The Citi Double Cash vs The Discover it

The Citi Double Cash and the Discover it are two of my top-rated cash back cards  for 2016. They both offer different perks and different ways to earn cash back and rank among the best earners for putting money back into your wallet. Here’s a comparison of the Citi Double Cash vs the Discover it with a winner crowned at the end.  

Basic card features

Citi Double Cash

• No Annual Fee
• 13.24% to 23.24% APR, based on your creditworthiness.
• 0% introductory APR for 18 months from date of first balance transfer when transfers are completed within 4 months from date of account opening. After that, your APR will be 13.24% to 23.24%, based on your creditworthiness. 
• Balance transfer fee is either $5 or 3% of the amount of each transfer, whichever is greater.
• Foreign transaction fee is 3%
• No late fee for 1st missed payment

Discover it®

• No Annual Fee
• 0% Intro APR for 12 months on purchases. After the intro period, then 11.24% to 23.24% Standard Variable Purchase APR applies.
• 0% Intro APR for 12 months on balance transfers. After the intro period, then 11.24% to 23.24% Standard Variable Purchase APR applies.
• Balance transfer fee is 3% of the amount transferred.
• No late fee for 1st missed payment

The Discover it also has a few additional benefits that you won’t find with the Citi Double Cash, such as:

• Free FICO score
• No foreign transaction fees
• 100% U.S.-based customer service available day or night

The 0% Intro APR that the Discover it makes the Discover it a much more appealing option for many consumers who think they may have some large purchases to put on their card or who think they might want to carry a balance within the first year. The APR on balance transfers with the Citi Double Cash is a little more generous at 18 months, but overall I think the Discover it offers better features with its 0% intro APR, no foreign transaction fees, and free FICO score.

Earning Rates 

These two cards have very different earning rates.

Citi Double Cash

• Earns 1X on all purchases and another 1X on those payments when your monthly bill is paid on time. This amounts to a 2% return.
• No sign-up bonus

Discover it®

• Earns 5X on rotating bonus categories up to $1,500 per quarter.
• Cashback Match^TM: After the first 12 consecutive billing periods that your new account is open, Discover will match all of the cash back rewards you’ve earned.

Since these earning rates are so different, it’s a good idea to run calculations to see which card will eventually earn you more cash back based on your spending. If you take a look at the Discover it bonus categories and realize that you don’t spend much at all on the 5X categories, the Citi Double Cash will likely net you better earnings. However, if you utilize some of the bonus categories to a certain degree, then the answer to which card is better for you will likely depend on your spending level.

See the comparison done below to find out which card is the better earner based on spending habits over time.

Pure cash back cards

Neither of these card earn points that can be transferred out to travel partners. This makes the comparison between these cards much easier because you don’t have to factor in increased value from travel redemptions. 

Ways to redeem cash back

Citi Double Cash 

As soon as the cash rewards balance totals $25 or more, you may redeem your cash rewards. You can choose to redeem your cash rewards as follows:

• Request a check for at least $25 up to the total cash rewards balance at the time you redeem;
• Redeem for a statement credit to your Card Account for at least $25 up to the total cash rewards balance at the time you redeem;
• Redeem for a gift card in set denominations from the available inventory.
• Redeem for a credit to your linked Citi savings or checking account or to a checking account from which you have paid a Citi Credit Card bill at least two times.

Discover it®

You may redeem your Cashback Bonus for:

• Gift cards or instant eCertificates —starting at $20
• Charitable donation to select charities—starting at a penny
• Credit to your Account—starting at a penny
• Electronic deposit into any account you designate—starting at a penny
• Pay with Cashback Bonus at select online retailers—starting at a penny

Discover has one of the most flexible cash redemption policies allowing you redeem starting at just a penny so it’s not a huge knock against Citi that they aren’t as generous. It’s just important to note the $25 requirement for Citi and note that you’ll have to make at least two bill pays from an outside bank account to a Citi credit card before you can redeem cash back into one of those accounts.  

Comparing the earning potential 

Because the Discover it earns 5X up to a certain limit on rotating bonus categories, you need to think about how much you would spend on any of these given bonus categories throughout the year in order to gauge which card would maximize your earnings.

Ask yourself the following question:

Can I spend $6,000 annually in the following ways:

• $1,500: Gas and ground transportation
• $1,500: Movies and restaurants
• $1,500: Amazon.com/home impreovement stores/department stores
• $1,500: Amazon.com

Maxing out $1,500 in quarterly spend on purchases like movies and restaurants may not be realistic for many people and so the average consumer may struggle max-out all of the bonus categories for the Discover it. 

Thus, I’m going to compare the two cards based on spending habits that would either 1) max out the bonus categories or 2) halfway max out the bonus categories. To provide more meaningful insight, I’m going to compare the cards over different time periods: 1) 1 year; 2) 2 years; and 3) 5 years. 

I. FIRST YEAR COMPARISON

(The first year comparison will factor in Cashback Match (“CM”) for the Discover it)

1. Maxing out Discover it bonus categories

If you spend $10,000 perfectly maxing out rotating bonus categories.

• Citi Double Cash: $200
• Discover it: $340 + (CM $340) = $680

If you spend $25,000 perfectly maxing out rotating bonus categories.

• Citi Double Cash: $500
• Discover it: $490 + (CM $490) = $980

2. Halfway maxing out Discover it bonus categories

If you spend $10,000 perfectly halfway maxing out rotating bonus categories.

• Citi Double Cash: $200
• Discover it: $220 + (CM $220) = $440

If you spend $25,000 perfectly halfway maxing out rotating bonus categories.

• Citi Double Cash: $500
• Discover it:  $370 + (CM $370) =$740

Findings after first year of spending:

Due to the first year Cashback Match by Discover, it’s basically impossible for the Citi Double Cash to compete with the Discover it for first year earning when the 5X categories are maxed out. As you can see, the race is not even close. Thus, if you’re focused on short-term gains, the Discover it will net you more earnings and will be your best bet. (Just remember that you’ll have to wait 12 months to receive your double cash back from Discover.)

II. SECOND YEAR COMPARISON

A. Maxing out Discover it bonus categories

If you spend $10,000 perfectly maxing out rotating bonus categories.

• Citi Double Cash: $200 + $200 = $400
• Discover it: $680 + $340  = $1020

If you spend $25,000 perfectly maxing out rotating bonus categories.

• Citi Double Cash: $500 +$500 = $1,000
• Discover it: $980 + 490 = $1,470

2. Halfway maxing out Discover it bonus categories

If you spend $10,000 perfectly halfway maxing out rotating bonus categories.

• Citi Double Cash: $200 + $200 = $400
• Discover it: $440 + $220  = $660

If you spend $25,000 perfectly halfway maxing out rotating bonus categories.

• Citi Double Cash: $500 +$500 = $1,000
• Discover it: $740 + $370 = $1,110

Findings after second year of spending:

Again, the Cashback Match from year 1 is simply too good for the Citi Double Cash to catch up to the Discover it in earnings. So even after two years, the Discover it is the better earner.

III. FIFTH YEAR COMPARISON

A. Maxing out Discover it bonus categories

If you spend $10,000 perfectly maxing out rotating bonus categories.

• Citi Double Cash: $200 X 5 = $1,000
• Discover it: $1020 + ($340 X 3) = $2,040

If you spend $25,000 perfectly maxing out rotating bonus categories.

• Citi Double Cash: $500 X 5 = $2,500
• Discover it: $1,470 + (490 X 3) = $2,940

2. Halfway maxing out Discover it bonus categories

If you spend $10,000 perfectly halfway maxing out rotating bonus categories.

• Citi Double Cash: $400 + ($200 X 3) = $1,000
• Discover it: $660 + ($220 X 3) = $1,320

If you spend $25,000 perfectly halfway maxing out rotating bonus categories.

• Citi Double Cash: $1,000 + ($500 X 3) = $2,500
• Discover it: $1,110 + ($370 X 3) = $2,220

Findings after fifth year of spending:

It takes about five years, but in the long-run the Citi Double Cash will actually net you more cash back if you spend around $25,000 a year and only halfway max out the rotating bonus categories. However, if you max out your quarterly spending with the Discover it (or even come close) you will likely still be better off with the Discover card.   

Don’t forget about Discover Deals

The Discover it also has access to Discover Deals, which is a shopping portal where you can earn even more cash back savings when purchasing items from online retailers. The beauty of getting the Discover it is that Discover will also double the cash back earned in the first year from the shopping portal! And those points are in addition to what you’ll earn on the card. So if you hit a 5X category and found a great deal on Discover Deals like 5X at a place like Home Depot, you could earn 20X on those purchases!

Read more about that amazing shopping portal here.

Final Word

Overall, I like that the Discover it has better benefits like 0% intro APR, no foreign transaction fees, and a free FICO score available. But what I really like is that the earning potential is better almost all the way across the board versus the Citi Double Cash. If you’re likely to put spend on the 5% bonus categories of the Discover it, I think it’s definitely the better card for you.