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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