How You Can Earn Over 2.6% Cash Back by Using a Combination of the American Express Blue Cash and Chase Freedom Cash Visa Credit Cards

If you'd like daily tips, thoughts, and suggestions on how to grow your net worth, subscribe to Free Money Finance for free by clicking this link.

As most of you know, I like and use the Blue Cash from American Express card. It earned me almost $500 last year, and I'm hoping for more in 2007. I've looked at a ton of other cards in an effort to find one that gives me more cash, but I haven't found any. That's why I've named the Blue Cash from American Express card the best cash-back credit card.

That said, I'm always on the lookout for a better-performing card. Recently, I had a discussion in the comments of my post titled The Best Cash-Back Credit Card. Chris told me that he thought the Chase Freedom Cash Visa card was a better deal. We went back and forth for a bit, then we took our conversation offline. I asked him to do a review of both of the cards under three different spending scenarios and to provide a backup spreadsheet for review. He graciously agreed and what I have below is Chris's take on the American Express Blue Cash card versus the Chase Freedom Cash Visa card. His take:

Overview of the Cards

The American Express Blue Cash card offers a tiered rebate level, based on your year-to-date purchases.  For the first $6,500, you earn 1% on purchases at grocery stores, gas stations and drug stores and 0.5% on everything else.  Once you've gone past $6,500 for the year, you earn 5% on purchases at grocery stores, gas stations and drug stores and 1.5% on everything else.

The Chase Freedom VISA gives you 3% on purchases at grocery stores, gas stations and drug stores and 1% on everything else.  It is not tiered; you earn the full 3%/1% from the first dollar spent.  But, while there is no overall maximum on the amount of reward you can earn, there is a maximum of $600 per month which can earn the 3%; purchases over that earn only the 1%.  Further, if you allow your reward balance to reach $200 before redeeming, Chase will kick in an extra $50.  This means that you are effectively earning 3.75% on grocery/gas/drug purchases (subject to the $600 max) and 1.25% on everything else. 

Now, Chase has recently added another option to the Chase Freedom VISA, sometimes called "Dynamic Cash Rewards."  This feature allows your 3% earning to change to the three essential categories where you've spent the most each month.  The "essential categories" number fifteen, and include gas, grocery and drug stores, as well as telecommunication charges, cable/satellite TV/Internet Service Providers, utility payments, gym/health club memberships, spas/salons, quick service payment/fast food restaurants, video rentals, department stores, dry cleaners, movie theatres, local and suburban commuter passenger transportation (including ferries, bridges, tolls, parking garages, taxis/limos), and pet supply stores/veterinary services.

Assumptions

For the purposes of this comparison, I'm going to make a few assumptions.  First of all, I'm assuming your charges are spread out somewhat consistently over the year.  Because of the tiered nature of the AmEx card, the timing of charges can affect the amount of your rebate.  Even at the same total yearly spending level, if you make a significant portion of your non-g/g/d purchases very early in the year (like taking a large vacation in January), you will increase the rebate you get.  If you delay those non-g/g/d purchases until later in the year, or make an inordinately high level of your g/g/d purchases early in the year, you will reduce the rebate you get.  Again, for the sake of this comparison, I'm assuming your spending patterns are consistent.  For the purposes of the Chase card, I'm assuming grocery, gas and drug will be your essential categories, and that you will allow your rebate, as an ongoing rule, to accumulate to $200 before cashing in.

Results

• For a total spending level of $1,000 per month, of which $450 is grocery, gas and drug, the AmEx Blue Cash would earn $223, while the Chase VISA would earn you $285.  Winner: Chase.

• For a total spending level of $2,000 per month, of which $700 is grocery, gas and drug, the AmEx Blue Cash would earn $526, while the Chase VISA would earn you $480.  Winner: AmEx.

• For a total spending level of $3,000 per month, of which $850 is grocery, gas and drug, the AmEx Blue Cash would earn $781, while the Chase VISA would earn you $630.  Winner: AmEx.

My conclusion is, that at a relatively low level of spending, the Chase VISA may be a better deal for you.  But if you spend more than, say $1,700 per month, the AmEx Blue Cash starts to be more advantageous.  The higher your spending, the more the AmEx Blue Cash makes sense.  Your mileage will, of course, depend on many factors, including the percentage of g/g/d purchases to other purchases, and purchase timing (as described above).

But wait, there's more!

If your spending is at a level where the above would indicate the AmEx Blue Cash would be superior to the Chase VISA, you can bump up your rewards a notch by using a hybrid approach.  Taking advantage of the "Dynamic Cash Rewards" option of the Chase Freedom VISA, you could select any three of the other twelve "essential" categories (other than grocery, gas, and drug), and use the Chase VISA for only those charges.  Put everything else, including gas, grocery and drug on the AmEx Blue Cash.  Doing so will automatically earn you some extra cashback bonus. 

For example, in the $2,000/$700 example above, using only the AmEx card would earn you $526.  But by peeling off, say $300 in other "essential" categories onto the Chase VISA, you'd forego $66 from the AmEx, but you'd earn $135 on the VISA, for a net gain of $69.  At the $3,000/$850 example, if you diverted $600 in essentials to the Chase VISA, you'd drop your AmEx rebate by $112.50, but you'd earn $270 on the Chase VISA, for a net gain of $157.50.  Now, remember, I'm assuming you're allowing the Chase rebate to accumulate to $200 before redeeming, so to get the full amount of these savings may take somewhat more than a year to reach the necessary level, as would be the case in the $2000/$700/$300 example.

And actually, carrying the Chase VISA in addition to the AmEx isn't such a bad idea anyway, since there are a few places which don't take AmEx.  Using this approach, you've covered most of the bases.

Be careful if you sign up for the Chase VISA, however.  Chase apparently still offers the straight g/g/d Chase Freedom card, as well as the Dynamic category one.  Make sure you're getting the one which allows the categories to switch automatically, else the hybrid approach will not work.

In short, the strategy which works best for you will depend on your overall spending level, as well as the amount you spend in the various categories.  With a little planning, you can maximize your cash back.

A few thoughts on this from me:

1. Thanks again, Chris, for all your work on this.

2. I've attached Chris's spreadsheet at the bottom of this post so you all can download it and see if his analysis is correct. You can also use it to see what you would expect to earn from each of these cards based on your spending habits. (BTW, your results may vary based on your spending habits and total charged. For extra thoughts on this, see The Keys to Getting the Best Reward Credit Card for You.)

3. I use the Amex card as my primary card and the Subaru Platinum MasterCard from Chase as my backup. (I detailed why in What My Second Credit Card Does for Me.) But after seeing this, I'll probably switch to the Chase Freedom Visa card and use the dual strategy Chris recommends above.

4. It's no surprise to me that the Blue Cash from American Express (review here) card wins when you charge a lot on it. After all, the card was named the best reward credit card for "big spenders" by Money magazine.

5. At the highest spending level, the Amex card returns cash rewards of 2.17%! At the second highest it returned 2.19%! A couple thoughts on this: 1) these percentages are WELL ABOVE the "industry standard" 1% cash back and 2) these are also well above the 1.84% I earned last year. I need to do a better job of charging on/managing my card -- I'm leaving money on the table.

6. By combining the two, you earn a rebate of 2.61% on your total purchases -- a level that is simply phenomenal!

7. If any of you out there think you have a card/cards that can return more cash back, let me know. I'd love to let Chris have a crack at it! ;-)

Download amex_blue_cash_vs_chase_freedom.xls

Comments

[davideo]

If you live near a Wheel Works (like I do in the Bay Area) you can get 5% off any purchase (tires, etc) with their card (which is actually a Credit First National Association card.) In addition, if you carry a zero balance, you have up to 90 days to pay interest-free.

[Drew]

I was interested in the Chase Freedom Visa® Signature card. How do you receive the awards? Can you credit the reward to your account online like Discover or do they send a check? Also, can you schedule online payments in advance of the due date? For example if my payment is due on the 20th, can I login the 10th and schedule to pay my balance on the 20th. My Sears card only lets me make an online payment that day. It posts the day you login (cannot schedule it).

[Chris]

Drew:

When your rewards have gotten to the level you want, you request a check and they send you one.

You can schedule payments up to three months in advance.

Chris.

[Jonathan]

does anyone know the answer to this: if I put my mortgage payments on my credit card, would these be considered "purchases" for the purpose of getting cash back?

[Jonathan]

ok no worries i just read the thread and got my answer.

[Chris]

In theory, yes, however the few mortgage companies that I've found that do accept CC payments tack on a service fee, which wipes out any cash back benefit. If you know of one that doesn't, let me know...maybe I'll refinance with them! :) But I highly doubt you'll find one.

Chris.

[IP]

I use a three card strategy. Citi Professional for 3% restaurants, Chase Freedom for Gas/Groceries/Utilities for 3.75% by waiting until $200 to redeem $250, and Orchard 2% for everything else.

I charge $100 utilities, $200 gas, $200 groceries, $200 restaurants, and $300 others monthly for a total of $1000 a month. This amounts to $30.75 rebate a month which is 3.075%

That is good stuff.

[Chris]

IP:

Nice going. About that Orchard 2% card: can one apply for that, or is it invitation only?

Chris.

[Lanku]

After reading all the comments I have come to terms that the Amex Blue Cash that I just applied for is probably not the card for me. I don't spend enough yearly to take advantage of the 5% and 1.5% ... I would be earning more back with the Chase Freedom Visa. The Citi Driver's Edge card looks even more appealing with 6% back on groceries/gas/drugstore the first year plus $.01 per mile driven on you car ... but it looks like a lot of paper work to submit mileage on your car and request reimbursement for services on your car each time. The only concern I have now is ... nowhere does it state that Chase will give you $50 extra when you accumulate $200 in rebates ... which is one of the most appealing features of the card. If it doesn't state these terms on the card ... I'm sure they can decide to stop doing it whenever they feel like it.

[Chris]

Lanku:

Look at:

http://www.chasefreedomnow.com/rewards/details_cash.asp

It details the $250 for $200 deal.

Chris.

[FMF]

Lanku --

Chris beat me to the answer. Also, use this link and get $50 back (as of this writing) after your first purchase:

http://www.cardoffers.com/manage/track/e.asp?ID=100370031

[MelMoitzen]

Here's a loophole that may be of interest: Purchases of gift cards prominently displayed at the checkout of your grocery or drug store for use at other stores and restaurants (Circuit City, Sears, Outback, Home Depot, Gap, blah, blah, blah) are no different than buying a gallon of milk or a bunch of bananas--they are purchases made at grocery or drug stores. It's not *what* you purchase on the card, it's all about *where* you buy it.

So if you're a regular customer at one of these stores/restaurants, the giftcards can serve as your currency...bought at a grocery store, and earning you a bonus rebate (3-5% with a g/g/d card), whereas using your g/g/d card directly at these businesses will likely only get you 1%.

So what's the downside? Not much for the casual user, but 1) If you do this often enough, you'll max out your bonus rebate fairly quickly (unless you have Amex Blue). 2) Giftcards sold in grocery stores typically have a $50/$100 maximum value, you might have to buy (and redeem) quite a few of them to get that big-screen TV. 3) Grocery stores typically have a $400-$500 credit card limit--it may require a phone call to your CC company to get the charge to go through. 4) Giftcards have a few disadvantages compared to credit cards at certain retailers, especially where returns are made without a receipt.

[MelMoitzen]

Sometimes credit card companies offer promotional offers that apply bonuses to spending a certain amount a certain way over a set period of time. Or, like with Amex Blue, bigger incentives kick in after you reach a certain level of spending. You want to take full advantage of this by simply changing your cashflow timing.

A few years ago, Amex encouraged me to get in the habit of charging my utility bills (cellphone, cable) on their card by offering a special 4% rebate in these categories on up to $2,000 in charges. The catch was that it needed to be spent in the next three months, and my cellphone and cable bills were each around $125/month.

Instead of leaving a lot of the available bonus on the table at the end of three months, the third month I made an overpayment of about $625 on each account with my Amex to bring me up to the $2,000 maximum spend. So while I laid out a nice amount of cash, I created a nice credit balance on each account, meaning I wouldn't have to pay again on either account for five months.

I bring this strategy up because so many rebate cards are on an annual cycle. Sometimes there are minimums to be met; sometimes you haven't reached the maximum available bonus and risk leaving money on the table at the end of the annual cycle. If you have the resources to support the cashflow, a strategy like this is one way to maximize your rebate without resorting to buying stuff you don't need.

[IP]

You fill out the form first and then they "pre-approve" you to one of their different versions of this credit card ranging from secured, annual fee, and no annual fee.

Hopefully you can get the no annual fee one because that's the only one that's worth it.

You can read it for more information. Seems like its a hit and miss in whether or not you get the card, but almost all get pretty low CL (some as low as 300 which is almost unusable).

However seems like they've been handing out $2000 as the CL, which is still pretty low but usable. The rewards cap out at $400 / year anyways which is $1666 of spending a month so $2000 is barely ok.

[IP]

In any case if you can get the card Orchard Bank for 2% for everything is the best cash back you can find for things not in general.

I know I'm not optimal in my restaurant (3%) for instance, but I do know however that that's the best CASH back you can get. You can get more via TY points with the mtvU for 5% at restaurants, but I prefer cash over points in general.

I also know that you can get 5% for gas/groceries and use 3.75% chase on 3 other categories not covered by your 5% gas/groceries but I don't spend enough in general to make getting a Blue Cash for 5% worth it. There's only a few non-teaser 5% ED cards left, and the AMEX blue cash is probably the most reliable one (there is Penfed 5% gas/1.25% everything else but requires you to buy a one-time membership and supposedly the old citi 5% gas/grocery dividend lives on in the form of the cobranded associated bank cash rebate card but I'm willing to bet after a year it'll go away just like my old 5% citi card did.

If you spend *enough* I'm willing to bet that a combo of AMEX Blue Cash/Citi Professional/Chase Freedom/HSBC Orchard bank using the AMEX for gas/groceries after 6500, citi professional for dining out, chase freedom for 3 of the 15 cats and HSBC Orchard bank for everything else will definately pay around the 3% range.

[Chris]

IP:

Don't overlook the Citi Driver's Edge card - 6% off gas, grocery and drug. I know they only advertise that for the first year, then it's 3%, but take advantage of the Drive Rebate feature, and you're effectively doubling it (depending on the number of miles you drive), to 12% off g/g/d the first year and 6% thereafter. Money back is in the form of rebates on auto maintenance, but still, 12% or 6% rocks over 3.75%.

Chris.

[FMF]

IP --

The Orchard card is good for a single-card strategy, but if you read the post above (and the comments) you can do much better than this with multiple cards (even just two.)

[IP]

I fail to see how using the Orchard for multiple card strategy like what I'm doing could make my returns worse.

What do you suggest for purchases that dont fall in categories? There is nothing paying better than 2% for say going to walmart (except for the wacky ones that count as grocery stores for some cards).

Or how about ordering some random stuff online? Or using your credit card to pay via paypal for your ebay purchases? I don't quite get what you are implying FMF because I don't see how using the orchard in a multi-card strategy like how I'm doing could be improved on.

[FMF]

IP --

Ok, I think I just missed it somehow -- I thought you were saying to use the Orchard card only.

[t.m.r.]

Hey - reading through these cards they all say that discounts/rebates don't apply to "warehouse clubs" or "superstores" - since I do most of my grocery shopping at Walmart (don't laugh!), does that mean the cards won't provide rebates?

[FMF]

TMR --

You'll still get the cash back, it just won't be at the top rate. For instance, with the Chase Freedom card, a charge at Walmart will earn you 1% back, not 3%.

[Chris]

FMF is correct. For the Chase Freedom, at least, Super WalMart, Super Target and Super Kmart are *not* considered grocery stores, so you only get the 1%. When I started out with the Chase Rewards card which gave 5% off g/g/d, they actually *were* considered grocery stores. And after I while it occurred to me that I could buy gift cards at the Super WalMart, etc., and use the gift cards at the regular WalMart and effectively get 5% off there. Better yet, Sam's Club accepts WalMart gift cards, so I could effectively get 5% off at Sam's, which really rocked, since otherwise the best I could do there was .25% on my Discover. Alas, no sooner had I discovered this scheme than Chase changed the rules so the Super stores didn't count anymore.

Interestingly, for those who live in the midwest, Meijer stores, which most people would consider a superstore, and which look for all the world like super-WalMart or super-Target, *do* qualify as grocery stores for the Chase Freedom.

I don't know how specific stores qualify on the AmEx Blue Cash, but I'll be finding out what does and doesn't qualify on the Citi Driver's Edge card soon...

Chris.

[Lanku]

Thanks for all the info and help. I applied and got my Chase Rewards Visa ... and I am considering a Costco Business Amex (if they allow me the Business Membership) and the Citi Driver's Edge as additional cards. One thing to note about the Chase Rewards Visa is that Chase also has Rewards Plus shopping on their website in which you get bonus cash back through their online merchants. For example, they offer 4% at Sony, 10% at Petsmart, and I remember New Egg and Buy.com being on the list too ... the list of merchants is pretty extensive. So in essence, if pet supplies was one of your top 3 spending categories, you could get 13% back by shopping online at Petsmart through Chase Rewards. It's also nice that they you can get more back on electronics through websites like NewEgg and Buy.com on top of the 1% back you would normally get. ... and buying gift cards at Supermarkets? Great idea! I've seen some Mastercard/Visa gift cards at Safeway valued at $100 that can be used anywhere a credit card is accepted =)

[Chris]

Careful about that Safeway Gift Card gambit...I was at Dominick's (our local Safeway-owned chain) and saw $25 American Express gift cards at the checkout and figured, hey, I could get these and get essentially 12% off at CostCo instead of the 1% I get otherwise (the only credit card that CostCo takes is AmEx, and my AmEx only gives 1%). I bought a $25 card. It wasn't until I got home that I realized that there is a $3.95 service fee tacked onto the cost of the gift card when you buy it. That's an over 15% service fee, thus obliterating any cash back advantage and then some. I'm going to try to return the card.

If the $100 AmEx cards also have only a $3.95 service fee, then it might be worth it. I don't know if all the cards have fees, or how they run, so be sure to check first and calculate the cost of the service fee versus what you're gaining in bonus.

Chris.

[MelMoitzen]

Chris,

Wasn't the service fee clearly noted on the cardboard overwrap? It is on all the VISA/MC/Amex/Discover gift cards I've seen at the grocery checkout.

[MelMoitzen]

Lanku,

A lot of the rebates for shopping through the Chase website (and more) are available by shopping through other websites which pass part of the commission on to you. Fatwallet.com, for one.

[Shaam]

Does somebody have any suggestions for how to use the Amex Blue for the first $6500?

[FMF]

Shaam --

My suggestion is to get the first $6,500 over asap on the Blue card. Some ideas:

1. If you have a TON of g/g/d charges every month, you could pile those on.

2. You could also save a big purchase for the first month of your year and laoad up there.

3. Another idea is to charge charitable contributions early in the year (if you make a bunch).

Any other ideas out there?

[Chris]

MelMoitzen:

Yup, the service charge was printed right there; I just missed it. More accurately, I didn't think to look for it, since I had specifically looked for it on all of the other gift cards (Home Depot, Best Buy, Sears, etc.) and didn't see one. On reflection, it made sense that the Visa/MC/AmEx cards would have a service fee while the others didn't. But at the checkout it didn't occur to me. And that's my bad. But I thought I'd plant a seed in the head of anyone else who was thinking of this, that they should check for the fee.

Oh yeah, and the gift cards are non-returnable. :(

I did note that the $100 AmEx gift card has a $6.95 fee, so if I'm getting 12% back on grocery, it's still potentially a net gain. But is it worth the hassle? Dunno...

Chris.

[Chris]

FMF:

Your suggestions seem sound, except #1. It seems to me that, as far as I can determine, you're best off if you time your expenses such that as much as possible of that initial $6,500 is non-grocery/drug/gas, because the difference in rebate is less on "other" purchases (.5% vs 1%) than on g/g/d (1% vs 5%). Of course, during that initial period, if you have to buy groceries, you're still better off doing it on the AmEx, unless you have an alternative payment method which nets better than 1% on g/g/d. In that case it gets really complicated to figure.

Charitable contributions are an excellent suggestion. You've also mentioned a large vacation early in the year. And saving big purchases till the beginning makes sense. If it were me, I'd make a big shopping list of things I'd like at CostCo (big plasma TV, big cushy chair to sit in to watch said TV, several five pound bag of potato chips to eat while sitting there, coffin in which to bury me after dying in aforementioned chair), since AmEx is the only thing they take there, so you can't get much more cash back on any other card there anyway.

Chris.

[MelMoitzen]

Great points, Chris--try to charge only stuff on which you're going to be taking a 0.5% hit versus g/g/d.

Also see my comment from 10/26. Create big credit balances by prepaying your cable/cellphone bills (and think of other monthly recurring payments you could prepay by CC). As much as you may hate your providers--who doesn't?--and find errors in specific line items being charged from time to time, recognize that these are different than accounting errors, which frankly are rare. They should have no problem recording your payment properly and keeping your balance straight.

All of this, of course, assumes you have the resources to support the cashflow and that you don't wind up paying interest or buying s*** you don't need.

[kyung kim]

I think this article can save your money.

Hyun a

[Pat]

I've been reading through all of your articles about both of these cards and the amount of money that I spend doesn't come anywhere near the amounts that you and Chris are talking about. It looks like the Chase card would work best for me, I think. My monthly spending on groceries, utilities, gas and etc. is less than $600 total. Am I wrong in this analysis?

[FMF]

Pat --

You are correct. If you don't charge that much, the Chase card is the better option for you.

[Sven]

Wow - tons of helpful info. Question: I've been approved for the AmEx 5%/1% and am waiting for it to arrive. How do you find out when the "beginning of your year" is? Is it the calendar year (jan 1 - dec 31) for everyone? Or how do you know? Thanks!

[FMF]

Sven --

I believe it is different for everyone (based on your anniversary month). My suggestion is to ask the Amex rep when you activate your card. They'll know for sure.

[Amanda]

I was able to earn 2.8% cash back using Chase Freedom and Discover's Get More in November. I think it will increase for December because Discover is offering an additional 5% on up to $200 in groceries. Sadly next quarter's Get More categories are not relevant to my spending: Airlines, Hotels, Car Rentals. Using Discover for cash back is definitely hit or miss.

[Chris]

Amanda:

I agree; for me Discover is strictly a niche card. I use it for whatever the quarterly bonus category is (up to the paltry limit), plus whatever special offers Discover happens to be running. A couple months ago, they sent me an offer of $5 extra cashback for putting my satellite bill on my Discover card. And you can do well with ShopDiscover, which gives pretty good cashback deals at various online retailers. But for general use, I pick one of my many other cashback cards.

Chris.

[Paul]

I prefer to bypass the whole spending of money to get cash back and instead I just "borrowed" the credit card companies money and earn interest on it.
I did a credit card transfer on an American Express credit card which has zero percent for a year and NO TRANSFER FEES for $30,000 to second credit card (Discover Card(s)) that don't have a balances. I've noticed that when you do a balance transfer that the source bank(American Express) doesn't check the destination bank(Discover Card) to see if there is actually a negative balance. I then called Discover Card and had them transfer the money to my checking account once it cleared their system. I did it in multiple transfers on multiple cards (not the whole $30K to to one card at once) Next I transferred it into my my ETrade Complete savings account to collect 4.7% interest on it. I also got another $6500 from a CitiCard. I just pay the minimum payment until it comes due (or get 6-9 month CD's). I should make roughly $1700 in free interest for few minutes work per month to make the payment. I use mint.com to monitor all my credit cards (in addition to setting up email alerts on the cards I owe on) and they'll send me emails if I forget to pay any card. This is my second year of doing this.... Free money as long as you don't miss a payment(AND DON'T MISS ONE!!!!!). IF YOU'VE EVER MISSED A PAYMENT OR HAVE BAD CREDIT DON'T DO THIS. Then I cancel the cards, wait a month and start it again. It hasn't appeared to have impacted my credit score negatively since it just jumped from 759 to 806 ( free daily up to date credit score is shown on the online account of Washington Mutual credit cards). My goal is to borrow 100K to get 4-5K in free interest per year while the 0% credit cards still exist. The reason you have to do a balance transfer with American Express is that they won't send you the money for deposit into a bank account unless it's a cash advance and that's NOT something you'd want to do with all the fees involved in addition to they don't give you the promotional 0% rate. Citibank will send you the money directly in a check that isn't considered a cash advance so you don't have to do the balance transfer nonsense. After a couple months my credit scored dropped back to 786 because of the new higher debt ratio but I don't care because it will go backup when I'm done with THEIR money.
The top few on this list have 0% and NO transfer fees.

[rocketc]

Great post. My head is still swimming, but we are going to try this stategy. I need every dime I can get my hands on.

[Chris]

Paul said:
"I prefer to bypass the whole spending of money to get cash back and instead I just "borrowed" the credit card companies money and earn interest on it..."

OK, well there's nothing new with this approach. This is the standard credit card arbitrage scheme. It's not for everyone, but I take advantage of it, sure. I'm currently into about $40K of 0% APR balances, and have the $ stuffed away in CD's. It is a good way to make some extra cash.

But to promote this to the exclusion of cash back cards is a bit myopic, IMHO. Because, unless you cloister yourself away from other human beings and live off the land, you still need to buy something somewhere eventually. How are you going to pay for the stuff at the grocery store, or the gas station, etc.? You could spend cash or use some dead-end credit card. But why not add another $1K annually to the money you're making on arbitrage by using making optimal use of cash back cards?

"The top few on this list have 0% and NO transfer fees."
What list?

Chris.

[FMF]

Chris --

Paul submitted his post with a link to a site (probably his own), which is a no-no here, so I deleted it.

[Keith]

We are considering the AMEX Blue Cash card as a replacement for our Citicards Mastercard in an effort to better maximize our cash back rewards.

In 2007 we averaged over $700 a month in Groceries at local supermarkets (Giant, Acme, Redners, etc) and over $300 a month in Gas at Mobil LukOil, Exxon, Wawa, etc.

We tend to spend roughly $500 more a month at restaurants and retailers.

Is the AMEX Blue Cash card our best option as I perceive it is and is it really beneficial for us to look into a 2nd card such as the Chase Freedom to take advantage of its rewards?

[FMF]

Keith --

Is this all you spend every year (just the categories you've quoted) or is there more? Overall, at lower levels of spending, the Chase card will be better while at higher levels the Amex card is better. If you combine them, you will earn more, though this may not be worth the hassle for you.

[Chris]

At the spending levels you indicate, it looks like the AmEx Blue Cash would be a good bet for you. As AmEx isn't universally accepted, you'll want a non-AmEx backup anyway, and I think the Chase Freedom would be an excellent complement. If the $500 of other spending includes a meaningful amount in any of the 15 Chase Freedom categories (maybe Telecommunications for your telephone bills, Department stores, Fast Food, Movie Theaters/Rentals) then you can benefit by getting at least twice the rewards (3% vs 1.5%) on those purchases.

The other card I'm liking right now is the Citi Driver's Edge card. In the first year, it gives 6% off grocery, gas and drugs and 1% off everything else. In succeeding years, it gives 3% off g/g/d and 1% off everything else. Furthermore, if you enroll a vehicle on the card, you can effectively double that cashback, if you take it in the form of rebates on auto repairs or a new car purchase, and you drive enough miles.

So, if you haven't done the CDE card yet, I'd say that the first year on that would be a no-brainer; you'd definitely do better on that than the AmEx. In later years, it'd depend on how many miles you drive and whether the repair/purchase rebate is acceptable to you. If you prefer cash rebates, then you'd be better off with the AmEX/Chase combo in succeeding years.

Chris.

[Keith]

Thanks for the response. In 2007 we spent over $24k on our lone major credit card, the Citi Mastercard. We received roughly $250 cash back which is why I'm looking to change since there are better rewards programs out there.

Looking at our budget in Microsoft Money, we spent $9854.98 in Groceries of which $1307.41 was spent at Costco. We also spent $3530.08 in gas (not at Costco (ours doesn't have gas)).

Outside of the ED categories, we spent $3730.75 in dining out which varied between sit-down restaurants to fastfood, delivery and takeout. We also spent $6406.44 on clothing between my wife, my son and myself at various retail stores ranging from Department stores (JC Penney, Macys, Target, etc) to specialized stores such as New York & Company, Carters, etc. My wife has individual credit cards for many of those stores which I will be closing out and have her use the main card with the best rewards for all future purchases.

Other then that, we have the usual mortgage, car/lease, school loan, cable/internet (Comcast), phone (Vonage) and daycare bills. From my research it only looks like we can use a credit card to make payment for only Comcast and Vonage. The others do not accept credit card payments.

Currently I'm looking at the Blue Cash Card along with the TrueSavings Costo card, both from AMEX as our best duel strategy.

Do you agree or disagree?

[FMF]

Keith --

You and I are at about the exact same level of charging and we both (it appears) like to shop at Costco. ;-)

I recommend the Amex Blue Cash and Chase Freedom cards (these are what I use) as outlined above. (FYI, Chase still has a $50 bonus if you use the link above.) I'm in the process of a transition (I just got the Chase card), but I'll be using the process detailed above in this post (or something very similar) in 2008.

As Chris said (and as you know), Amex isn't accepted everywhere, so that makes carrying a Visa like the Chase card extra nice.

Hope this helps!

[Keith]

FMF,

I'm going to apply for the AMEX Blue Cash this week. Do you know if there are any links to rebates for a new application?

As for my secondary card... you value the Chase Freedom card over the AMEX TrueEarnings card that gives 1% for Costco purchases and 3% for dining out (although I can't find a listing of the breakdown for what AMEX classifies as qualifying for this 3%)?

Am I correct in that the Chase Freedom card doesn't give anything for purchases at Costco and only 1% for most traditional dining out?

Wouldn't the two AMEX cards be a better dual strategy for our purposes? Am I missing something other then the fact that AMEX might not be accepted everywhere?

[Chris]

I agree with FMF here; the AmEx Blue Cash/Chase Freedom combination is a pretty good bet, especially as it's nice to have a non-AmEx backup.

I do love the CostCo/AmEx TrueEarnings card. But combining it with the AmEx Blue Cash is problematic. Because of the tiered rebates on the Blue Cash, pulling spending away from it can have a counterproductive effect.

If you did use both, you'd only want to use your CostCo/AmEx for restaurant and travel purchases, and that only after you've reached $6,500 of spending on your AmEx Blue cash for the year. All other purchases (including, ironically, all CostCo purchases) you'd want to do on your AmEx Blue Cash. If you did that, you would certainly improve your returns over the AmEx Blue Cash alone.

But if instead you used the AmEx Blue/Chase Freedom combo and spent just $190 on qualified categories on the Chase (which I'd think you could easily reach on ComCast + Vonage + Department Stores), you'd do even better. Of course, you could still throw the TrueEarnings card in there, too, for restaurant and travel spending, after you'd hit the $6,500 mark on the Blue Cash, though the gains start to diminish as the complexity increases.

Chris.

[FMF]

Keith --

What Chris said. I'll add a few more pieces of info:

1. Costco only accepts AMex (at least all the ones I've been in do.)

2. I think you need a Visa or MC option -- Amex isn't accepted everywhere.

3. Don't know of any bonus rewards for Amex Blue. Sorry.