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March 17, 2009


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I had a really good run using one credit card for "cash" back. It was issued by Countrywide, and applied 2% back to my mortgage principle when points were redeemed. Simple and effective.
Unfortunately, they're discontinuing the card, and it will be replaced by a Chase Freedom Visa, which appears to have the newer, watered-down version of rewards, basically 1% back in points on all purchases, redeemable for gift cards or cash back against your credit card balance.
I'm trying to figure out if it's worth it for me to seek out another cash back card offer that returns a better payout. I averaged $2K a month on the card last year, so the difference between 1% and 2% is a couple hundred dollars, at least.

I've got a question for you. I do most (if not all) of my grocery shopping at Whole Foods or Vitamin Cottage and those purchases are categorized with an (other) when they are listed on my Chase Freedom statement. Do you know if that means those purchases aren't qualifying for the 3% cash back on grocery purchases? Do I have to shop at Safeway, King Soopers, etc. to get the 3% cash back on those grocery purchases? Is there a way to tell what percentage you are getting back on each itemized purchase? Thank you!

Your credit card choice seems fine, but one thing I don't understand is why not a separate CC for gas?

Both Shell & BP (plus others) offer cards that rebate 5% on gas purchases. No floors/ceilings, a free card, and no waiting for the end of the year.

Seems like a no-brainer to me...


I have the Chase Freedom card. Did you factor in the limit on the bonus rewards. I usually cap out at $12 dollars per month of bonus rewards (that would be the 4% that is over the 1% on your top 3 categories).

I actually have a separate card from Pentagon Federal Credit Union that pays me 5% straight on gas so I use that for Gas and Freedom for everything else.

I figure with this strategy I get 5% on gas, 3.75% on my top three (a little less since I cap out but usually not by much) and 1.25% on everything else (that accounts for the 25% bonus by cashing out 200 for 250).

If you were expecting something like the bonus percent on 700 dollars or something like that though you will end up with quite a bit less after the cap.

Lauren --

It all depends on how the store's "code" is set up. If it transmits to Visa/MC that it's a grocery store, then it counts as a food purchase. If it's not set up that way, it doesn't.

TheCase --

Because I don't want to carry more than one card. Besides, Amex gives 5% back on gas at the second level, which I reach pretty quickly.

Apex --

I did not. What's the cap amount?

Does Schwab have fees associated with its brokerage account? (Account service fees, inactivity fees, etc.) Even small fees could cut heavily into the value of their card.

Sarah --

Nope, no fees that I know of.

The Scwab card sounds like a great option for ex-pats (no fx fee). The only other card I had been able to find with no fx fee was from Capital One and I am not sure of the rewards structure (was not a prime concern, the 1-3% traditional fx fee was). I too would like to know abou the account fees at Schwab.


I believe its $12 dollars per month of bonus. I also mis-spoke previously when I said that was the 4% of bonus, its only the 2% that exceeds the base 1% to get you to 3% total rewards if that makes sense.

So the 2% extra capped at $12 dollars I believe is $600 per month of spending in your top 3 categories that is eligible for the 3% rate, everything else would get 1% even if it was in the top 3 categories.

It may not be easy to find that stated explicitly but those numbers do sound familiar to me from what I had read many years past and it is consistent with what I see on my statements when I get capped.

A great read! I use the Citi Driver's Edge credit card for all of my grocery, drug store and gas station purchases. The 3% (6% for the first 12 month) for purchases to these categories and the $1 per 100 miles you drive make it a great card.

I have been using the two card system suggested by FMF for over a year. I have made gobs of money (havent kept tabs on it closely) using this method. However, there are a couple of issues that I have. One, is that Sam's Club will not accept Amex and neither will my grocery store. The second and more important issue is that my wife does not follow all the rules religiously to maximize how much we make off these cards. At the end of this year, I was thinking of going to the Schwab Visa card and ditching the two cards (Chase and Blue Cash) that I have for the sake of simplicity.

I did a similar calculation comparing my Fidelity Amex(same rules as Schwab) v. my Amex Blue Cash. Results, very similar to yours. As a result, the Amex Blue is my primary card.

One caveat - if someone goes with the Amex Blue, they will need some sort of Visa for a backup. I chose a Citi Driver's Edge Card because I can use it for gas (3% back) until I hit the $6,500 threshold.

Low charger + non-existing Chase cardholder = Schwab! :)

some credit cards you earn points everytime you use it. For every $1 retail, you earn 1 point (balance transfer or direct deposit are not eligible). Sometimes you earn 1% cash back, other credit cards you may earn 5%. Each card works differently. You can only redeem points starting at 2500 points with BOA. To redeem the points for cash, just call their customer service.

FMF - I will disagree on your comment on how store code detrmines the category. I have both Chase Freedom and Citi's Drivers Edge cards. Many of my purchases at the same smaller grocery stores are identified as Grocery on Citi's card while Chase identifies them as Other. This is not limited to grocery purchases only, but extends to other categories as well.

I think it will be helpful if you mention that Chase Freedom card is good only when you shop exclusively at large and well-known stores.

I went for Chase Freedom Card after reading one of your posts earlier as I thought it would work out great. But, they do a very poor job (must be intentional) categorizing my purchases. My purchases at Kohl's or charges to Utilities bill get classified as Other that irritates me. On top of that, they further sub-categorize my purchases into 15 categories excluding many of the charges that should generally fit into 15 categories.

What I want to say that it sound pretty tempting to get 3% in top 3 categories, but when one carefully examines the card statements, it becomes clear that Chase does a very poor job (I think it is intentional) in allocating one's charges to these 15 categories. Unless one always shops at very well known stores, one is more likely to get 1% rather than 3% touted (or 1.25% if redeeming at $200 level).

Infact, shouting along the same line of yours of hating Macys' (I hate Macys too), I would say that the same is true in case of Chase Freedom. I repeat it is good only when one will charge it at very well-known places. Moreover, Chase is trying to bite you in places where you may notice it easy. I am surprise that you recommend Chase card. I am surprise that most of PF bloggers recommend Chase Freedom card. Though I don’t doubt you FMF (as you back your recommendation with numbers), I doubt other PF bloggers if they get a good cut from Chase. If they do, they should also be clubbed in the same category as you would do for investment bank CEOs and their executives.

Here is what I would recommend:
- I recommend PenFed to get 5% on Gas purchases.
- For everything else, there is either Schwab Bank Invest First Visa Signature credit card that pay 2% on all purchases or Fidelity Retirement Rewards Card that pays 2% (you can direct your cash back to non-retirement accounts as well).
- Anyone who runs an annual credit card bill north of $15,000 and spends a lot on everyday purchases, get Amex Blue Cash Card. But most of us FMF readers will probably not fit in Amex Blue Cash category (I know that I don’t).

Anyone willing to make better than normal returns for a year (especially this year, getting more money back is going to be a big help):
- sign up with Citi's Drivers Edge card and get 6% on Everyday purchases for one year and then they drop down to 2% on Everyday purchases. Also, you get $1 for every 100 miles you put on your personal vehicle. I charged $7,500 on everyday purchases last year and got about $550 (including driven miles rebate). It was a very good return.
- Sign up with Citi's Home Rebate Card and get 6% on all your Utilities, Telecommunication, and Cable/Internet Bill for 12 months (I am doing this and saving tons of money)

Why go through the hassle of Amex Blue Cash or Chase card (figure out which categories earn you more or hoe to spend first 6500 and then the rest)? Instead go with simple cards where you know whatever money you spend, it will buy you the biggest buck back.

Forget Chase or Amex. 5% on gas with PenFed and 2% on the rest with Fidelity/Schwab with no extra hassle. Will do fine for the most of us.

Sanjeev --

Then how is category determined?

I called Chase and they told me this was the way it was set up.

BTW, the premise of this post is the SINGLE best cash back card. I know you can earn (a bit) more with two cards, even more with three, even more with four, and so on, but I only want to carry one.

I had called Chase about this before and they said that it was based on the information received from the store. I asked one of the grocery stores about it and they said they send the same information to both Visa/MC. I cannot figure it out myself that why Citi will show the right category and Chase will show it as Others purchase.

I don't know if it has got to do with how information exchange between Visa/MC and Citi/Chase is set up.

What I do know is that I miss out on a number of everyday category purchases with Chase if I do my shopping at smaller or regional stores. And I really care about maximizing the use of my dollars.

I see your point about having only one card. In my opinion, I will go with either Schwab or Fidelity that would give me 2% back on all purchases. For large spenders out there, Amex blue Cash sounds like a good deal.

Regardless, thanks for a thoughtful (and useful) post. Keep up the good work.

Don't forget about the Chase Professional Rewards Card. This card has "Premier Cash Rewards" which is 3% cash back at restaurants, office supply, gas stations, building supply, hardware & home improvement. When combining that with the chase freedom card I earn 3% almost everywhere.

I have the Chase Freedom Visa, the Chase Platinum Mastercard and Blue Amex cards. I use both Chase cards, switching from one to the other in the middle of the month to maximize my credit billing cycle, i.e. the Visa closes on the 2nd of each month and the MC on the 14th. With the Visa, I do wait until I have $200 in rewards to get the $50 bonus. As for the Mastercard, there is a cap on the maximum rewards earned in a year ($300). In the past 2 years, I have earned an average of $550 a year in cash back ($250 from the Visa and $300 from the Mastercard). Towards the end of the year, when I have reached my maximum rewards for the Mastercard, then I switch to the Blue Amex since it only earns 1% rewards. That is essentially "free" money for using these credit cards. We use them for everyday expenses like groceries, gas, pharmacy and food. I do pay some of my utility bills with the cards as long as there is no processing fee. Although Chase offers various rewards like gift cards for stores, we always redeem our rewards for Chase reward checks that we deposit into our savings since it is money that we did not plan on having.

Thanks FMF! I've been following your thoughts on this topic for at least a year. I added the Chase Freedom last year, but was still collecting points on Amex Starwood (Sheraton) as our main card until now. Been thinking about Amex Blue for the last year. Read this post on the 17th and opened a Blue account. Looked at my 2008 charges from 5 cards and cancelled the Blue account the next day before I got the card in the mail. It turns out most of our charges are retail (Target, Walmart, Costco, etc) and don't fit the Chase/Blue categories. Even our groceries primarily come from those three stores.

So, here's my strategy going forward (though my wife would like a single card, hopefully this will be easy enough to implement):
Schwab Visa 2% will be our main card
Amex Costco for Gas 3% and Dining Out 3% (and Costco 1%)
Chase Freedeom for Groceries, Internet, Telecommunications
Discover (only for 5% categories)

I've already added a label from a label maker to the Costco card that says "Gas Dining" and I'll add a label to the Chase Freedom card that says "Groceries" (up until now the Chase card wasn't in our wallets and only paying automatic bills for internet and phone).

So, this is a little complicated, but hopefully it will work best for us. I might consider complicating it a little more and getting the PenFed for 5% gas since gas was our 4th highest category in 2008.

I have been using the AMEX Blue Cash card for a couple of years now and I pay full balance off each month. Fantastic card! First year my cash back was $935, second year was $1039. I wait to make planned large purchases right after cash back is awarded to reach the $6500 tier faster as suggested here. First year I paid for all materials for a home renovation with AMEX. Second year I started using AMEX to pay for Comcast (cable, phone, HSI), auto insurance, cell phone, lawn service, some doctors & dentists, all online purchases and any other vendor who will take AMEX. Never use cash or checks unless there is no other way. I'll even use AMEX for a $3-$4 grocery bill - puts 15-20 cents back in my pocket each time. I have even let a few vendors know that I won't do business with them unless they take AMEX. So far electric and gas utilities won't accept credit cards. I am working on town government to let me pay my real estate taxes with AMEX - no luck yet.

I just applied yesterday for the Schwab 2% card based on the posts I have read. According to the website, they will waive the $1000 min in the brokerage account if you apply for the card first, then open the account. Can someone confirm this? I called but the Cust Service guy sounded unsure himself of the requirements.

I just got a Schwab card a week ago without the $1000 minimum. With a CSR on the phone, I set up brokerage account on line, then set up the credit card on line. Done! I called Schwab back and told them I wanted the card/number quickly for a purchase and they sent it federal express (no charge to me). But I did receive a call from Schwab within a couple days wanting to learn my investment needs for my new brokerage account. I simply told him I was only setting up the brokerage account to use the credit card and planned to transfer the rebate proceeds into another non-Schwab online checking account, which is apparently okay. Good luck!

I love using my cash back cards on just about every purchase you make. As everyone mentioned, as long as you're disciplined enough to pay it off on time in full, you can really take advantage of the rewards.

It's a shame the credit market is doing so poorly now because I remember a few years back, the market was flooded with a ton of great cards with great incentives to sign up. Let's hope that comes back in the future :)

Great breakdown/compare and contrast, FMF, and thanks for the update about new Chase members getting fewer cash-back categories (yikes!) Lucky for me, I have had a Chase Freedom Card since Nov. 06, and signed on last year to their cash rewards program (to accrue points for gas cards). I've found that while it is a good program, there are pros and cons to using it versus that of my Citi CashReturns Master Card. Currently I am set up w/Chase to receive cash-back rather than points, and yes, it has always been somewhat of a mystery to me too as to how my charges break down (or not) into the everyday categories Chase specifies for the additional 2% reward. On the statement they note that the categories defined in the description (in parens) are not necessarily the same ones used in calculating the cash reward, yet they seem to offer no clear explanation as to how they ARE calculated(??) Granted, it is somewhat quicker to accrue points than my Citi CashReturns M.C. (that I signed on with last fall) which offers no additional bonus above 1% unless shopping online. But the big advantage to Citi's card is that it has no cap or limit as to how much cash back one can receive. This is why I am planning to use the M.C. to pay for some upcoming dental work which unfortunately won't be covered by my insurance! If I was to compare their online shopping programs, where one can receive still MORE cash back linking to various retailers, I'd say the percentages offered by Chase are slightly higher than those offered by Citi (for the retailers I use anyway).

For those of you who have earned $$$ in cash back rewards, does anyone know if there is a certain amount above which it has to be reported to the IRS? I'm just curious…

Stacey- thanks for the info, I was able to set up the account without the $1000 min and link to the card over the phone. Based on your post, I asked for the card to be Fed Exed to get here before a trip next week, but they would not pay the $15 fee for me, so relying on snail mail. Oh well!

I just wanted to point out that the Chase Freedom 2% bonus awards (to come to a total of 3%) are limited to $12 per month as another poster indicated above. After that, all purchases no matter what category are all 1% back. That's the big disadvantage of the Chase Freedom Rewards cashback card...

I want to point out that AMEX is being retarded and as of 6/01/09 are dropping the 1.5 to 1.25. which is ridiculous.

Can i use my credit card to withdraw cash from ATM?...

For any still using a Costco AMEX card, I just got a notice from them that the 3% reward for gas purchases is now limited to the first $3000 in gas purchases. After $3000, the reward is 1%.

Chase Freedom is dropping (or changing) its 3% rewards for current customers. I got a letter in the mail today.

The letter reads: "The triple cash back rewards you earn on Everyday spending categories will no longer be available. However, there will be opportunities to earn 3% cash back in new spending categories throughout the year."

I'm not sure exactly what they have in mind, but I may be shopping for a new card. The 2% from Schwab is looking better.

Chase Freedom just gave the really bad news about it's new ways to get cash back - The worst of the news is that the $50 bonus when redeeming $200 in cash back will no longer be available after June 30th

Just got the same letter from Chase - switched my AMEX Blue over to cash rewards and started using that as my primary a month ago. Lucky timing on my part. I still like to have a good visa rewards card for the places that don't take AMEX, so I'm checking to see if there's anything better than Chase right now. I really don't want to drop $1000 into opening yet another account though for the Schwab card though.

George - I got a Schwab card without the 1k deposit. As you mentioned, I first applied for the credit card, then opened the Invest and Checking accounts. All done without depositing anything (to activate the checking required a small deposit, I transferred $25, but you can withdraw that after you get them all opened).

So far, Im very pleased with Schwab. Their web interface is good and they update their data immediately, vs one or two days later like most others.

CHASE letter today, as above, plus: We have added a $30 yearly rewards membership fee ... your fee will be waived for the first year. On or about June 30 your account will be automatically updated with the benefits ... you'll receive a Welcome Kit explaining all your new rewards ... in greater detail.

They lost me with the $30 yearly fee so far ... but will make a final decision after reading the full disclosure to be provided next month.

PLEASE -- if anyone gets the full disclosure, let us know the details!

This has been my card for over a year. Totally satisfied. Got the extra $50 for signup, then 2x got the $50 bonus at redemption. No complaints!

Kay (and others) --

Check out this post for an update:

Don't buy more than what you'd buy otherwise, pay off your card every month, and so on. But I'm going to assume that you're more advanced than that, and thus I'll move right on to the meat of this post.

Chase Freedom may HAVE been a good deal (I've had one for several years and have gotten quite a bit of cash back), but, as of tomorrow, July 1, 2009, the are offering only a straight 1% on all purchases PERIOD, making this card just another credit card with no particular advantage over a hundred others.

Follow up to my May 16 post ...

Never did get the "Welcome Kit explaining all your new rewards" that was "on the way".

Today called Chase to confirm status - was told:
" As of June 29, 1% all purchases + additional 2% for gas,grocery,fast food. Can no longer redeem $200 for $250 check. Minimum redemption is $50 for $50 check. Sorry I did not get the mailing w/the details 'that was sent in April', will send again. "

But -- the reward section of the web site STILL shows my card w/the old reward program.

Bottom line: Be sure and call Chase to confirm what you now have (or do not have!) -- then wait for the July statement to actually verify what the rep says. Got the feeling today was the classic corporate left hand clueless about the right hand. At the very least, the web site contradicts the rep.

I have Mastercard from (Parent company is HSBC bank) , no annual fee, 3% CB on Gas, Grocery and drug stores, 2% on everything else including warehouse purchases. I think this is a good card to have if you only want to carry one card.
A few caveats: Starting limit on the card is very VERY small Usually $2000. Within a year they raised limit to $5000 and now its approx $10,000 after THREE years. You get CB checks in $50 increments upto $400 per year. No monthly caps only yearly cap.They won't automatically mail you check, you got to request it online. I usually wait til I have accumulated close to $400 then ask for 1 check. Hope this may help someone.

I use Chase Freedom and Amex Blue Card, but here's another little trick that works for me. As a third card I switch back and forth between United and American mileage cards. They both give me a 20k mile bonus and no fee for the first year. Any charges earn the usual one mile per dollar spent. I always cancel within the year and then switch to the other one. They always try to convince me to switch to another fee-free card, but I always hold my ground and insist on canceling. After a few months I always get the same offer in the mail, essentially begging me to come back. It's kind of cheesy of me I admit, but hey it's not my fault that they keep making the same generous offer over and over again! The 20k miles are worth at least a couple of hundred bucks to me, and sometimes a lot more, such as upgrading to first class on an overseas flight (not always available, however).

I've used all three cards and still have all three - Chase Freedom, Amex Blue and Schwab Visa. Here are my pros and cons.

Pro - accepted everywhere
Pro - great website
Con - too much fine print, such as $12 per month cap etc
Con - mickey mouse rewards program, such as $200 rewards earns extra $50
Con - horrible customer service, but improving

Pro - great cash rebate, especially for those who use card for everything
Con - NOT accepted everywhere, such as grocery stores which is 5% cash back
Con - annual cash back reward

Pro - accepted everywhere
Pro - ONLY card with straight forward rewards program
Pro - ONLY card with 2% cash back on EVERYTHING
Pro - monthly cash back reward
Pro - must open Schwab account, there is NO cost but it is a hassle
Con - must transfer reward cash from Schwab account to link bank account
Con - horrible website, unable to sync with Money or Quicken
Con - horrible website, this is not joke, appearance is 10-15 years out dated
Con - honestly, H.O.R.R.I.B.L.E. WEBSITE! (IT dept should be fired)

In the end, we use the Schwab card for everything because the Amex card is cannot be used at our grocery store and groceries are the largest portion of our normal monthly expenses. It takes one extra step to transfer the Schwab cash rewards from our Schwab brokerage account to our bank account which is done electronically and instantly at no additional cost. However, it is odd that you can open a Schwab brokerage account and keep it open without putting a dime into the account other than the cash back rewards from the credit card.

Schwab brokerage has incredible customer service. However, their credit card is through a third party who has average customer service.

If Schwab Visa improves their website appearance, functionality and stabilizability, then Schwab Visa is hands down the best cash back card available.

If Amex becomes accepted everywhere Visa and Mastercard are accepted, then Amex is the hands down best cash back card available.

One correction regarding the Schwab Visa.

Schwab Visa transaction can sync with Money and Quicken, but it can ONLY be done manually and ONLY after the statement is available. If you like to sync your transactions daily, weekly or multiple times per month, it is not available. This makes it difficult to recognize or remember all your transactions in order to categorize them or to verify there is no unusual activity occurring (fraud prevention).

The sync feature with Money and Quicken are available with nearly every financial institution, which goes to show how out dated Schwab Visa's website is today. And this reflects poorly on Schwab who has a great reputation as an online brokerage account.

I am sorry to tell you but your numbers are all messed up. Did you actually get $533.32 using chase freedom from your annual expenditure of $24090? Or did you just compute and decided thats what you possibly would get? I have used chase freedom for an year and their calculation of top three spending categories is quite funny. I stopped using it after I bagged the $50 bonus reward that added up to $250 in total rewards. As some users indicated above they do have a cap of $12 return in top spending categories every month. As per that you will not get more than $144 in a year from top 3 categories that requires $4800 of spending in a year in those categories. So from your annual expenditure of $24090 what is left is $19290 which will yield only a 1% return that makes up $192.90 in rewards. Adding $50 in bonus you total rewards from a chase freedom card can not be more than

Whereas your computation shows $533.32!! which is simply not possible given the terms and conditions. I have talked to chase reps and they have confirmed me that return on top categories will not exceed more than $12 a month.

With Schwab card you will earn $481.80 for a 2.00% return. The Schwab card beats chase freedom any day. The added benefits of being able to get your cash back at the end of every month, simplicity of reward calculation, not having a foreign exchange transaction fees etc. make this card even more superior. The Schwab account is totally free and they do have one of the best interest bearing FDIC insured checking accounts in the market with no strings attached. Free life time checks, no fees on ATMs all over the world, no over draft fees etc are just few of the many conveniences Schwab checking account offers. All you need to do is tie your Schwab one brokerage account with the checking account. They also have one of the best customer services. I am not advertising for Schwab. I have been their customer for nearly 2 years now and I just love it. Just thought of sharing it.

Cool --

I've since switched to Schwab myself (this post is several months old) since both Amex and Chase reduced their rewards.

Another 2% cash back card worth mentioning is the Fidelity American Express.

It has one important advantage over the Schwab 2% card: Fidelity will cut you a check.

So you don't have to open a Fidelity account to take advantage of the 2% cash back.

I had the Countrywide card that applied your cash rewards to your mortgage. That was sweet. Maybe too sweet given Countrywide imploded. I have the Chase card now which does not wow me. I'm looking for something better. I tried the Discover Card, but have earned very little over 9 months. I missed the fine print that said that the first couple thousand dollars you charge does not accrue points. I also get frustrated that they don't count my point from the 5% categories correctly and there's no way I have found to challenge it. I can't even tell how they calculate the rewards. Also, it has $3,000 limit, which came as a surprise.

I may try the Schwab card since I have a Schwab account alreay. Thanks for the tip.

What about the Citi Forward card?

TJ --

What about it? Any details?

I use the Schwab Credit Card. It was a no-brainer since I already had a Schwab brokerage acct.

A couple of PROS about this card that was never mentioned ...

- Using the card outside the US DOES NOT incur any fees. Also the currency exchange rate is very liberal. We checked the rate we got from last months travel and it was a better deal than taking travel checks and cashing it over there. Also, Schwab Bank offers a debit card that charges no ATM fees anywhere in the world and also has excellent current conversion rate. You will be shocked at the fees other credit and debit card companies charge.

- Schwab VISA gives you access to the SHOPSAFE feature ... a single-use credit card number you can use for online-transactions. This to me is VERY VERY VERY important.

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