Discover’s it®card is the company’s credit card that’s geared toward providing cashback rewards. Each month, Discover It cardholders receive 1% cash back on every purchase and 5% cashback rewards on specific purchase categories that change every few months. Discover also matches your cashback earnings in your first year as a Discover it® cardholder. You can easily manage and apply your rewards on Discover’s website or via telephone.
Unlike other providers, Discover quantifies its rewards with money as opposed to points. Discover offers a number of different ways to use the rewards. Many of the rewards seem quite fun and tempting, but how can you determine which reward will work best for you?
The reality is, if you don’t utilize your rewards, you could miss out on extra deals and perks that can range anywhere from enjoying a mini-shopping spree to paying down credit card debt. No one wants that! Let’s look at the best ways to redeem that reward money and make sure it’s working for you.
Pay Off Your Balance First
First things first: Pay off that balance! There’s a common myth that keeping yourself in a little bit of debt is better for your credit score. This has been debunked, but it lives on through word of mouth. Having as little debt as possible is always best for your credit score; experts recommend keeping it below 7% of your total credit card limits. Interest payments can also be very costly. Make sure the balance is paid off before treating yourself to any perks you’ve earned by using the card.
Discover it® offers two options that help you pay off your balance. The first is to have your rewards money applied directly to your card balance. There is also an option to have the rewards deposited into your bank account that’s linked to your online Discover account. This can help you plan to make higher regular payments later on. Or, if you earn and transfer a consistent amount regularly, you can save some money while adhering to your routine.
Utilize Seasonal 5% Cashback Deals
Discover It cardholders have the choice to opt in to the card’s 5% cashback rewards every few months. This means that, on a quarterly basis, making purchases from certain shopping categories or stores can earn you 5% cash back in rewards instead of the typical 1%. The places that offer the rewards change and usually represent the season in some way. For example, summer months often incentivize cardholders to pick up the tab at movie theaters and restaurants. October through December will often earn you 5% cash back at places like Walmart and Target to reward you for holiday shopping.
It’s a little strange that this isn’t an automatic feature of the card — you need to confirm with Discover that you want to participate in each quarter’s rewards. It’s true that opting in to 5% cashback every three months can help you stay plugged into your finances. However, if you don’t activate the 5% cashback rewards, you could miss out on a lot of future savings.
Discover typically lets folks opt into the seasonal cashback reward months in advance, but it’s also easy to forget months in advance. Discover’s 5% cashback calendar is available online, however. Knowing when the 5% cashback categories are changing over can help you plan for bigger purchases. For example, January through March of 2022 includes purchases spent on gyms. This may incentivize someone to purchase an annual gym membership as opposed to paying monthly rates because of the greater potential for savings.
Not only should you opt in, but you should also check to make sure that you filled out all the steps and you’re receiving the helpful perk. It’s easy to forget, and sometimes a page doesn’t load, so definitely double-check this periodically.
Practice Patience With Gift Card Deals
When your balance is paid off, one of the best ways to use your Discover rewards is to utilize the option to receive the cashback bonus as a gift card. This reward option has matured and developed over the years. It used to be that you could use $20 in rewards for a $25 gift card and $40 for a $50 gift card. Discover has since improved the rewards.
Today, you can purchase gift cards from over 100 different brands. Whether you’re looking for clothing, tech gadgets, dining out, home improvement supplies or other goods, there’s something for everyone. Instead of a set amount of extra dollars you get from each business, Discover adds a value varying from 5% to 20%, depending on the brand.
To really make this work for you, it pays to be patient. You can get up to 20% on a $200 gift card — meaning Discover adds $40 to the $160 dollars in points you earned! This can result in a self-care shopping spree, a great gift or savings for a rainy day. Not everyone spends enough money each month to earn this many points, though, so it might take you a few months to capitalize on this reward.
Forgo the Charitable Donation Option
The other option for using your points is to donate them to charity. From a moral standpoint, this is admirable. But if your wallet suddenly learned how to speak, it’d say that this isn’t the best decision for your personal finances, especially if you’re focusing on paying off debt. It’s up to you as the credit card holder to make the most informed decision possible.
The IRS treats credit card rewards as discounts, not income. This is great because you aren’t taxed for receiving these rewards. It also means that, unlike other charitable donations, you can’t claim them on your taxes even if you donate them to a good cause. Essentially, you’d be helping Discover meet its own charitable giving goals and erasing yourself from the act of giving. If you want to donate to charity, use the direct deposit into your account option. This can help you build up a donation that’s tax deductible, and it can help you develop a relationship with nonprofits.
The bottom line here is to check on your balance and transactions often. This will ensure you can get the most out of your Discover it®card. There are a lot of rewards offered, but it’s your call to make in the end.