Are credit cards that automatically reward your top spending categories a good deal?
Key takeaways
- There are some cards that allow you to automatically earn rewards in your top spending categories without opting in.
- The advantage for you is that you don’t need to put in an effort to identify certain categories to earn rewards each period.
- It’s better to use these cards as part of your broader credit card rewards strategy rather than to channel all your spending to them.
If you’re the kind of person who likes to maximize rewards but doesn’t want to put in a lot of work, a certain card trend could work to your benefit. Several credit cards now let you earn rewards in your top spending categories without requiring you to preselect them.
Consumer cards that automatically reward your top categories
Citi Custom Cash® Card
Venmo Credit Card
Chase Freedom Flex®
Business cards that automatically reward your top categories
World of Hyatt Business Credit Card
American Express® Business Gold Card
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View all rewards cardsWhat’s in it for you
The pitch is that you can spend as you normally would; the card issuers point out that there’s no need to preselect categories or jump through any special hoops. This may benefit the issuer more than it helps you, however, because your non-bonus spending often earns lackluster benefits.
Let’s say you spend $2,000 per month on the Citi Custom Cash. If at least $500 is in one of the eligible categories, it’s nice that one month you might maximize travel, and then maybe the next month it’s groceries or home improvement stores and so on. That’s a streamlined process that caters to someone with varied spending habits who doesn’t want to put in much legwork. But what about your other spending?
If you earned $25 cash back by spending $500 in one of the Custom Cash’s 5 percent categories, the other $1,500 that you spent only earned $15 (a 1 percent return). In total, you got $40 back on $2,000 in spending (an overall return of 2 percent). If you spend more than $2,000 per billing cycle on this card, you’ll come out ahead with a no-annual-fee, 2 percent cash back card such as the Citi Double Cash® Card (which technically gives 1 percent cash back when you make a purchase and another 1 percent when you pay it off).
These cards are useful as part of a broader rewards strategy
As you can see, if you use one of these cards for all your spending, you’re not getting the best bang for your buck. But if you truly want to maximize your credit card rewards, these cards can be useful as part of a broader multi-card portfolio.
You could use a 2 percent cash back card as a solid foundation and surround it with cards that emphasize categories in which you spend a lot of money. The Citi Custom Cash and the Venmo Card would be particularly well suited for some of the less offered categories — such as home improvement stores, fitness clubs, entertainment and bills and utilities — since these aren’t as common. There are many more cards to choose from that offer enhanced dining, grocery, travel and gas rewards.
Or, if you really want simplicity, a 2 percent cash back card is a solid choice. Chances are a card that gives 2 percent cash back on everything would outpace one that only offers a better return on a single category if you spend enough.
Have a question about credit cards? Email me at ted.rossman@bankrate.com and I’d be happy to help.
*Information about the Venmo Credit Card, Chase Freedom Flex® and World of Hyatt Business Credit Card has been collected independently by Bankrate. Card details have not been reviewed or approved by the issuer.
