You've probably seen the marketing emails or the little notification in your app. It's that time again where the "big" categories flip. Honestly, keeping track of discover rewards this quarter feels like a part-time job if you’re trying to squeeze every last cent out of your spending. Most people just click "activate" and hope for the best, but that’s basically leaving money on the table. If you aren't tactical about where you're swiping, you're just getting the standard 1%, which, let's be real, is pretty pathetic in an economy where a gallon of milk costs as much as a small car.
For Q1 2026 (January through March), Discover has stuck to a script that feels familiar but carries some specific nuances you need to navigate. We're looking at Restaurants and Drugstores.
It sounds simple. You eat, you pay, you get 5% back. But there are weird exclusions and "gotchas" that always trip people up. Like, does a coffee shop count? What about a pharmacy inside a grocery store? It gets messy fast.
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The Reality of the 5% Restaurant Category
Restaurants are the heavy hitter here. This includes your standard sit-down spots, fast food joints, and even some cafes. The cool thing about Discover’s definition is that it’s generally pretty broad. If the merchant's category code (MCC) says "eating place," you’re usually golden.
But here’s the kicker.
Third-party delivery apps like DoorDash, UberEats, and Grubhub usually count, but only if the transaction is processed correctly. I’ve seen cases where a local mom-and-pop shop uses a weird payment processor that registers as "Professional Services" or "General Retail." In those cases, you’re stuck with 1%. It’s frustrating.
You’ve also got the "Wholesale Club" problem. If you’re grabbing a slice of pizza at the Costco food court or a hot dog at Sam's Club, don't expect that 5% bonus. Those transactions almost always code as "Wholesale Clubs," which is a completely different category. It sucks, but that’s the game.
What Most People Get Wrong About Drugstores
The second half of discover rewards this quarter is drugstores. This is where the real strategy happens. We aren't just talking about buying a bottle of Advil or some cough drops.
Major chains like CVS and Walgreens are the obvious targets. They sell way more than just medicine. You can buy groceries, electronics, and—this is the big one—gift cards. Now, technically, Discover's terms and conditions often have language about "cash equivalents," but for years, buying a $50 gift card for Netflix or Amazon at a CVS has generally triggered the 5% back.
Think about that for a second.
If you know you’re going to spend $200 at Amazon next month, buying those gift cards at a drugstore right now locks in that 5% return. It’s a workaround that savvy churners use to bypass the spending limits or category restrictions.
However, do not try this at a pharmacy located inside a Target or a grocery store. If you go to the CVS pharmacy counter inside a Target, that transaction is almost certainly going to code as "Target" or "Discount Store." You will get 1%. You have to go to the standalone drugstore to make this work.
The $1,500 Ceiling and Why It Matters
Discover isn't just handing out unlimited money. There is a cap. You get 5% on up to $1,500 in combined purchases for the quarter. Once you hit that $1,500 limit, everything drops back down to the standard 1%.
If you max it out, you’re looking at $75 in cash back. It’s not life-changing, but it’s a free dinner or a few tanks of gas.
- Activation is mandatory. You can't just spend and expect the money to show up later. If you spend $1,000 in January but don't hit "Activate" until February, you only get the 5% on the February spending. It’s a cheap move by the banks, but it's how they keep their margins high.
- The "Cashback Match" Factor. If you are in your first year of owning the Discover it® card, this is actually a 10% category. Discover matches all the cash back you earn at the end of your first year. That makes this the most lucrative card in your wallet by a long shot.
- Digital Wallets. Sometimes Discover runs a "Digital Wallet" category (Apple Pay, Google Pay) in later quarters. When that happens, the restaurant/drugstore strategy becomes even easier because you can just tap your phone everywhere. But for Q1 2026, you're tied to the specific merchants.
Navigating the Weird Exclusions
It's easy to get overconfident. You think you're being smart, but then the statement closes and you see a string of 1% icons.
One major pitfall is "Department Stores" that have a pharmacy or a snack bar. If you buy lunch at a Macy's or a Nordstrom cafe, it might not code as a restaurant. It often codes as the department store itself. The same goes for bakeries or caterers. Sometimes they count; sometimes they don't. It usually depends on whether they have seating and a specific "eating place" license.
Also, watch out for "Convenience Stores." Even if they sell sandwiches, places like 7-Eleven or gas station kiosks are frequently excluded from the restaurant category. They are their own beast.
Comparing Discover to the Competition
You can't talk about discover rewards this quarter without mentioning the Chase Freedom Flex. Usually, Chase and Discover try to avoid overlapping too much, but when they do, you have to decide which card to prioritize.
If Chase is offering 5% on Groceries and Discover is offering 5% on Restaurants, you’ve got a clear path. Use the Discover for the Friday night out and the Chase for the Sunday meal prep. If they both offer the same thing, look at your "Year End Match." If you're still in that first-year window with Discover, always use it first. 10% beats 5% every single time.
How to Actually Maximize the Spend
If you aren't naturally spending $500 a month at restaurants and drugstores, you shouldn't just spend money for the sake of getting 5% back. That’s how you end up broke with a lot of "rewards."
Instead, look at your upcoming fixed costs.
Do you have a recurring prescription? Move it to a standalone drugstore for these three months. Do you take a lot of clients out to lunch? Use the Discover card and get reimbursed by your company—you keep the 5% profit.
The drugstore category is also a goldmine for household essentials. Toilet paper, cleaning supplies, shampoo—stuff that doesn't expire. Stock up at Walgreens during a sale while the 5% is active. By stacking a manufacturer coupon, a store sale, and the 5% Discover reward, you can often get these items for 40-50% off their "retail" price at a grocery store.
Practical Steps to Take Right Now
Stop reading and actually do these things if you want the money.
- Open the Discover app immediately. Check the "Rewards" tab. If you see a button that says "Activate," hit it. Do it now before you forget and buy a $100 dinner tonight.
- Audit your Digital Wallet. If you use Apple Pay or Google Pay, make Discover your "Default" card for the next three months. This ensures you don't accidentally use a 1.5% or 2% card at a restaurant or CVS.
- Check your progress. Set a calendar reminder for mid-February to see how close you are to that $1,500 limit. If you’re at $1,400, stop using the card for these categories and switch to another one. If you’re only at $200, it’s time to look at those gift card options at the drugstore to bridge the gap.
- Pay attention to the "Merchant Name." If you see a weird name on your statement that didn't give you 5%, you can sometimes call Discover and dispute the coding. They aren't always helpful, but if it was clearly a restaurant, they might give you a courtesy credit.
The 5% back on discover rewards this quarter isn't a life-changing windfall, but it's a game of inches. Over a year, if you max out every quarter, that's $300 (or $600 with the match). That pays for a flight, a new gadget, or a nice chunk of a high-yield savings account. Don't let the banks win by being lazy.
Stay on top of the categories, watch the exclusions, and make sure that activation button is clicked. It's your money; go get it.