Battle of the Cash Back Credit Cards
Credit cards can be a valuable tool. For those of us with the discipline to pay off the card each month, the cash back available to us can be a worthwhile. If you are going to buy stuff anyways, you might as well be rewarded for it.
Forget airline miles and hotel points. Unless you do a significant amount of travel for your work, you are never going to see enough points to make a tangible difference on your next vacation. Cash back is where it is at. My fiancé and I both use cash back credit cards. While I use a Chase Freedom card, she uses a Blue Cash from American Express. If we had to chose one over the other which would it be?
Blue Cash from American Express
Blue Cash offers 1% back on supermarkets, drug stores, and gasoline. 0.5% on everything else. The catch is when your purchases within a year exceed $6,500. All of a sudden the cash back jumps to 5% on the above items and 1.5% on all others.
The sticking point is that your cash back is credited to your account at the end of the year. Not exactly cash in hand but still good considering the higher than average % back.
Advantages:
- Higher cash back %, after spending $6,500 within a year, your rewards jump to 5%
- No cap on rewards
Disadvantages:
- American Express is not as widely accepted as VISA
- “Cash Back” is statement credit at the end of the year
Freedom from Chase
Chase Freedom offers 3% on supermarket, fast food, and gasoline and 1% on all other transactions. While that may not seem quite as impressive as Blue Cash, Chase offers to sweeten the pot by letting you get the cash back as you earn it. You can request a check with a little as $50 in rewards. But if you wait until you have $200 in rewards, Chase will cut you a check for $250 instead. For those of you keeping score, that is a 25% bonus to your usual rewards.
Advantages:
- Cash back can be redeemed as you earn it
- It is actual cash, not a statement credit
Disadvantages:
- Rewards % is not as high
- After spending $600 in a month on 3% purchases, the rate drops to 1%
In order to take full advantage of either card, we would have to pool our purchases together to reap the maximum reward possible. So if we had to choose, which one would it be? That depends on how much we would actually spend during a normal month.
- Groceries: $350
- Fast Food: $100
- Gasoline: $420
- TOTAL: $870
We spend approximately $700 more in other purchases a month. That would include bills we could pay via credit card. Assuming that spending to be our baseline, we can run the numbers to find our best situation.
Our total yearly purchases would come out to $18,840. Wow, scary right? I smell another post coming in the near future, but I digress. Here are the numbers crunched and tabularized for your enjoyment and hopefully both of our enlightenment. While the full spreadsheet would not display properly, I’ve included the summaries here.
| Spending | Yearly |
| Special | $10,440.00 |
| Normal | $8,400.00 |
| $18,840.00 | |
| American Express | |
| 1.00% | $36.01 |
| 0.50% | $14.50 |
| 5.00% | $341.95 |
| 1.50% | $82.52 |
| $474.97 | |
| Chase Freedom | |
| 3.00% | $216.00 |
| 1.00% | $116.40 |
| $332.40 |
And it’s Blue Cash by a nose! I did not include the extra 25% bonus from Chase. That would bring the total Chase rewards up to $415.50. Not a blowout by any means. While Blue Cash takes the overall crown, we would have to weigh the extra $59.47 from Blue against the convenience of cash in hand from Chase.
For most families, $400 or so dollars over a year is not all that exciting, but it is money that you would otherwise not of had. For that reason, cash back credit cards are going to be a piece of my financial plan until such time as they become not worth the effort. $400 is still very much worth it to me right now.