November 1 is a special day in the credit card world. That’s because it is the day that Discover announces the next year’s categories for the Discover It Card. Conversely, Chase reveals the Freedom Flex’s next category two weeks before the next quarter starts. The beauty of Discover revealing their categories so early is that cardholders can plan for the next year when to use their credit cards. This is vital for optimally earning points and miles.
The Discover It earns 5% cash back on quarterly rotating categories and just 1% on non-bonus spend. It’s not a travel card per se. But you can use the cash back for travel expenses that cannot be paid for with points or miles. The Discover It is also my oldest active card and one that I use when the category works for my spend.
What’s Going On?
The 2021 categories for the Discover It are as follows:
- 1st Quarter: Grocery Stores, Walgreens, & CVS
- 2nd Quarter: Gas Stations, Wholesale Clubs, & select streaming services
- 3rd Quarter: Restaurants & Pay Pal
- 4th Quarter: Amazon.com, Walmart.com, & Target.com purchases
The current categories are Amazon.com, Walmart.com, and Target.com purchases. In-store purchases at Target and Walmart do not count.
Discover’s categories for 2021 are repeats of 2020 all year long. This is underwhelming because it appears that executives did not get creative, but lazy. Discover did not add any new categories, nor their their replace any old ones.
Discover is starting the year off with Grocery Stores, Walgreens, and CVS Pharmacy categories. The Grocery Store category is great because earning 5% cash back rivals some of the better cards from American Express for no annual fee. But the American Express Gold Card and the Blue Cash Preferred earn more than the Discover It all year long for groceries. This is also an excellent category because many people are eating at home more due to the COVID-19 pandemic.
Furthermore, Walgreens and CVS won’t generate as much spend for a lot of people. But having them for the first quarter could be nice to increase cash back earnings on pharmacy purchases.
Moreover, Discover switches to three categories led by Gas Stations for the second quarter. I won’t be using this category because I get my gas at Costco, which only accepts Visa. That also eliminates the Wholesale Clubs category for me. However, a lot of people shop at Sam’s Club and other wholesale clubs that accept Discover. Earning 5% there will be bountiful.
The select streaming services category replaces 2020’s Uber and Lyft categories. Discover’s list of streaming services is extensive, so earning additional cash back should be easy. Streaming services is also an excellent category for millennial and Generation Z cardholders. This is because streaming services are a common expense among these generations.
Next, Discover moves onto Restaurants and Pay Pal for the third quarter. Both categories are repeats of 2020’s categories. For me, 5% cash back on Dining is not as valuable as 3x Chase Ultimate Rewards (UR) points that I can earn on the Chase Freedom Unlimited.
Pay Pal is an easy way for people to send money to others online. For some cardholders, using the Discover It for Pay Pal expenses is an easy way to earn 5% cash back next year.
Finally, Discover repeats the fourth quarter of 2020 with a trio of online categories. This category is useless for me because I prefer to shop at a brick and mortar store. But it’s a huge category for many because of holiday shopping. Therefore, there is no reason to discount it.
Furthermore, this category is an excellent choice for many because of the COVID-19 pandemic. Online shopping is set to explode this holiday season as more people are staying home than ever. And next holiday season might be even bigger regardless of what happens with the pandemic.
2021 is going to be another 2020 for Discover It cardholders. Now is the time to think about if the categories align with your current spending habits and lineup of cards.
Plus, revealing categories now gives Discover a first-mover advantage against Chase. They had the time to pick the categories and control the 5% card niche a month and a half before Chase. However, Chase can select the Freedom’s categories based on what Discover has revealed today. Chase can take back the upper hand by knowing what not to pick. They have the option to go a different route or compete with Discover by choosing the same categories. Chase has gone both ways in the past.
One of the purposes of this post is to serve as a reminder to register for Discover’s categories. You can register for the current (4th Quarter 2020) category until December 15, 2020. And you can register for the next (1st Quarter 2021) category starting today. Use the link below to register for both categories.