How to Optimize Discover’s 5% Cash Back at Target, Amazon

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If you're a Target devotee or an Amazon loyalist, your Discover card can be your ticket to earn a nice chunk of cash back this quarter, even while you're busy buying holiday gifts for others.

From October through December 2017, several Discover cards — including the Discover it® Cash Back credit card — are offering 5% cash back on up to $1,500 in combined spending at Target and Amazon.com. Cardholders must activate those categories to earn the 5% cash back, and all other purchases earn 1% cash back.

If you want to take advantage of this bonus offer, here's how to optimize rewards.

Steps and strategies

• Set Discover card as your default payment method. If you've saved information for multiple cards on Amazon.com and Target.com, it can be easy to overlook which one is being used during checkout. When shopping online, set the Discover card as your default payment method so that you don’t miss out on any rewards.

• Take care of holiday shopping. Whether it's Halloween candy and costumes or Christmas and Hanukkah gifts, there'll be plenty of chances to earn cash back on holiday shopping in the fourth quarter of 2017, so do as much of your spending as possible at Target stores, Target.com and Amazon.com. Black Friday and Cyber Monday, two days when merchants offer discounts, fall in this quarter, too, so take advantage of online and in-store deals that will be available. Compare Target and Amazon to get the best price on items.

• Complement your card use. Say, for example, you have the Discover it® Cash Back credit card and the Target REDcard. The latter already offers a 5% discount at Target’s stores and website. In that case, you could save the Discover card for Amazon.com and spend the full $1,500 there to get cash back. Or perhaps you have the Discover it® Student Cash Back and the Amazon Prime Rewards Visa Signature Card. The latter already gives 5% back at Amazon, so you could do all your Discover spending at Target and get both bonuses. Once you hit your $1,500 cap with Discover and revert to 1% cash back on other purchases, you could switch to a flat-rate cash-back card with a higher ongoing rewards rate.

• Take advantage of free shipping with Amazon Prime. Amazon Prime is the retailer's $99-per-year (or $10.99-per-month) subscription service that includes free two-day shipping, access to Amazon streaming services and more. If you're a Prime member, consider using Amazon to buy items you don't want to drive to the store for. And if you don't have Prime? Perhaps the holiday quarter is a good time to try it. Put the subscription on your eligible Discover card and it'll count toward the 5% cash-back bonus.

• Stock up on gift cards. Gift cards also count toward the Discover bonus as long as they’re bought through Target and Amazon (it doesn’t count if you purchase an Amazon gift card at your local grocery store). So even if you don't shop much at either of these two giant merchants, you can buy other retailers' gift cards at both places and you'll also get the cash back on the front end.

• Keep tabs on your bonus spending through Discover’s online tracker. When you log into your Discover account online, you can review a list of the qualifying purchases made to make sure you’re earning the maximum rewards. Likewise, you can see when you're approaching your bonus cap.

• First-time cardholders can get even more cash back. Discover cards also offer a special promotion when you sign up, allowing you to automatically get a dollar-for-dollar match of all the cash back or miles earned at the end of your first year. As Discover puts it: INTRO OFFER: Unlimited Cashback Match for all new cardmembers – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300. It means that if you’re a new cardholder, you can earn a total of 10% cash back on your Amazon and Target spending after your 5% back is matched at the end of the year.

Potential pitfalls to earning bonus

• Digital wallet purchases might not count. If all your credit cards are saved to your mobile device’s digital wallet, you might want to think twice about using it to earn your bonus points this quarter. According to Discover, eligibility for the 5% cash back depends on how the wallet service codes its purchases. A transaction would earn 5% cash back only if it's coded as belonging to the underlying merchant so that Discover is made aware that it’s a Target or Amazon purchase.

• Third-party vendors might not count either. If you want to use your Discover card to pick up a Starbucks coffee inside Target, the purchase might not count toward your bonus. Discover doesn’t have control over how third-party merchants set up their agreements with the chain. The availability for the 5% cash-back bonus will depend on how the merchant is registered by Target.