The Best Cash Back Credit Card – If I Could Only Pick Just One
Despite the popularity of credit cards that offer such rewards as airline miles, the vast majority of cardholders still prefer the simplicity and ease associated with cash back credit card rebates. The most efficient way to maximize your rebate opportunities is still the multi credit card rewards approach. However, despite the greater reward potential with having multiple cards, a sizable number of consumers simply do not want to deal with the hassle of carrying around a wallet bulging with credit cards . If you are one who prefers to have just a single card in your wallet, then definitely take a look at the following two cards – The Chase Freedom Visa Signature and the American Express Blue Cash Card. Depending on the specifics of your card usage habits, you should pick one or the other, as your rebate earnings will differ depending on how much you spend per month and year. As a third alternative, you could even use a hybrid combination of them both for full rebate earning potential.
If You Plan To Spend More Than Approximately $1,500 A Month On Your Credit Card, I Recommend the:
- American Express Blue Cash® – Voted as Kiplinger’s selection for the best cash rebate card, the Amex Blue Cash credit card offers a tiered rebate program, based on your purchases to date. For the first $6,500 you earn in the rebate year, you’ll earn 1% back on purchases for groceries, gas, and drugs, and 0.5% on everything else. However once you spend over $6,500 for the year, you can earn 5% cash back on all your every day purchases at supermarkets, gas stations and drugstores, and 1.5% cash back on all other purchases.
But If You Expect To Charge Less Than $1,500 A Month, I Suggest the:
- Chase Freedom Credit Card – Under the Chase Freedom Visa Signature’s dynamic cash rewards program, you’ll earn 3% cash back (standard 1% plus a bonus 2% rebate) for all eligible purchases made in the top three bonus categories where you spent the most. The bonus categories cover a lot of ground and include: grocery stores, gas stations, drugstores, convenience stores, fast food restaurants, telecommunications, department stores, cable and internet, video rentals movie theaters, commuter passenger transportation (including parking, taxis, and tolls), dry cleaners, pet supply stores and vet services, utilities, beauty shops, and gym memberships.For everything else, you’ll earn 1% cash back. There is also a cap on the bonus rebate amount you can earn per month – $12, which equates to $600 worth of net purchases in the bonus categories. When you reach $600 for the month, the remaining bonus category purchases will only earn the 1% base rebate. There is also an opportunity for a bonus rebate once you accumulate $200 in total rewards. Chase will tack on a $50 bonus rebate on top of your $200 – for a total of $250 (offering an effective rebate rate of 3.75%/1.25%).For a limited time, Chase Freedom is also currently offering an instant $50 sign-up bonus after you make your first purchase.
If You’re Interested In The Nitty Gritty Comparison Calculations That I Based My Recommendations On – Here They Are:
For the American Express Blue Cash Card calculations, I applied the program’s lower rebate rate of (1%/0.5%) until total expenditures crossed the $6,500 expenditure threshold to qualify for the higher rebate rate of (5%/1.5%). During the crossover month I shifted and timed higher rebate potential expenditures to qualify for the higher rate. However, bear in mind that in real practice, your actual cash rebate will vary depending on the timing of when you make certain types of purchases. Clearly for rebate purposes, you would be better off timing most of your higher rate (grocery, gas, drug) purchases until after you’ve crossed the $6,500 level.
To ensure an equivalent comparison for the Chase Freedom Visa Signature, I assumed that the cardholder chose to make groceries, gas, and drugs their 3 bonus higher rate categories. I also applied the effective bonus rate of 3.75%/1.25% on the assumption that the card holder would wait until $200 was accumulated to get the $50 bonus rebate.
- For $500 worth of expenditures per month, comprised of $150 worth of groceries, gas, and drugs – the American Express Blue Cash card earns $39 worth of cash rebates per year. The Chase Freedom Visa earns $96 (not enough for the $50 bonus). The Chase Freedom is clearly the better choice here.
- For $1,000 worth of expenditures per month, comprised of $400 worth of groceries, gas, and drugs – the American Express Blue Cash card earns $211 worth of cash rebates per year. The Chase Freedom Visa earns $270 (with the prorated $50 bonus). The Chase Freedom is still the better choice.
- For $2,000 worth of expenditures per month, comprised of $700 worth of groceries, gas, and drugs – the American Express Blue Cash card earns $526 worth of cash rebates per year. The Chase Freedom Visa earns $480 (with the prorated $50 bonus). The Amex Blue Cash Card finally edges out the Chase Freedom Visa.
- For $3,000 worth of expenditures per month, comprised of $900 worth of groceries, gas, and drugs – the American Express Blue Cash card earns $790 worth of cash rebates per year. The Chase Freedom Visa earns $630 (with the prorated $50 bonus). The Amex Blue Cash Card clearly blows the Chase Freedom Visa away when it comes to rebate performance for high spenders.
May 9th, 2008 at 6:43 pm
Thanks for the comparison I think I’m going to have to cancel my American Express and go with the Chase Freedom
May 9th, 2008 at 8:51 pm
Brandon, you really don’t need to cancel unused credit cards to open a new card.
You may be better off storing the old credit card in a safe place and keeping it active. Having unused credit limit available has a positive overall effect on your FICO credit score.
June 8th, 2008 at 8:51 pm
This is a great comparison, thanks! I have a question, though. Did you take into account that with the Chase Freedom card, you get a $50 bonus for every $200 in rewards? If not, then after spending $2000 a month with the Chase card, you really get $530 which would barely beat American Express.
June 8th, 2008 at 9:13 pm
Yes I did Alex. In my nerdy credit card calculations, I used 3% / 1% purchase rebate percentages when monthly Chase Freedom rewards were still below the $200 reward limit. However, once it exceeded $200, I switched to the prorated $50 bonus rebate percentages of 3.75% / 1.25%
June 9th, 2008 at 10:59 pm
I see…and once you reached to the second $200 (so I guess $400 total), then you added in another $50?
June 10th, 2008 at 1:32 pm
Thanks for the great comparison. Chase now does the top 5 categories for those cardholders with Chase Checking accounts. Do you think that expands the difference between the two cards for the lower spender (advantage Freedom). Or do you think it is mainly a marketing scheme, because most mid to higher spenders will probably hit the $12 bonus cap solely in the top 3 categories?
June 18th, 2008 at 12:57 pm
How does the Advanta Platinum Business Card compare to the Chase Freedom card?
July 8th, 2008 at 9:29 pm
Does Whole Foods count as a “grocery”? Seems obvious that it should, but, in looking over my statement, I’m not quite sure that it does. Anyone know?
July 8th, 2008 at 9:34 pm
Kyle,
I’m fairly certain Whole Goods counts as a grocery store for higher credit card reward purchase category purposes. Such places like Trader Joe’s would be included as well. Only warehouse clubs like Costco’s, BJ’s, and Sam’s Clubs would not be part of the supermarket category.
July 21st, 2008 at 12:34 pm
First I want to thank you for all of your research. Discover Cards sent me an offer for their new (I think) discover More card with additional cash back features, but when comparing it to my AMEX Blue it seems lacking. I have a Chase Card and have not used it in months. It seems from your figures that I might want to switch use to Chase. I buy about $400 or more worth of gas per month. Where do they cap your cash back in a catagory? Should I charge amounts over that on a different card?
Thanks, Ken
May 24th, 2009 at 12:29 pm
Chase Freedom is canceling their 3% promotion (at least for some people). They canceled mine as of July 1 but not my husband’s. Probably because I utilitized the rewards more than he did.
June 7th, 2009 at 3:40 pm
Is American Express accepted in as many retail stores as Visa or MC cash cards? I signed up for an Amex Blue Cash card but have not activated the card yet. If I can’t use it everywhere “I want to be,” the savings won’t be as great. Thanks in advance for any feedback from current Amex Blue Cash card users.
August 1st, 2009 at 4:47 pm
Chase has changed their terms for the Freedom Card. They are no longer giving cash rebates for gas purchases as a credit against the next months bill. They are going to the “points” method. I’m canceling my account and moving to either Discover or American Express I think.
August 31st, 2009 at 6:38 pm
Discover has a credit card that gives 5% cash back for gas.
September 1st, 2009 at 7:24 pm
Having used both Chase and Amex I like the simplicity of getting back cash from Chase whenever I hit the $50 worth of rebates (about every three months) while Amex will only do this once a year. (a long wait indeed).
September 21st, 2009 at 3:18 pm
There’s a big gotcha with Amex Blue Cash for 5% cash back on gas, groceries, and drug stores: the retailer must self-identify as one of those categories, otherwise Amex will credit at the lower 1.25% rate (down from 1.5% last year). I’ve found that many gas and grocery stores do not properly self-identify, which can significantly lower your benefit. This caveat, coupled with the $6,500 threshold and that you must wait until the end of your billing year to get the credit has caused me to switch back to a Capital One no-hassles reward Visa, which credits a flat 1.25% on all purchases. I am considering a dedicated gas card, though, to re-capture more of my gas money.
October 3rd, 2009 at 6:34 pm
My Discover Open Road card is dropping the 5% Cashback bonus effective January 2010. They will change to 2% Cashback Bonus. They say flexible redemption options starting at just $20.00. But they make me wait until I have $50.00. No explanation! I really believe they recanted what they offered to me.
October 4th, 2009 at 11:49 pm
Chase Freedom Card is now dropping the 3% cash back, for 1 point a dollar and 1 point a purchase which means they are cutting cash back to less than 1.5%. Said in big envelope with pretty pictures in letter that this was a better program. I understand they are slashing what they give back, so I slashed up the card and went back to using Amex cash back card.
October 6th, 2009 at 11:08 pm
As a former Washington Mutual customer who was switched to a Chase checking account, I actually walked into a Chase bank last week and got a sales pitch on the Chase Freedom card. There was no mention of cash back, just point rewards, which I don’t prefer because they get all convoluted. I’ve had Amex Blue for years and prefer the straightforwardness of it. If you use your main credit card constantly as I do, you will not have a problem hitting the $6,500 threshold. And though you only get your cash rebate once a year, it comes out to hundreds of dollars – a large amount you will actually notice. I’ll just stick with their card.