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Discover offers the chance to earn up to 5% cash back on everyday spending categories with two of its credit cards: the Discover it® Cash Back and Discover it® Student Cash Back. That's a generous rewards rate, although it comes with a few caveats: Bonus categories rotate quarterly and must be activated, and there's a cap on earnings. When managed effectively, bonus categories allow you to rack up lots of rewards in several different categories throughout the year.
The card issuer recently announced its bonus categories for 2021, giving prospective new cardholders the chance to determine if a Discover card is the right choice for them.
What Are Rotating Rewards?
Most rewards credit cards offer a flat rewards rate on everything you purchase or a tiered-rewards system that allows you to earn bonus rewards on certain fixed categories and a lower rewards rate on everything else.
Rotating-rewards credit cards, on the other hand, offer bonus rewards on select categories that change every quarter. There are only a few major credit cards that offer rotating rewards, including the Discover it® Cash Back, Discover it® Student Cash Back and Chase Freedom FlexSM.
Recently, Discover unveiled the full list of bonus categories for all of 2021. With both the Discover it® Cash Back and Discover it® Student Cash Back, you'll receive 5% back on up to $1,500 spent in purchases on these rotating categories. All other purchases will net you 1% cash back.
Keep in mind, though, that you have to activate your promotion each quarter to take advantage of it, which you can do through your online account or the Discover mobile app. If you get email reminders, you can even just click on the button in the email.
Additionally, for new cardholders, Discover will match all the cash back you earn during your first year with the card. This cash back match applies to all rewards earnings, whether it's from the 5% bonus categories or the 1% cash back rate that applies to everything else.
What Are Discover's 2021 Bonus Categories?
For 2021, Discover is offering bonus rewards on the following categories for cardholders who activate:
- January — March: Grocery stores, Walgreens and CVS
- April — June: Gas stations, wholesale clubs and select streaming services
- July — September: Restaurants and PayPal
- October — December: Amazon.com, Walmart.com and Target.com
Again, it's important to note that your bonus rewards on these categories aren't unlimited. You'll earn the higher rate on just the first $1,500 in combined purchases across all the categories each quarter. This means that you can earn up to $75 each quarter in bonus rewards, not including the first-year match. Once you reach the $1,500 spending limit, bonus rewards category spending will accrue cash back at the base 1% rate.
Which Card Is Right for You?
The Discover it® Cash Back and the Discover it® Student Cash Back both offer the same rewards program, so picking the right card for you depends on whether you're a college student.
If you are a student, you can choose between either, but might have an easier time getting approved for the student card. If you're not a college student, your only option is the Discover it® Cash Back.
With both cards, you'll receive an introductory 0% APR promotion on purchases, though it's much shorter with the student credit card (14 months with the Discover it® Cash Back vs. 6 months with the Discover it® Student Cash Back). After the end of the introductory 0% APR period, your interest rate will climb to a variable 11.99% - 22.99% APR with the Discover it® Cash Back and a 12.99% - 21.99% variable APR with the student version of the card.
Also, the student card will give you a $20 statement credit for each year that your GPA is higher than 3.0, for up to five years total.
As with any financial product, it's important to consider multiple credit cards and compare them side by side to choose the right fit for you.
How to Maximize Your Rewards With Rotating Categories
As with tiered-rewards credit cards, rotating-rewards cards typically offer just 1% back on your non-bonus spending, which is a mediocre return.
During your first year with your Discover card, however, the downside of this lower rewards rate is dulled thanks to the cash back match at the end of your first year with the card. But after that, it might be a good idea to pair your rotating-rewards Discover card with another card that offers a high base rewards rate.
For example, you could use your Discover card for its bonus categories and the Citi® Double Cash Card - 18 month BT offer for everything else—the Citi card, from our partner, offers a flat 2% cash back on every purchase, with 1% cash back accruing when you make a purchase and the other 1% earned as you pay it off.
With this approach, you can take advantage of the bonus opportunities on your Discover card without leaving money on the table with other purchases.
Check Your Credit Before You Apply
Before you apply for any credit card, it's important to check your credit score to determine if you have a good chance of getting approved.
The Discover it® Cash Back is designed for consumers with at least good credit, while with the Discover it® Student Cash Back, you may be able to get approved with fair credit or better. If you can't qualify for either card, you may consider applying for the Discover it® Secured card. This secured card is easier to qualify for and even earns rewards, but you'll have to make a security deposit when you open the account. If you manage your account well and make all your payments on time, Discover may transition you to an unsecured card.
If your credit score isn't quite where it needs to be, take some steps to improve your credit before you apply for a card. This process can take some time, but it can be worth it to take advantage of better rewards opportunities.