To delete a custom category, just tap on 'Spending' on the navigation bar and then on 'Your Spending'. From there, tap on 'Edit custom categories'.
Tap on Manage custom categories and this will take you to see all your custom categories. Tapping the '...' will allow you to delete or edit the category.
If you are deleting the category, any transactions assigned to this category will then move back into their previous/default categories.