Which rewards card to use where: categories, rotating bonuses and caps

A wallet with three rewards cards has a best answer for every purchase, and it changes during the year. How the earning rules work and a simple way to stop leaving rewards behind.

Money · Updated 5 October 2026 · 4 minute read

Rewards cards are designed so that no single card is best everywhere. One pays more at supermarkets, another on travel, a third in categories that change every three months. Someone carrying three or four of them has a best choice for every purchase, and working it out at the till is more arithmetic than anyone wants to do. The rules are simple once they are laid out.

The three kinds of earning rate

• A flat rate. The same return on everything, commonly 1.5 or 2 percent. This is the card for any purchase that nothing else rewards better.
• Fixed bonus categories. A higher rate, often 3 to 6 percent, on a set list such as groceries, dining, fuel or travel, and a base rate of 1 percent on the rest.
• Rotating categories. A high rate, often 5 percent, on categories that change each quarter, and usually only after you switch the bonus on for that quarter. Forgetting to activate it is the most common way to earn 1 percent while expecting 5.

Caps: where a good rate quietly ends

Most bonus rates apply only up to a spending limit. A rotating 5 percent category is commonly capped at $1,500 of purchases a quarter, and some grocery bonuses stop after a set amount each year. After the cap the card drops to its base rate, and nothing tells you at the point of sale.

That makes a card's best use depend on the date. A grocery card that was the right choice in February can be the wrong one in October, once its yearly cap is spent and a 2 percent flat card has overtaken it. Knowing roughly how much of each cap remains is the difference between a rule of thumb and the right answer.

The category is decided by the merchant, not the purchase

Every business that takes cards is assigned a merchant category code by its payment processor, and the card issuer pays the bonus according to that code. What you bought does not enter into it. This produces a few well-known surprises:

• Groceries bought at a warehouse club or a large general retailer usually do not count as supermarket spending.
• A restaurant inside a hotel may code as lodging, and a café inside a bookshop as a bookshop.
• Fuel bought at a supermarket's pumps may code as the supermarket, or may not.
• Paying through a third-party app or a digital wallet can change the code that the issuer sees.

When a purchase earns less than you expected, the code is nearly always why. Your statement shows how each merchant was classified, which is worth a glance for the places you shop every week.

Points are not always worth a cent

Cash back is easy to compare: 3 percent is 3 percent. Points and miles need one more step, because their value depends on how they are spent. The same point might be worth half a cent as a statement credit, one cent against travel booked through the issuer, and more when moved to an airline or hotel programme for the right booking. To compare cards fairly, decide what you will really do with the points and use that value. Three points per dollar that you will redeem at half a cent each is 1.5 percent, and a flat 2 percent card beats it.

Do annual fees pay for themselves?

A fee is worth paying only if the extra rewards exceed it. The sum is short. Take what you spend in the card's bonus category in a year, multiply by the difference between its rate and the best free alternative, and compare the result with the fee. A card paying 6 percent on groceries against a free card paying 3 percent earns an extra $30 for every $1,000. With a $95 fee it needs a little over $3,000 of grocery spending a year to break even, and it pays only on spending below its cap.

A system that takes a minute

1. Write down each card's rates and caps once. A note on your phone is enough: card, category, rate, cap, and the date the cap resets.
2. Set a reminder for the first day of each quarter to activate rotating categories and update the note.
3. Assign a default card to each place you shop often. Most spending goes to a handful of merchants, so a handful of decisions covers most of the year.
4. Use the flat-rate card for everything else.

The rule that outranks all the others

Every figure above assumes the balance is paid in full each month. Interest on a carried balance runs at many times the best rewards rate, so a single month of interest can cancel a year of careful card choice. Rewards are a discount on spending you would have done anyway. If a bonus is the reason for a purchase, the card is winning and you are not.