The price of gas where I fill up is $2.23 per gallon. But I just filled my tank at a net cost of $1.98 per gallon.
I get a 3-cent-per-gallon discount from Shell’s Fuel Rewards program, and the other 22 cents per gallon in savings come from my credit card’s cash-back bonus.
That’s right: You can get 10% cash back on gas!
You can get 10% back on everything from groceries to restaurants, too. And when this deal is gone, you’ll still be able to get at least 5% back on many of the things you buy.
By the way, gas stations were not on the list of categories for my credit card. So how did I get 10% cash back? Let me explain…
How to Get 10% Cash Back
There are many 5% cash-back credit cards. They offer 5% cash back on purchases made at retailers in certain bonus categories that change every three months.
For example, the categories might be restaurants and movie theaters for the first quarter of the year, and could change to Amazon and gas stations the second quarter.
Some cards have 2 or 3% categories in addition to their 5% categories. Any purchases that don’t fall into any of those categories typically pay you 1% cash back.
You normally have to activate the category bonuses or you won’t get them. You’ll usually be reminded to do this by email, and then you can easily log into your account and click a button to qualify.
If you forget, you’ll get whatever the regular cash-back rate is — typically 1%.
The Discover It Card
Discover it may be the best 5% cash-back credit card.
Getting your cash is easy: Just go to your account, find “Rewards” and under “Redeem,” select “Cash,” which is directly deposited into your bank account or used as a credit on your statement (there are also shopping and gift card options).
The current offer of 0% interest for 15 months on purchases and balance transfers is nice, too.
But what really makes the Discover card valuable is the “double cash back” they’re offering for the first year for new card holders.
So, you get 5% on bonus category purchases and 1% on other purchases, and then, after a year, Discover doubles all the cash back you earned. That means those 5% category purchases get you 10% cash back.
The limit is $1,500 in purchases each quarter. After that, you get the 1% rate, which is really 2% for your first year, thanks to the double cash back.
This means you can make up to $150 cash back every three months just on your bonus category purchases.
Of course, you may not buy enough stuff in a given category to maximize that 5% cash back. You don’t want to buy things you don’t need just to get points. And when you do need things, they may not fit in the current category.
But there is a solution to both of these problems, one that will get you more cash back without spending more money.
For example, the Discover bonus categories were gas and ground transportation for the first quarter of 2015. I didn’t have the card then, and I never spend $1,500 — the maximum eligible for the 5% bonus — on gas in three months anyhow.
When I got my card in the third quarter, the Discover Cash Back Calendar listed these categories:
- Home improvement stores
- Department stores
But I still got 10% cash back on gas.
How do you get 10% cash back (or the regular 5%) when your purchase doesn’t fall into the right category?
And how do you claim more bonus cash back when you don’t have enough category purchases? One strategy you can use is to…
Buy Gift Cards to Get Category Bonuses
I bought a $50 Shell gas station gift card at Home Depot using my Discover card. I used that to pay for my next two times at the pump.
Because my purchase was made at a home improvement store, I was credited 5% cash back, which will be doubled when I’ve had my card for one year.
I’ll buy more gas cards as I need them, and if I don’t max out my 5% category, I’ll load up on them before the end of the quarter.
But this isn’t just about gas: Home Depot offers gift cards for multiple retailers, covering everything from sporting goods to restaurants. So you have quite a few options for converting your normal purchases into ones that generate bonus category points.
Of course, it’s easy to use this strategy when the 5% categories include places that sell a variety of gift cards. But what about in the second quarter of 2015, when the Discover categories were restaurants and movies?
Fortunately, there are several ways to get your 5% (or 10%) cash back on almost anything you buy.
1. Plan Ahead
If the coming quarter has no good categories for gift card purchases, buy them now. Just be aware of the limits for each quarter.
For example, if you’ve used up $1,000 of the $1,500 maximum spend that qualifies for Discover’s 5% categories, buy $500 worth of gas station gift cards to use in the future.
2. Find a Retailer With the Right Code
Categories are not always clear because stores can be coded a number of ways by card issuers.
For example, the Chase category “grocery stores” does not include Walmart or Target.
On the other hand, there are reports that purchases of items inside some convenience store gas stations fall into the “gas” category, and many of these places carry gift cards.
Visa has an online search tool for retailer codes, but you can also make a small purchase and check your statement later to see if a particular store (one with gift cards) is in a bonus category.
3. Get Several 5% Cash-Back Cards
For the first quarter of 2015, the Discover bonus categories were gas and ground transportation — tough places to find gift cards for other retailers unless you know a gas station convenience store that codes properly.
During this time, the Chase Freedom bonus category calendar listed grocery stores. Most grocery stores carry a variety of gift cards.
In other words, the more 5% cash-back cards you have, the more likely you can maximize your cash back on any purchase.
4. Choose Your Categories
The U.S Bank Cash+ card lets you choose two 5% cash-back categories from 12 different options.
“Department Stores” is the only category where you are likely to find gift cards for other retailers, so choose that to start.
Then you can choose a category you’re likely to use heavily but for which there are few gift cards available, like “Fast Food” or “Cell Phone.”
5. Buy Discounted Gift Cards
For example, I bought CVS gift cards online using my Discover card. I only got 2% cash back in that case, but the cards were selling for 20% off, so I did far better than getting a 5% or 10% category bonus.
The Fine Print
Typically, there is a limit to how much spending qualifies for the bonus category payouts.
The limit is $1,500 per quarter for Discover, so you can theoretically collect $600 cash back each year on bonus categories and another $600 your first year. There’s no limit on regular 1% cash-back purchases.
Because of the uncertainty of some categories (is a pharmacy in a grocery store in the “drug store” category?), you may want to do a small test purchase and check your statement before spending a large amount, assuming you’ll get 5% cash back.
Remember: It’s the retailer where you make the purchase that has to fit the category, not the purchase itself.
As Chase explains for their Kohl’s category bonus, “Kohl’s gift cards purchased at any location other than Kohl’s or Kohls.com are not eligible for 5% cash back.”
So, for another example, a movie theater gift card isn’t in the movie category if you buy it at Home Depot; it’s in the home improvement store category.
Finally, make sure you activate your bonus categories each quarter. Otherwise that 5% will revert to just 1% on most cards.
Your Turn: Do you make good use of your 5% cash-back credit cards?
Disclosure: We have a serious Taco Bell addiction around here. The affiliate links in this post help us order off the dollar menu. Thanks for your support!
Steve Gillman is the author of “101 Weird Ways to Make Money” and creator of EveryWayToMakeMoney.com. He’s been a repo-man, walking stick carver, search engine evaluator, house flipper, tram driver, process server, mock juror and roulette croupier, but of more than 100 ways he has made money, writing is his favorite (so far).