This is applicable for two cards – the Discover IT cash back as well as the Chase Freedom. While the two had somewhat clashing categories last year, this year we might get to see a bit of a difference.
Discover IT Cash-back JAN-MAR
Unlike Chase, Discover announces it’s categories for the whole year in advance. So we know exactly which category falls in each passing quarter.
So while quarters 2,3 and 4 are straight forward, the first quarter may be a bit confusing. While it does say Grocery Stores, supercenters like Walmart and HEB are NOT covered under the 5% cash-back.
If you shop at Kroger, Whole Foods, Trader Joe’s, Aldi, etc… you will benefit here. Another simple way to find out if your local store gets you the 5% cash-back is to make a small purchase once and see the posted cash-back.
Please do read the terms and conditions by discover when activating the quarter so that you may know what is not included.
By placing a limit of $1500 combined purchases in the three months, you can only get $75 in cash-back effectively.
Chase Freedom JAN-MAR
We believe Chase offers a better deal than Discover if you’re someone who drives a lot as it’s 5% back on gas or 5x points.
With a limit of $1500 combined purchases in the three months you can make a maximum of 7500 points which if redeemed at a 1:1 (point:cent) value, will get you $75. Alternatively, if you have the Sapphire Reserve card, the same 7500 can be redeemed towards travel at a 1:1.5 making it worth $112.5 and $93.75 if transferred to the Preferred.
Where this card shines is the drug store category. Places like CVS are home to gift cards for almost every place – restaurants, grocery stores, Amazon as well as Visa/Amex gift cards (which do require you to pay a small fee). Why is this good? Well imagine instead of getting 5x back on one thing, you’re able to get it on every spend – wouldn’t that be great.
If you plan it right, you can get everything using gift cards for three months or longer.
A piece of advice however, if you spend only 300 a month, we’d recommend sticking to that instead of buying $500 worth of gift cards and over extending yourselves. If you think you’ll spend that money in the future, only then should you get the higher amounts – only towards the end of the quarter.
Buying gift cards for places you are going to spend anyways is NOT manufactured spending.
While both cards have categories than enable one to buy gift cards to use elsewhere, from a cash-back point of view, Discover wins it. But if travel is your focus, we believe the Chase freedom offers a better return especially if you transfer the points to the Sapphire Reserve/Preferred.
Year one of your discover card is what will effectively get you a 10% back (match offer) so that’s $150 instead of $75. If that makes sense to you, then choose that path.
Do not overspend and plan accordingly what your game is going to be like. Spend money you have and not what you don’t.