You can make 3 times the rewards on common purchases with a 5% cash-back card—but there's a catch (2024)

As credit card issuers compete for your business, many cash-back rates have risen above 1%. Today, there are cards that offer a whopping 5% cash back in rotating categories, allowing savvy spenders to maximize their earnings.

Of course, there's a bit of a catch. In order to earn 5% cash back, you have to manually activate the offer each quarter, and there's a limit to how many points you can earn.

Ahead, Select breaks down how these cards work and how to maximize your rewards, plus we look at three of the most popular 5% cash-back cards out there so you can determine if one is right for your spending needs.

Subscribe to the Select Newsletter!

Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly.Sign-up here.

Each quarter, there are new bonus categories, like gas or groceries, that earn 5% cash back, up to a quarterly maximum (typically $1,500). Once you hit the cap, you earn 1% cash back on the rest of your spending.

These categories are typically pre-selected by the card issuer and released up to a year in advance via an annual cash-back calendar.

You have to activate each quarter's bonus categories in order to get the 5% cashback. This can be done online by using your card issuer's mobile app or over the phone. If you don't activate, all purchases will earn 1% cashback.

If the bonus categories are in line with your spending, it can be smart to take advantage of a 5% cash-back card. The bonus rewards you earn during those periods could outweigh what you'd get using a flat-rate card that only earns 1% to 2% cash-back year-round.

Here are three popular 5% cash-back cards and their bonus categories, to help you decide which card might be right for your lifestyle.

Discover offers four different credit cards that allow cardholders to enroll every quarter to earn 5% cash back in various categories, up to a $1,500 quarterly maximum (then 1% cash back). Consumers can choose from the following cards: Discover it® Cash Back, Discover it® Student Cash Back, NHL® Discover it® and Discover it® Balance Transfer.

Here's the Discover cash-back calendar for 2024:

• January to March (activate now):Restaurants and drug stores
• April to June (activate now): Gas Stations & Electric Vehicle Charging Stations, Home Improvement Stores, and Public Transit
• July to September: Announcing on June 1
• October to December: Announcing on September 1

If you maximize your spending in these categories, you could earn $75 cash back each quarter on top of the 1% cash back you earn in all the other categories. Bonus category purchases that exceed the $1,500 quarterly maximum, as well as all other purchases, earn unlimited 1% cash back automatically.

Cardholders who use the Chase Freedom Flex℠ earn 5% cash back on up to $1,500 across all of that quarter's categories.

Bonus categories are revealed each quarter, so there's always something new to explore. This may be a setback for consumers who like to plan out their spending, but here is what we know so far.

Here's the Chase Freedom cash-back calendar for 2024:

• January to March(activate now): Grocery stores**, fitness clubs and gym memberships and self-care and spa services
• April to June: Announcing on March 15
• July to September: Announcing on June 15
• October to December: Announcing on September 15

Bonus category purchases that exceed the $1,500 quarterly maximum, as well as all other purchases, earn 1% cash back. If you maximize your spending in these categories, you could earn $75 cash back each quarter on top of the 1% cash back you earn in all the other categories.

The U.S. Bank Cash+® Visa Signature® Card is a flexible 5% cash-back card that lets you choose two categories each quarter to earn 5% cash back on up to your first $2,000 in combined eligible purchases. This is a helpful feature for consumers who want control over the bonus categories.

You can select two of these 5% cash-back categories:

• TV, internet and streaming services
• Fast food
• Cell phone providers
• Department stores
• Home utilities
• Select clothing stores
• Electronics stores
• Sporting goods stores
• Movie theaters
• Gyms/fitness centers
• Furniture stores
• Ground transportation

You also can choose one of three categories to earn an unlimited 2% cash back: grocery stores, gas stations or restaurants. Bonus categories need to be selected every quarter, even if you want to keep the same selections.

All other purchases earn a standard 1% cash back.

If you maximize your spending in your chosen 5% rewards categories, you could potentially earn $100 cash back each quarter on top of the unlimited 2% cash back you earn on either grocery store, gas station or restaurant spending, plus 1% in all the other categories.

While a 5% cash-back card can be beneficial on its own, you can earn even more by pairing it with a flat-rate cash-back card.

For example, for everyday purchases, you could use the Citi Double Cash® Card, which earns an effective 2% cash back: unlimited 1% when you buy, plus an additional 1% when you pay for purchases. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on Citi Travel℠ portal through 12/31/24. You could also use a 5% cash-back card, like Discover it® Cash Back or Chase Freedom Flex℠, for bonus category purchases.

If you are looking to maximize rewards, a 5% cash-back card can be a great asset. Oftentimes, they have standard interest rates and no annual fee.

However, these rotating category cards aren't for everyone. Trying to optimize your usage can be a lot of work, and many people don't want the hassle.

Further, because these cards typically have spending limits on their 5% back categories, you can often earn more in total cash-back rewards with a flat-rate cash-back credit card. With these cards, all purchases earn the same amount and you don't have to worry about rotating bonus categories, activation or quarterly caps.

For example, the Discover it® credit cards offer 5% cash back on select purchases in rotating categories upon activation, up to $1,500 in combined spending each quarter (then 1%), while Select's top pick for cash-back card, the Chase Freedom Unlimited® Card, offers an unlimited 1.5% cash back on all purchases.

Pro tip: Although billed as a cash-back card, if you have another Chase-Ultimate-Rewards-earning card like theChase Sapphire Preferred Card, you can convert the cashback earned with a Freedom card intotransferrable Ultimate Rewards pointsand potentially receive more value from your rewards.

Based on our calculations, Discover it® Cash Back cardholders would earn an estimated average of $696 in cash back after the first year, while Chase Freedom Unlimited users could earn $847. The savings grow the longer you use the cards: Discover it® cardholders would earn an estimated $2,088 in cash back after five years, while Chase Freedom Unlimited 2,709 users could earn up to $2,335.

At the end of the day, the best cash-back card for you is the one that fits your spending habits and allows you to maximize desired rewards.

Catch up on CNBC Select's in-depth coverage ofpersonal finance,tech and tools,wellnessand more, and follow us onFacebook,Instagram, andTwitterto stay up to date.

Read more

Information about theNHL® Discover it® has been collected independently by Select and has not been reviewed or provided by the issuer of the cards prior to publication.

For rates and fees of the Discover it® Cash Back, click here.

For rates and fees of the Discover it® Student Cash Back, click here.

For rates and fees of the Discover it® Balance Transfer, click here.