The Ins and Outs of Category Bonuses

Category bonuses earn you a greater reward for certain types of spending.

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Getting you to sign up for a credit card is a challenge for banks, sure, but once you have the card on hand and meet the minimum spending requirements, issuers need you to keep swiping in order to turn a profit. Miles and points collectors can have more than a dozen cards at their disposal, so companies need to offer an incentive to motivate you to use their own card over another.

One way to accomplish this is through quarterly category bonuses that earn you a greater reward for certain types of spending.

Chase Freedom is one of the most popular such cards on the market. By default, rewards are issued as cash back, but if you have another Chase credit card that earns Ultimate Rewards, such as the Chase Sapphire card, you can convert each cash point into a reward point, getting much more bang for your buck. Most Freedom purchases earn just one point per dollar, but Chase runs four promotions each year that can earn you five points per dollar with certain types of spending.
 
Each promotional period runs for three months, and you can earn five points per dollar during each period on the first $1,500 in purchases. This year, promotional categories have included gas stations, restaurants and movie theaters, but Chase also partners with specific retailers, offering bonus points at Starbucks, Lowe's home improvement stores, Kohls and even Amazon.com, depending on the month. If you take advantage during each period, you can earn 24,000 bonus Ultimate Rewards points each year, over the one point per dollar you'll earn on all other purchases you make with the card.

There's no annual fee, so it pays to get Freedom even if you only plan to use the card to take advantage of these quarterly bonuses.

Some cards also offer continuous bonuses for everyday spending at certain types of stores. Gas stations, pharmacies, and grocers typically net you the greatest return here, but making purchases at restaurants and even office supply stores can earn you a bonus with certain cards, too.

Chase has some of the most lucrative products here as well. The Chase Sapphire card earns you two points per dollar on all dining and travel expenses, including flights, hotels and even taxi cabs.

The Chase Ink business cards, such as Plus and Bold, pay five points on every dollar spent at office supply stores on the first $50,000 spent per card each year. You also earn a similar bonus on certain utility expenses, such as cellular phone, internet, and cable TV services. Granted, you probably won't max out that $50,000 annual limit even if you try very hard, but you can buy far more than office supplies at stores like Office Depot and Staples -- these retailers sell everything from computers to prepaid Visa cards, which you can then cash out or use for purchases at other stores, effectively earning five points per dollar on all your purchases.

Category bonuses, while relatively straightforward, still require a fair amount of your time for research and upkeep if you plan to take full advantage. With Chase Freedom, you'll need to register during each quarter, and remembering to carry the card (and actually use it) with certain merchants requires a fair amount of discipline. It's best to start out with just a few cards, such as the Chase Freedom or Sapphire.

Once you feel comfortable balancing your different options, you can add products from American Express or the Chase Ink cards and really maximize your return.