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Credit Card Q&A: How Do Spending Tiers and Spending Caps Work on Rewards Cards?

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Credit Card Question: What does it mean when a rewards credit card has a spending tier or a spending cap? -Kelsey

Answer: Hi Kelsey, rewards program details can be confusing, can’t they? I think the easiest way to explain this is with an example. Let’s take a look at The Discover More Card since it has a spending tier and spending caps.

The Discover More Card offers up to 5 percent Cashback Bonus in rotating categories. But on all other purchases, you get .25 percent until your annual purchases reach $3,000. After your annual purchases total $3,000, you get bumped up to 1 percent cash back on all your purchases. This is an example of a spending tier, which in this case is $3,000.

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But you have to read the fine print carefully because with most spending tiers, there are also purchases that are excluded in the calculation toward the spending tier. With the Discover More Card, warehouse purchases and rotating category purchases are not applied to the $3,000 spending tier.

Now let’s look at the rotating categories for this card. From July through September, you get 5 percent Cashback Bonus on up to $300 in hotels, gas stations, theme parks and movies. In this case, the spending cap is $300. The spending cap limits the amount you can earn in this category to $15 (300 x .05). And the $300 you spend isn’t included in the calculation toward the $3,000 spending tier.

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Most credit cards that offer rotating categories have spending caps in place. Again, you have to read the fine print and the program details because sometimes the caps differ by category.

With travel rewards credit cards, spending tiers are sometimes the gateway to a more elite level of benefits. For instance, the PenFed Premium Travel Rewards American Express Card offers membership in Priority Pass, which gives access to over 600 airport lounges, to cardholders who spend $15,000 annually.

Really, the important thing is to read the fine print so you know if there are spending tiers or caps and, if so, what the exclusions are. If you know the rules, you can maximize your rewards.

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