Discover already has one of the more popular credit cards on the market, but that’s not stopping the company from releasing another cash back credit card into the fray. How does one maximize the cash back potential of this new card?
Discover is now offering the Discover it® chrome card, which has no annual fee and offers 2% cash back at gas stations and restaurants on the first combined $1,000 spent in the two categories per quarter — no sign-ups needed. All other purchases earn 1% cash back.
How Much Cash Back?
Over the course of the year, the maximum amount of cash back that you’ll earn from the two bonus categories is $80.
That amount of bonus cash back seems inferior to the regular Discover it® card, which offers 5% cash back on rotating categories on up to $1,500 spent in those categories per quarter after you sign up. For instance, the Discover it® card is offering 5% cash back for online shopping and department store purchases on up to $1,500 — October through December 2014 when you sign up. If you maximized that cash back period, you’d get $75 bonus cash back during each of those quarters.
The catch is that there’s no guarantee that the Discover it® will continue to offer the gas and restaurant bonus categories in the future. (Given that competing credit cards, including Chase Freedom® and Citi Dividend, often offer gas and dining as bonus categories, it is likely that Discover it® will continue to have them too.)
Furthermore, it is a tall order to spend $1,500 at just gas stations or restaurants in 3 months’ time.
According to the Bureau of Labor Statistics, the average consumer expenditure on gasoline and food-away-from-home is $2,700 each per year.
So, it won’t be realistic that you’d earn the maximum $75 in bonus cash back on those categories within a quarter.
Other than the cash back structure, the new Discover it® chrome card carries all of the same features as the regular Discover it® card. Some of the noteworthy perks include no penalty APR, a free FICO® Credit Score online and on monthly statements and no foreign transaction fees.
With the cash back format being the differentiator between the two cards, you would have to look at how you spend in order to determine the better card for you. If you are looking for a general credit card for shopping, the Discover it® card is probably the right choice for you — you’d probably earn more in cash back through the year on 5% cash back categories.
If you are looking for a credit card to use mostly on gas and restaurants, go with the Discover it® chrome card.
(There is a student version of this card.)