Could This Cash Back Card Dethrone the American Express Blue Cash Preferred for Best Grocery Card?

If I told you there was a credit card offering a whopping 6% cash back on any one of six common spending categories, including dining and travel, would you think it’s one of the best cash back cards to consider applying for this summer? As a credit card expert who’s covered this topic for years, I would.

The Bank of America Customized Cash Rewards credit card is the latest addition to the list of top rewards credit cards, thanks to a new offer. In their first year, new cardholders can earn 6% back on purchases in one spending category of their choice from six available options.

What’s the catch? A few caveats make this card less lucrative than it seems, and it might not be the right card for everyone. Here is what you need to know.

Everything you need to know about the new offer

The Bank of America Customized Cash Rewards now earns double cash back in one category of your choosing for the first year. That means 6% cash back in the choice category instead of 3% cash back on the first $2,500 (in combined purchases each quarter in the choice category, and at grocery stores and wholesale clubs, then earn unlimited 1% thereafter).

There is no end date for this offer for new cardholders. You can choose one of these options to be your choice category:

• Travel
• Dining
• Drug stores
• Home improvement and furnishings
• Gas and electric vehicle charging stations
• Online shopping (including cable, internet, phone plans, streaming)

You can switch your category once a month through online or mobile banking. If you don’t switch it, your selection from the previous month will carry over. You’ll also earn 2% back at grocery stores and wholesale clubs, and 1% back on all other purchases.

There is a $2,500 combined quarterly spending cap for the bonus rewards in the choice category and 2% categories, after which you’ll earn 1% back on those purchases. In addition to the boosted first-year cash back rates, new cardholders can earn a $200 welcome bonus after spending $1,000 in purchases in the first 90 days after opening the credit card.

This new offer looks really strong…

To understand why the new Customized Cash Rewards offer is so good, you need to understand the cash-back landscape.

Flat-rate cards, like the Wells Fargo Active Cash Card, tend to offer 2% back on all purchases. Tiered rewards cards, like the Blue Cash Everyday® Card from American Express, typically offers 3-5% back on a few fixed categories and 1% back on everything else. Rotating rewards cards, such as the Chase Freedom Flex, usually offer 5% back on one or two rotating categories, up to a quarterly maximum, which change throughout the year at the issuer’s discretion, and 1% back on everything else.

With this new offer, Customized Cash Rewards offer 6% back in your choice category (plus 2% back at grocery stores and wholesale clubs) for the first year. More importantly, you can choose your 6% category and change it once per month.

That means both higher rewards and more flexibility than most competitors. The quarterly spending cap does limit rewards beyond a certain point, but that’s relatively common among no-annual-fee cash back cards with high category bonuses.

Though maximizing rewards requires some careful planning (more on that later), this new offer makes Customized Cash Rewards one of the best cards for anyone whose top spending categories change throughout the year.

…but there are some caveats.

Before you pounce on this new credit card offer, be sure to consider these caveats.

Bonus rewards are only for the first year with a spending cap

The biggest weakness of Customized Cash Rewards is the $2,500 quarterly spending cap on the choice and 2% categories, limiting rewards for big spenders. (To be clear, big spenders can still make great use of this card for their first $2,500 of spending. They’ll just want to use a different card afterwards.)

The second issue is that after the first year, the reward rates revert back to the baseline:

• 3% cash back on the choice category
• 2% back at grocery stores or wholesale clubs
• 1% cash back on all other types of purchases

While those are still a competitive rewards rates for a no-annual-fee card, they won’t be top of the line for some choice categories.

You have to time spending carefully to maximize rewards

One important thing to note is the Customized Cash Rewards quarterly spending cap is shared among the 3% and 2% categories, and is calculated based on the chronological order of your transactions, so improper timing can reduce your rewards. With the 3% choice category rewards rate upped to 6% for the first year, the difference is even starker.

For instance, say this quarter you plan to spend $1,000 on groceries each month, plus another $1,000 on online shopping (your choice category) at the end of the quarter. If you use your card as normal, charging the $3,000 in groceries throughout the three months and finally the $1,000 in online shopping, this is what your rewards would look like:

By contrast, if you made the online shopping purchase first, you would’ve earned $105, as you would have benefited from the 6% rewards rate on that purchase before those grocery purchases ate up your quarterly spending quota. A difference of a few dozen dollars isn’t the end of the world, but with some extra planning, you can maximize rewards with Customized Cash.

Does the first year double cash back stack with the Preferred Rewards program?

The Bank of America Preferred Rewards program offers up to a 75% bonus on its credit card rewards for eligible customers who maintain a certain balance in a Bank of America banking or Merrill investment account. The Preferred Rewards bonus will apply to the base 3% choice category cash back rate, but not the additional 3% from the first year bonus, according to a Bank of America representative.

So someone in the highest tier of the Preferred Rewards program could potentially earn a total of 8.25% cash back on their choice category purchases during the first year subject to the quarterly spending cap: 5.25% from the base rewards and an additional 3% from the first year bonus.

Remember not to overspend for the sake of earning rewards

Several choice category options — like travel, online shopping, and home improvement and furnishings — lend themselves well to large purchases. If you’re already planning on making those types of purchases (and have budgeted for them), this card is a great option to earn extra cash back on those expenses. But don’t let the rewards push you into making purchases that you otherwise wouldn’t have, or ones that are out of your budget.

While this card does have a 0% introductory APR offer for 15 billing cycles on purchases and balance transfers (18.24% to 28.24% variable APR thereafter), it’s still not a smart idea to take on credit card debt for discretionary spending. 6% cash back might seem like a lot of rewards, but it’s nowhere near the interest you’ll pay from carrying a balance month to month at the regular APR.

Should you get the Customized Cash Card with the new offer?

As a credit card expert, I wouldn’t hesitate to recommend this card to readers as well as my friends whose needs and spending habits fit its profile. You should probably pick up this card if all of the following apply to you:

• You spend a lot in one or more of the choice categories.
• You want a new cash back card and don’t already have the Customized Cash.
• Your quarterly spending in the choice and 2% categories is below $2,500 or you switch to a different card once you hit that cap.

That said, it’s not for everyone, including myself. I personally prefer the travel rewards from my trusty Chase Sapphire Preferred Card over cash back rewards, since I value the flexibility of transferable points more than a higher base rewards rate. If you’re in the same camp, consider a dedicated travel card instead.

If you don’t spend a lot in any of the choice categories, you’ll be better off with another card that rewards you where you spend the most. Although this card does offer 2% back at grocery stores and wholesale clubs, there are more rewarding cards for groceries. And if you spend a lot and only want to use one card for everything, a 2% unlimited cash back card might be your best option.