U.S. Bank Shopper Cash Rewards vs. Store Cards: When 5% Beats 6%

Maybe the only thing more impressive than the 6% rewards tier offered by the U.S. Bank Shopper Cash Rewards® Visa Signature® Card is the lengthy list of major retailers where that rate could apply. Among the two-dozen possibilities, you'll find Amazon, Best Buy, Lowe's, Ikea, Target, Walmart and more.

But despite its eye-catching rewards rate and that dizzying array of brand behemoths, the card is not necessarily the best pick for everyone — especially when you consider that many of the merchants on its 6% list already offer store credit cards that earn up to 5% back — with far less effort, and for no annual fee.

Yes, the U.S. Bank Shopper Cash Rewards® Visa Signature® Card can be a great pick for strategic shoppers — those who spend a lot of money each year with qualifying merchants and don't mind putting in some work to get maximum value. But that doesn't mean it's an ideal substitute for a store credit card if that store is where you do most of your everyday spending.

Here are some things to consider when making your decision.

» MORE: Your store credit card wants to be your everyday card

First, factor in the annual fee

Unlike most store credit cards or even general cash-back credit cards, the U.S. Bank Shopper Cash Rewards® Visa Signature® Card has an annual fee: $0 intro for the first year, then $95.

So after the first year, you'll need to subtract $95 from the total amount of cash back you earn annually to determine the overall value of the card. The sign-up bonus for the U.S. Bank Shopper Cash Rewards® Visa Signature® Card can go a long way toward defraying that cost — but only if you can meet its spending requirements: Earn a $250 bonus after you spend $2,000 in eligible purchases within the first 120 days of account opening.

Store cards tend to have much less lucrative bonuses, if they offer a bonus at all — but you're also not "starting from behind" with an annual fee, and you're likely under less pressure to meet a high spending threshold within a specific time frame.

» MORE: What makes a good store credit card, and how to avoid bad ones

And consider the spending caps

When assessing the value proposition of the U.S. Bank Shopper Cash Rewards® Visa Signature® Card, it’s essential to consider how cash back is earned, as well as the limitations on those earnings.

That 6% cash-back rate has several restrictions:

• It applies to two retailers, not all 24 of them.

• You must select those two retailers every quarter. Otherwise, you'll earn only 1.5% back.

• Earnings are capped at $1,500 in combined spending across your two retailers per quarter. Depending on how much you spend at those two retailers, you might hit that cap pretty quickly. Either way, you can snag only $90 in cash back from the 6% category every three months, or $360 for the year.

The card also offers one 3% "everyday" rewards tier, but it, too, has quarterly activation requirements and a $1,500 quarterly spending cap. (Options include wholesale clubs; gas and EV charging stations; and bills and utilities — fairly broad, but not exhaustive of "everyday" purchases.) Regardless, the maximum you can earn per quarter from the 3% tier is $45, or $180 for the year.

Most rewards-earning store credit cards do not impose quarterly or even annual spending caps.

» MORE: Don't let spending caps curb your cash back

A case study: Target shoppers

Comparing the U.S. Bank Shopper Cash Rewards® Visa Signature® Card against a popular store card — the Target Circle™ Credit Card — illustrates how to weigh the costs and benefits of both.

6% rate, with an annual fee

Let's say you're a frequent Target shopper, so you opt for the U.S. Bank Shopper Cash Rewards® Visa Signature® Card and select Target as one of your two 6%-back categories. If you do this every quarter and always hit the $1,500 cap at Target, you'll spend $6,000 at the retailer in one year, netting you $360 in cash back.

But after year one, you'd owe an annual fee, bringing your effective earnings down to $265.

5% rate, without an annual fee

The Target Circle™ Credit Card’s annual fee is $0. It gives you 5% off most Target purchases, whether in-store or at Target.com, and there is no spending cap.

Per the example above, that same $6,000 in annual spending at Target would save you $300 for the year — no annual fee to worry about, and no need to evenly distribute your spending across four quarters to avoid hitting caps.

» MORE: How to make the most of the Target Circle™ Credit Card

The breakeven point

Even though 6% is higher than 5%, the U.S. Bank card's annual fee and quarterly caps change the math. To come out ahead with it vs. a no-annual-fee store card with a 5% rate, you'd need to spend $9,500 a year at Target — except that's not possible with the U.S. Bank Shopper Cash Rewards® Visa Signature® Card. Why? Because only $1,500 in quarterly spending ($6,000 a year) is eligible to earn 6% back; after that, you'll earn just 1.5% back at Target, and everywhere else.

The big picture

Of course, this example doesn't take into account all factors, including the sign-up bonus or other rewards tiers on the U.S. Bank Shopper Cash Rewards® Visa Signature® Card.

But the point is that over time, if you do most of your everyday spending at Target and not many other places, the Target Circle™ Credit Card is going to make more sense for you.

» MORE: 4 big mistakes to avoid with your Target Circle™ Credit Card

The store card competition at a glance

Of the 24 possible 6%-back retailers you can choose with the U.S. Bank Shopper Cash Rewards® Visa Signature® Card, many of them already offer $0-annual-fee store credit cards that earn rewards as high as 5% back. Here's a list:

» MORE: U.S. Bank Shopper Cash Rewards vs. AmEx Blue Cash Preferred

When to choose the U.S. Bank Shopper Cash Rewards® Visa Signature® Card

You're a strategic spender who doesn't mind a little maintenance

In general, the U.S. Bank Shopper Cash Rewards® Visa Signature® Card is a superior pick to any store card if you:

• Spend a lot of money per year (enough to offset the card's annual fee with rewards).

• Tend to spread that spending out across multiple merchants.

• Don't mind consistently managing the card's quarterly bonus categories.

As long as you remember to activate the 6% and 3% categories and use the card strategically, you can pocket a lot of cash back and come out far ahead. Here’s one possible scenario:

• For the 6% category, you choose Walmart and Amazon, and you hit the quarterly spending cap each time — a fairly easy feat considering those two merchants sell practically everything. You’d rake in $90 for the quarter.

• For the 3% everyday category, you select "bills" and use the card to pay for your phone, power and water bills, and maybe a streaming subscription. For the quarter, you spend $1,000, earning $30 cash back.

• You pay for everything else with the U.S. Bank Shopper Cash Rewards® Visa Signature® Card, from dining to charitable giving, earning an unlimited 1.5% back. You spend a total of $1,500 for the quarter and get $22.50 back.

Your quarterly cash-back total would be $142.50, and if you maintained those spending habits throughout the year, you’d end up with $570 in cash back.

The U.S. Bank Shopper Cash Rewards® Visa Signature® Card produces the most value when it’s used frequently, strategically and across a variety of purchases.

» SEE: How to make the most of the U.S. Bank Shopper Cash Rewards Card

You want to avoid the drawbacks of store cards

Some of the common weaknesses of store cards may provide further incentive to choose the U.S. Bank Shopper Cash Rewards® Visa Signature® Card. Store cards usually have high APRs and low credit limits, and some of them are "closed-loop" products, meaning they can only be used with the brand that's stamped on the front.

It’s also usually the case that rewards earned with a store credit card can only be redeemed at that particular store. Often, the rewards aren't worth a lot; many store cards don't earn any rewards at all.

If you’re turned off by most store credit cards, but the U.S. Bank Shopper Cash Rewards® Visa Signature® Card also isn’t a good fit for you, there are plenty of less-complicated cards that occupy a still-valuable middle ground.

For example, the $0-annual-fee Wells Fargo Active Cash® Card earns an unlimited 2% cash back on every purchase.