Custom Category Credit Cards Rewards May Be the Future — But There’s a Catch

As someone who’s taken a strong interest in the world of credit card rewards in recent years, it’s definitely been an exciting few months. Things started heating up last year when several travel-focused credit cards began upping their offers and introducing limited-time perks in order to keep customers rolling in amid the halt in travel. More recently, what can only be described as a pissing contest between Chase and American Express has seen the former bring out a big ass 100,000 point offer for its Sapphire Preferred card. Finally, this week brought word of not one but two new cards from big issuers: the Wells Fargo Active Cash and the Citi Custom Cash cards. While both of these new/upcoming products have their own pros and cons, I wanted to talk about the Citi Custom Cash card’s unique-but-not-that-unique structure — one that I see catching on as issuers attempt to up their game.

Let’s start with the headline of the Custom Cash card: automatically earn 5% cashback on your top spending category each billing cycle. Sounds pretty awesome, right? Well, it is, but there are of course some limitations to this. First, the 5% earnings are limited to the first $500 in spending on that category. After that, you’ll earn a standard 1% back (you’ll earn 1% back on all other purchases as well).

Second, only a handful of spending categories are eligible to elevate to 5%. These include restaurants, gas stations, grocery stores, select streaming services, select travel, select transit, home improvement stores, fitness clubs, live entertainment, and drugstores. Granted, there are some pretty appealing categories among those choices, but there are surely some omissions as well. Nevertheless, the Custom Cash card presents an opportunity for credit card enthusiasts and newbies alike to earn a decent amount of cashback without a ton of effort or thought.

When I first read about the Citi Custom Cash card, what immediately came to mind was the Venmo Credit Card. To be sure, Venmo’s offering also wasn’t the first to come up with the idea of spending habits dictating rewards instead of the other way around, but it did make the concept a bit simpler and more flexible. With the Venmo Credit Card, customers can earn 3% back on purchases in their largest spending category each month, 2% back on the second-largest category, and 1% back on everything else. As for the restrictions, after the first year, the 3% and 2% rewards end after you reach a combined $10,000 in annual spend across these top two categories. Also, Venmo’s list of eligible spending categories is limited to dining & nightlife, travel, bills & utilities, health & beauty, grocery, gas, transportation, and entertainment.

Comparing the two products, some benefits and drawbacks to each leap out. In terms of categories, some of Venmo’s seem a bit broader — for example, “entertainment” versus “live entertainment.” Meanwhile, another obvious differentiator is that Citi’s card offers 5% back in one category while Venmo’s divides this between a 3% primary category and 2% secondary. Thus, the choice of which makes more sense and helps you earn the greatest amount of rewards will come down to preference and spending. Other than that, aside from some other random perks and definite style differences, the two cards are fairly similar, including the fact that neither charges an annual fee.

Funny enough, running the numbers, the Venmo card and Citi Custom Cash card even have the same maximum annual reward cap (outside of the unlimited 1% back, which both offer). With the Custom Cash card’s $500 per month spending limit for the 5% cashback, this perk amounts to a maximum monthly earning of $25 — or $300 per year. Meanwhile, if you used the Venmo card exclusively for purchases in one of its eligible categories, you’d earn 3% back on up to $10,000 in purchases annually after your initial uncapped year. This too works out a yearly cashback total of $300.

Come to think of it, both the Discover It card and Chase Freedom Flex card have quarterly caps of $1,500 in combined spending among their rotating 5% categories. Thus, you could potentially earn $75 per quarter from these bonuses. Times that by four quarters in a year and that gives you a total of — you guessed it (or just did the math quickly) — $300! Obviously the ability to earn up to $300 a year on a no annual fee card is still nothing to sneeze at, but it’s definitely interesting that so many issuers have made this their limit.

On the surface, I really like the idea of a credit card that can evolve with your spending habits and potentially help you maximize rewards effortlessly. And while I don’t have any of these cards yet, I could see adding one to my collection somewhere down the road — and believe that many more such cards will likely arrive in the near future. However, as the past two paragraphs point out, credit card companies have their rewards pretty dialed in. In turn, it’s hard to say how much innovation there can really be while still making a product that benefits them monetarily. I guess we’ll just have to wait and see if the current credit card wars result in a custom category card that really breaks the mold.