to $100 upfront.
Citi Dividend Platinum Select Mastercard
Reward categories change quarterly. From July 1 to September 30, you can earn 5% cash back on
- Restaurants
- Car Rentals
- Hotels
After you get your card, you must enroll by logging into your account or calling 1-800-231-0891. There is no cap on the 5% back, except for the $300 overall cap on all dividend rewards annually. All other purchases do earn a standard 1% with no tiers, and rewards do not expire as long as you have activity once every 12 months.
Chase Freedom Card
Reward categories change quarterly. From July 1 to September 30, you can earn 5% cash back on up to $1,500 spent in the following categories:
- Gas
- Airlines
- Auto Rentals
- Hotels
You must enroll at ChaseBonus.com. All other purchases do earn a standard 1%, with no tiers or expiration of rewards. Currently, the Chase Freedom Visa card has a promotion offering a $100 check if you sign up and make $799 in purchases in your first three months.
Discover More Card
Reward categories change quarterly. From July 1 to September 30, you can earn 5% cash back on up to $300 spent in the following categories:
- Gas Stations
- Movies
- Theme Parks
- Hotels
In September, you can also earn 5% cash back on up to $200 spent in grocery stores and drugstores. You must enroll online to activate the rewards each quarter. Discover card has a tiered cashback rate (1% unlimited Cashback Bonus on purchases after your total annual purchases exceed $3000; purchases that are part of your first $3000 earn .25%.). Currently, Discover has a promotion offering a $75 cashback bonus if you sign up and make $500 in purchases in your first three months.
PenFed Platinum Cashback Rewards Card
Bonus categories appear and change regularly for this card, but not on a set schedule. Currently through August 31st, cardholders can earn 3% cashback in the following categories:
- Electronics
- Home Improvements
You can view all the eligible merchants here. You don’t need to enroll. This is in addition to the year-round rewards structure of 5% cash back on gas purchases (must pay at pump), 2% cash back on supermarket purchases, and 1% cash back on everything else. Rewards are credited monthly on your next statement.
Note: To get this card, you must also have membership to the Pentagon Federal Credit Union (you can apply for both at the same time). In general, membership is open to the military, US government employees, or the family or household of existing members. However, anyone can become eligible by joining the National Military Family Association (NMFA) for a $20 one-time fee. PenFed also offers other competitive financial products, including low-rate mortgages and long-term CD rates.
In order to keep track of all these, I usually just cut off the top part of a Post-It note with the sticky backing, and use it to label each card in my wallet. Here’s a pic of one of my cards:
Find more in Credit Cards, Deals & Offers | 7/8/10, 6:43pm | Trackback
July 8th, 2010 at 7:03 pm
They are accepting apps for the Citi Dividend card again?
Cool! unfortunately I just apped for the Forward (approved) so I’m not going to take any chances.
July 8th, 2010 at 7:07 pm
Did they stop? I can’t believe I’ve had my Citi Dividend since 2003. My annual income in 2003 was less than $20,000 a year.
July 8th, 2010 at 10:28 pm
I was thinking creating an app to manage all these rotating categories. But I think your approach works, and it’s simple and free
July 8th, 2010 at 10:49 pm
I just got one from my local credit union. 8.15% APR. Not bad.
July 9th, 2010 at 4:37 am
What a pain … You have to remember to enroll. Then you update your post-its. Then you look at the post-its at the point of sale. If the bonus is capped, do you write the total bonus-eligible spend so far on the post-it too?
July 9th, 2010 at 5:45 am
Citi Forward is the best card around if you go out to eating and drinking.
July 9th, 2010 at 6:31 am
Jonathan, yes, the Citi Dividend card was unavailable when they started the quarterly promotion and for some time before – the only one available was the Student one.
July 9th, 2010 at 7:36 am
hahahah! I do the same thing with the sticky note!
July 9th, 2010 at 7:55 am
I love your Post-It note idea! I’ll definitely have to give that a try. How often do you update the stickies?
July 9th, 2010 at 9:21 am
I’ve taken advantage of the Discover rotating categories for many years now. I am thinking about switching all of that spending — as soon I get to my next reward with Discover — to my new Chase Freedom card since it offers 1% on regular purchases without having to meet any spending threshold.
Although I agree that significant savings can be achieved and that tracking this kind of thing is fun, I think we have to be careful of it becoming too much of a distraction. No one ever spent their way to financial well being. I know people that spend way too much time concerned about getting the best credit card when they should be thinking about with opening an IRA, savings account, etc.
July 9th, 2010 at 10:15 am
Yes, I have been labeling my credit cards for some time this way. My wife and I carry four different cards, and the labels remind us which card to use for what, to get 2-5% on things. However, recently I have changed to flipping the card over vertically and putting the label on the back, behind the embossed name. I then keep them flipped over like that in my wallet, so the label shows while they are in the wallet slots.
Why did I switch to putting them on the back? I had occasional issues where having it on the end of the card with the magnetic strip caused the label to get caught on the reader when swiping the card. Having it on the other end avoids that. As a bonus, the label is there for my wife and me, but when I lay my credit card down to pay, it is on the bottom so it remains private (and avoids my giving the same explanation repeatedly).
Wanted to share this tip.
Chip
July 9th, 2010 at 3:12 pm
I write on my cards with a Sharpie. Nothing to get gummed up. Rubbing alcohol takes it off as categories rotate.
July 10th, 2010 at 4:18 am
Citi Dividend Platinum Master Card is still available on their website. My Citi Dividend card has been converted to a Citi Dividend World Card recently. The 5% reward may be short lived as the going forward bonus will be 2%. The 5% is only there I believe as they changed the program as of July 1. No longer able to get 2% on groceries, utility bills, drugstore, gas stations and convenience stores as of July 1. Also with the program change, rewards are only available in $50 increments. Still limited to $300 in rewards a year with this card.
The thing I don’t like about the Freedom 5% rewards, is that you are not credited until 6-8 weeks after the quarter ends and you are capped at $60 in bonus points. Basically, same as Citi, $300 in rewards a year.
July 10th, 2010 at 8:57 pm
Jonathan – how do you find out what credit card is promoting which reward in that time period?
July 11th, 2010 at 4:43 pm
@Derrick – If you have the card, they’ll either e-mail you or you can check their respective websites, usually either upon login or on the page where you register. Sometimes, they’ll also send you a letter.
July 13th, 2010 at 8:06 am
Word to the wise – I have the Discover More card and they have not been crediting the 5% I’ve earned for bonus purchases even though I signed up for them every quarter. Also, even though I have spent more than $3000 this year they are still only giving me 0.25% instead of 1% on the remainder of purchases.
I am going to call and chew them out right now and I am debating whether it is worth it to use a card with a rotating bonus system if you have to call them up every month to make sure they don’t cheat you.
July 13th, 2010 at 10:16 am
Disregard my previous post. Unfortunately I reached Discover’s maximum of $400 a quarter that qualifies for the 5% bonus. Also I just had my “anniversary date” so the clock started over and I had to spend $3000 again before I could get the 1% on everything else. It would be nice if Discover notified you about which specific stores qualified, and listed on each statement which part of the balance earned 5% and which fell under the everything else rate.
July 13th, 2010 at 11:02 am
Since I’ve done this kind of thing for awhile now, here’s my analysis:
Pros:
–Maximize rewards
–Keep old cards active (meaning company’s less likely to cancel the card due to inactivity)
Cons:
–Have to remember to pay more bills on time (credits not worth late payment fee)
–Have to keep track of more reward systems to make sure credits are right (some are delayed by 8 weeks!)
–May not accumulate frequently enough on each system to avoid losing points (Citi Dividend card points are like airline miles — must keep card active to avoid losing points — temptation to overspend)
–May have lots of rewards systems with insufficient points to ever qualify for the benefit (i.e. 4 cards with $15 rewards each on them, as opposed to 2 cards with $25 — higher total dollar value, but inaccessible)
Personally, my optimum is the 2% Fidelity AmEx, 1.5% Fidelity Visa for almost everything else, and occasionally 1-2 cards with these rotating categories when I spend for one big thing that puts me over the accumulation threshhold (i.e. Discover with Sears to hit a tool sale over Father’s Day weekend), or to split out spending that needs to be accounted separately (i.e. one card for work travel, so that it’s easy to hand over the whole credit card statement for reimbursement without redacting personal spending — and if the work cc # is stolen it won’t affect my other personal cards).
July 14th, 2010 at 1:32 pm
with most of these programs, you have to actively manage the cards. for example, with discover (who has a constantly changing program that’s not quite transparent by design) i usually go out and charge up a gift card for the maximum of the range. recently, i went to a restaurant i frequent during the year and charged a $200 gift card. boom, i hit the limit and tossed the card back in drawer to freezed until the next bonus period opens.
July 14th, 2010 at 6:07 pm
They should have an app that will recommend which credit card to use based on your previous purchases and on what place you are currently shopping at. Thus having it do all the “thinking” as to what card to use.
July 14th, 2010 at 7:10 pm
Can someone tell me how I enroll my Citi Dividend card in the 5% bonus online? I poked around Citi’s web site and could not see how to do this. Thanks.
July 14th, 2010 at 7:45 pm
An app might be able to help someone like me keep all those rotating rewards straight. I agree with Ken that you can’t exactly spend your way to financial soundness so I’m not going to put all my energy into keeping track of all these rotating credit card rewards.
July 15th, 2010 at 5:37 am
erik – that’s a good idea!
July 15th, 2010 at 7:11 am
@Ryan. The link for the 5% can be found by logging into your account online. Click on your account once logged in. You should be able to find a link to signup for the 5% somewhere on that page.