Edited by Joe Cortez; May 2018
Banks will entice you to apply for their credit card by offering a big bonus up front. But after getting your card and meeting the minimum spending requirements, they're more concerned with giving you a reason to keep using it.
Many frequent flyers and frugal travelers have more than a dozen cards at their disposal. How do you choose which card to use at which shopping stop?
One way to accomplish this is through quarterly category bonuses that earn you a greater reward for certain types of spending. And with the right strategy, you can take advantage of these category bonuses to quickly build up points for your next discounted trip.
What are category bonuses?
Credit cards aimed at travelers often offer category bonuses for spending at targeted stores. Category bonuses are offered in two different ways: revolving quarterly categories and continuous bonus categories.
Revolving quarterly bonuses are offered on select credit cards, such as the Chase Freedom card. Each promotional period runs three months and offers you bonus points on top of those you already earn. In the case of the Chase Freedom Card, you would earn a total of five percent cash back in the revolving quarterly bonuses.
Past promotional categories include gas stations, restaurants and movie theaters. But Chase also partners with specific retailers, offering bonus points at Starbucks, Lowe's, Kohls and even Amazon.com. The yearly announcement of quarterly bonus categories is usually announced every December.
Continuous bonus categories are just what they sound like: regular bonus points for everyday spending at certain types of retailers or companies. These are most commonly found on airline, hotel and flexible points credit cards. Using the Hilton Honors Ascend Card from American Express as an example: you could earn 12X Hilton Honors bonus points for each dollar of eligible purchases charged on your Card directly with a participating hotel or resort within the Hilton Portfolio and earn 6X Hilton Honors bonus points for each dollar of eligible purchases on your Card at U.S. restaurants, at U.S. supermarkets, and at U.S. gas stations.
Some credit cards also offer continuous bonuses for everyday spending at certain types of stores as well. Gas stations, pharmacies, and grocers are typically the highest continuous bonus categories, but some cards offer bonuses at restaurants and even office supply stores. The Costco Anywhere Visa Card by Citi lets you earn four percent cash back on eligible gas worldwide, including gas at Costco (up to the first $7,000 per year), three percent cash back on restaurant and eligible travel purchases worldwide, two percent cash back on all shopping at Costco and Costco.com and one percent cash back everywhere else.
If you are a regular Costco shopper, this card could help you earn cash back towards a big vacation.
Before applying for either type of card, think about your spending habits and how you would use either card in your regular life. If you can't maximize the bonus categories, then it may not be the best card for you.
What are the pros and cons of category bonuses?
As with every financial product, category bonus credit cards come with pros and cons. It all depends on your personal spending habits and how you plan on using your points and miles towards discounted trips.
One of the pros of category bonuses is that you always get the biggest return for your spending. By using one card for gas and groceries, one to maximize travel spending and a revolving quarterly bonus card for everything else, you can make sure you earn well over two percent cash back with every transaction.
Another plus of category bonus cards is how they interact with other cards. Both American Express and Chase offer credit cards that can earn flexible points towards transfer partners or travel rewards. By holding multiple cards from each company, you can maximize your overall rewards and get that dream vacation faster.
There are downsides to category bonus credit cards as well. For instance, bonus cards often come with a cap on how many points you can earn in a category. This can range from $1,500 per quarterly category on the Chase Freedom card, or all the way up to $7,000 of gas per year on the Costco Anywhere Visa by Citi. If you are planning big spending in those categories, make sure your card won't limit your rewards.
Another downside of category bonuses is tracking when they change. Although category bonuses shift every three months, keeping track of the next bonus category can be a pain for some. If you plan on applying for a credit card with revolving quarterly bonuses, be sure to understand when the categories are going to change. Otherwise, you could only be spending towards a paltry one percent cash back after the category ends.
Which credit cards offer the best category bonuses?
Some cards are better than others when it comes to maximizing category bonuses. Here are our picks for some of the best category bonuses:
- Best overall category bonus: Voice Credit Card from Huntington National Bank - The Voice Credit Card allows you to be in charge of the revolving quarterly bonus categories. Every three months, select between one of ten categories to earn 3X rewards. The categories can change based on your lifestyle, or can be the same based on where you spend the most. Although maximizing the bonus every year would give you $60 less in rewards than the Chase Freedom card, having full control of your bonus categories may be better.
- Best travel category bonus: Chase Sapphire Reserve - If you travel often and enjoy dining out, the Chase Sapphire Reserve offers the most sustainable rewards over the long run. The card offers 3X points per $1 spent on travel from flights, cruise lines and hotels to car rentals, trains and taxis, as well as 3X points per $1 spent at restaurants from fast casual to fine dining and cafés to pizzerias. Because there is no cap on rewards,
- Best gas and grocery category bonus: Blue Cash Preferred Card from American Express - If you would rather get rewarded from cash back than travel points, this is the card for you. You can earn 6% cash back at US supermarkets, on up to $6,000 per year in purchases (then 1%), 3% cash back at US gas stations and select US department stores and 1% cash back on all other purchases. All the cash back is received in the form of Reward Dollars that can be redeemed as a statement credit - putting you in complete charge of how you use your cash back.
- Best category bonus for everything else: Discover it - Cashback Match - Imagine a credit card that not only offers you five percent cash back on revolving quarterly categories, but matches all the cash back you earn in the first year. That card is the Discover It - Cashback Match: with no annual fee, your spending turns into straight rewards you can use for travel, hotels, or anything else you want to use them for.
While relatively straightforward, category bonuses still require a fair amount of your time for research and upkeep if you plan to take full advantage. But with diligence and dedication to getting your money back, a category bonus can help you get a lot closer to your next trip by rewarding you for what you already buy every day.