Gaming 5% Cashback Categories

Yesterday, I posted my quarterly update on 5% cashback categories for the more popular credit cards. In it I noted that this quarter basically all the cards were competing in the same categories (e.g. home improvement). From a business perspective this doesn’t make much sense, but as we all know credit card companies don’t always make sense. From a consumer perspective however, this causes a problem. There’s no card I can use in Q2 2011 to get 5% back on my groceries or travel or lots of other things.

What’s a credit card reward maximizer to do when this happens?

I think the answer might be gift cards. Think is the operative word here. I think that I can buy gift cards in Q1 at my grocery store that I will still get my 5% cashback on and that I will then use to buy my groceries during Q2. To test this hypothesis I bought $500 worth of grocery gift cards at my grocery store yesterday using my Chase Freedom card which is currently paying 5% back on grocery purchases. If this was counted as a grocery purchase, then I just got $25 back. And, yes the cashier asked why I was buying this many gift cards. And, yes, I was met with the same blank stare I typically get every time I try to explain some way that I’m hustling or gaming the system.

Once I get my credit card statement, I’ll do the calculations to make sure this purchase was counted as groceries. If so, this opens a whole new avenue as my grocery store sells a host of gift cards. Thus, I could simply buy gift cards for planned purchases and get a guaranteed 5% back. The potential downsides are: this purchase is not treated as a grocery purchase so I don’t get the 5% back (in which case this is a total FAIL), I have to frontload my spending which reduces the interest I can make on my $ (this is more than offset by the 5% though), and I have to be planful about my spending (always a good thing).

I will be back in a few weeks to let you know how it goes. UPDATE 4/16/11 I logged into my Chase account and looked in the Chase Blueprint section which categorizes your purchases. Sure enough the $500 grocery card purchase was categorized under groceries. I’m still not 100% sure because the reward points tend to trail the actual statements by 1-2 months according to the CSR.

Have you already done this or tried it? How did it work out? Please comment below.

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  • Andrea

    Hi Slug, could you share your experience with us? In the end, did you get 5% cash back on gift card purchases using your Chase Freedom card?

    • Andrea,

      Thanks for reminding me. The answer is muddled I’m afraid to say. I think I got the rewards, but I can’t be sure. The problem is with the way the Chase system is set up. There’s several problems. The first is that bonus points aren’t actually given to you in the same statement period that you receive the statement so you can’t align your purchases that way and say I made $500 in grocery purchases and should get an additional $20 in points because of the bonus. Further to this, there’s really no way to align them later either. You can use the Blueprint TrackIt option to show your spending by category by statement which let’s you ball park the total spending, but there’s really no way to reconcile this with your rewards. The CSR I spoke to today totally empathized my position, but there’s nothing she could do other than take it under advisement and escalate it (i.e. send it into a black hole)

      Personally, I made the switch to the AMEX Blue Cash Preferred card. It pays 6% back on groceries year round. That cashback level on groceries alone will more than offset the $75 annual fee for me. Your own results may not so definitely do the math.