I'm Changing My Main Credit Card

As many of you know, I've used the American Express Blue Cash credit card as my main card for several years. It's earned me a good bit of extra income and I've labeled it as the best cash back credit card. I've even recommended it to many people. Well, the king is dead and I'm moving on.

I was tipped off by a reader's comment, did a little searching and then ran into this page. I hadn't seen this in my statements (did they even tell me?), but I assume it's true (I couldn't find anything on their site.) The detail that hit me hard was this one:

After the first $6,500 of purchases made annually on the Card, the rebate is changing from 1.5% to 1.25% for all Eligible Purchases (except for those at supermarkets, drug stores and automobile gasoline stations, which will continue to earn a 5% rebate as described below).

So, they're taking down the phase 2 rebate for "all other" purchases from 1.5% to 1.25%. And since the Blue Cash card barely won the competition for the best cash back credit card when the rebate was 1.5% (and then only won on a few tie-breakers), it's now no longer the champion IMO. I'll be moving all my charges to the Chase Freedom card asap and only using the American Express card at Costco. It's a shame, but is a sign of the times -- card issuers are getting tougher and tougher on rewards.

Unfortunately, this will put a kink on my earnings for 2009 as I already have a good amount charged on the American Express card. I'll probably use it for gas, groceries, and at drugstores through the end of the year since I'll earn 5% on those. Then in 2010, I'll switch totally to the Chase Freedom card.

Just wanted the rest of you to know what's going on with me and make sure you were aware of the change.

Comments

[tom]

I knew it!!!!

The Credit Card Bill of Rights is going to hurt those who are responsible and pay off their balances each month!! I guarantee that this is in response to that bill! Just another bailout that hurts responsible people.

[Sarah]

A "bailout," Tom? Who is being given money, and how much?

[Rajs]

Just want to check if this is for all or when you get cash back and new rules gets applied. I saw it on this month statement when I got the cash back.

[tom]

Bailing out all the consumers who carry credit card debt month by month. This is a bailout for those people. Yes, CC companies are shady, but those consumers allow them to be.

[Praveen]

Where does this put the Schwab or Fidelity cards?

[Tim]

sorry, the credit card didn't earn you anything, it may have given you a discount on your purchases at the end of the day, but it didn't earn you anything.

[Sarah]

Tom, are you actually under the impression that those people are receiving some kind of payment from the government? Or that the credit card companies are going to be forced to give them money?

[Matt]

FFFFFFFFUUUUUUUUUUUUUUUUUUUUUUUUUU

[Eric]

Sucks big time!

I thought you were going to switch to the Schwab 2% card? No?

[Zeeshan]

I can see that you are putting a lot of time and effort into your blog and detailed articles! I am deeply in love with every single piece of information you post here. Will be back often to read more updates!
Financial Spread Betting

[sam]

I suppose it had to happen some time, they are looking to make money back. I think it will put people of Amex now though if the returns aren't as great.

[Stacey]

Two comments:
1) Did you follow-up on the Chase Freedom Card limit on rebate per month. I thought someone posted on your last credit card blog that Chase limits the rebate to $12 per month?
2) I just got an update from AMEX Costco card. They are limiting the 3% on gas to the first $3000 in gas purchases. Might not impact most, but those that travel a good bit may be impacted by this change.
Cheers,

[FMF]

Praveen --

They're all pretty equal. See this analysis:

http://www.freemoneyfinance.com/2009/03/the-best-cash-back-credit-card.html

Stacey --

Can you point me to a particular resource/link/post regarding the Chase Freedom card? Doing a bit of research, this piece says there's a $600 monthly limit on the bonus categories:

http://www.stopbuyingcrap.com/reviews/review-chase-freedom-visa-rewards-credit-card/

If you're over $600 per month on your top categories, then you may simply want to go with the 2% Schwab card.

Eric --

I already have the Chase card. Will probably look into getting the Schwab card. Need to re-do my calculations once I "work my way out of" the Amex card.

[DCS]

I'm surprised by Chase. I have an older "Freedom" card (5% on gas, 1% on everything else, direct credit against monthly statement balance) that I keep expecting to change. I can't believe they didn't drop that back when gas was $4.50 a gallon.

[Luke]

I go a bit overboard with my credit cards and use 3.

My "main" card is like the Schwab 2% card which is the discontinued Fidelity 529 2% Master Card.

My other two cards are Citi Cards - Driver's Edge and the new Forward card for my purchases.

It is a bit convoluted, but I think I get the best return on my purchases this way.

[tom]

Sarah,

Of course not, if the consumers who carry balances (majority of Americans) would have actually spent less than they could afford then this bill wouldn't exist. So, yes, I see it as bailing them out, although not with money.

[Jeff]

Chase tells me if I let $200 of rewards build on my Freeedom card, they will redeem $250. Worth looking into.

[Michael]

The American Express One card offers 1% cash back on all purchases and deposits the cash back into an FDIC insured American Express Bank Savings account that is currently earning 2.75%. The savings account can be linked to a checking account and up to $10k can be transferred in or out of the account electronically. Higher deposit or withdrawal amounts can be initiated in 2-3 days via a faxed request. If you pay your credit card bills in full each month, this could be a great option to grow savings.

[FMF]

Michael --

I think I'm missing something. Does that card only pay 1% back? If so, it's a weak option compared to so very many others. For details, see this:

http://www.freemoneyfinance.com/2009/03/the-best-cash-back-credit-card.html

[My Personal Rants]

I already switched over to the Schwab 2% card and I only charge gas, grocery and drug store on the Amex Blue for the rest of the year as I'm already in the 5% bracket. Once I hit my anniversary I'll quit using the AMEX Blue altogether and go with the Schwab card for good. That is unless they cut back on the cashback too.

[Apex]

I am the one who posted about the limit on the Chase Freedom. The specific details are as follows:

Chase gives you 1% back on all purchases. There is no limit on this.

Chase gives you 3% back on your top 3 categories. This is a 2% premium over the 1% base level of cash back. On this 2% premium there is a limit of $12.00 per billing statement that they will pay out as premium cash back.

So for instance, lets say you had $2000.00 in total purchases for the month. That gets you $20 bucks in base level cash back.

Then if you had $800 in purchases at your top 3 purchases (lets say, gas, groceries and restaurants). You would normally get an extra $16 bucks in premium cash back for those purchases but instead you will only get $12 bucks in premium cash back because the premium cash back is capped at $12 per billing statement.

This would result in you getting $32 in rewards instead of $36 for that billing period.

So this would be 1.6% cash back in this example but given that you can save up until you get to 200 dollars and then receive a 250 dollar check that is another 25% premium on top of your cash back which would get you to an even 2% cash back in the example I layed out above.

Hope that helps to clarify how the Chase Freedom card works.

Unfortunately I don't think new customers can get the same terms.

[Credit]

Chase Freedom card? are you sure?

[tom]

I think I'm going to switch to a combination of the Schwab 2% card and the AmEx Costco Business Card. That way, I'll have 2% on everything, 5% on gas, and 3% on restaurants.

Is there any card that has 5% on groceries?

[Sarah]

Okay, Tom. So anything that solves a problem or changes a rule is a "bailout." That's a creative approach to English, but whatever lets you demonize other people to get you through the night, I guess. I trust you are refusing to accept the tax bailout you're almost certainly getting in your paycheck right now, though.

[Dan]

Let's be honest...some of these credit card companies were getting pretty generous with their rewards cards. What used to be a best-kept secret is no longer after the last two or three years - EVERYONE is talking about rewards cards now. I think the gravy train is slowing down. I mean, think about it...a credit card company PAYING YOU ~$500 per year for the free use of credit each month on a card that has no annual fees. It was bound to end sometime.

That said, FMF's strategy is much like the one I adopted three months ago. I use my Costco American Express card for restaurant purchases at 3%, travel at 2%, and trips to Costco at 1%, then use my Chase Rewards Plus Visa (I think this is a somewhat obscure Chase card that is no longer offered) for its 5% at gas/grocery/drugstore and 1% for everything else.

[tom]

Sarah,

Whoa, Ok, so I've obviously pushed your buttons, sorry.

Yes, "bailout" has become a buzzword. It means to rescue from financial distress. I think this bill "solves" problems that shouldn't even be an issue.

I'm not here to demonize, my position with credit cards is that if you use them, you have to play by the credit card company's rules. If there are no rules, and you don't like that, then don't use them, or pay off the balance. I agree that arbitrary rate increases and double-cycle billing aren't ethical, but does any of that matter to someone who carries a $0 balance?

This bill helps those who carry balances each month (which is a majority of Americans). Extenuating circumstances aside, they spent more than they could afford and they should have to face the consequences. Normally, I'm all about lending a hand to someone in need, but not at the expense of personal responsibility and my cash back rewards.

I can't refuse the tax credit, so yes, I am accepting it. It's not a "bailout" for me, I spend less than I earn. I'm actually using it to "stimulate" the economy.

[Apex]

Just as a side note to Tom and Sarah's ongoing debate about bailouts and cash back rewards.

Credit card companies on average charge the merchant about a 2% transaction fee on all charges. Since the majority of purchases now are done on credit cards this 2% has by necessity been incorporated into all prices. The cash back cards are taking this 2% and returning part of it to you as the purchaser. So you are getting back a portion of the increase in price of the items that was brought about by the transaction fee to the merchant.

This percentage has remained mostly unchanged for decades. Back when 95% of all transactions were cash/check this percentage may have made sense as a way of corvering the costs of building out the electronic clearning network etc. Now that this thing is fully mature and ubiquitous, I cannot understand how this fee is even 1/2 of 1% let alone 2%. Perhaps its legacy and expectations from consumers with their rewards cards.

Regardless, it is my belief that over time this fee should be slowly reduced down to a level that is close to zero which would entirely eliminate cash back rewards which make no economic sense. And I maximize my cash back, but I don't believe anything in this system of cash back rewards should persist.

It is comparable to about 10 years ago when all kinds of glass companies were giving a free box of steaks with the replacement of wind shields and insurance would pay for the entire wind shield. Clearly the glass companies were over-charging the insurance companies and passing on the savings to the consumers in the way of a bribe with a box of steaks. Everyone in turn would pay for this with higher premiums and thus we all paid for people with broken windshields to get free steaks.

This didn't make any economic sense and thats why the insurance commissioners shut it down. You don't see any offers like that anymore. This is the same thing with credit card rewards. The credit card companies are bribing the consumers to use their cards by over-charging merchants and then passing that savings on to credit card users in the way of bribes. If their real costs of running transactions was 2% then they couldn't afford to give us all cash back. It's clear that merchants are being over-charged and we are in trun being bribed and we are all paying for it with higher priced products to cover the merchant fees.

It is my sincere hope that these fees are reduced and cash back rewards go away. In a few years the overage will be squeezed out of the price of products by competition and we won't be trying to use different cards for different purposes to try to reclaim a portion of the overage that we pay for products.

If this bill were in anyway to start eliminating cash rewards to the point where it would eventually get efficient credit card companies to lower the merchant fees, I believe it would be better for everyone involved and make things simpler. We should not be bribed with our own money.

[tom]

Apex,

My point with the bill eliminating rewards was that CC companies will start reducing rewards programs because they are losing money through the bill's provisions, not because the bill makes them do so.

CC companies will not be lowering merchant fees anytime soon, in fact, they may raise them to replace lost income from the bill in the same way they are reducing rewards programs.

My overarching point was that this bill is "solving" problems that are not real problems. I don't consider consumer irresponsiblity a problem of the US Government.

[Michael]

Re: The AMEX One card. I agree that the 1% cash back is not as high as some of the other cards. However, most other cards do not allow you to "get the cash in hand"; you can only use it to pay off credit card balances. The AMEX One card gives you the CASH and places it in a savings account earning 2.75% (not many banks can give 2.75% on liquid cash; the highest I can find is 1.65% at CitiBank and HSBC), you have access to that cash at any time.

[FMF]

Michael --

Personally, I'd rather earn $500 in a year and have a statement credit than earn $250 a year, have access to it anytime and earn a very low interest rate on it. Maybe it's just me...

[Jason]

I checked my AMEX Blue Cash online account access after reading this post, and it's still showing I'm getting 1.5%. Are you sure you are correct on the change, or is it just not a change for everyone?

[Jason]

Ah, apparently the change occurs on June 1st. Disregard my comment.

[Ruth]

You may want to reconsider your decision - I just got a letter from Chase about changes to my Freedom card rewards. As of June 30 on my card, no more 3% on the top everyday categories each month; they are changing to a rotating category selection like Discover. They are also discontinuing the $50 bonus when redeeming $200 in rewards.

So basically you will be getting a straight 1% rewards on purchases, with bonus rewards on whatever the current category is. I assume this is going to be rolled out to everyone sooner or later; I have a Visa Signature card and mine takes effect June 30.

[BK]

Ruth -
Likewise, I just rec'd a similar letter in the mail. Same thing: "Everyday" category structure being nixed, as is the the $50 bonus on $200 in rewards. Ironically, I believe it says something like "see inside for improvements" to my reward program on the envelope, yet I struggle to determine which of their bulletpoints is an improved benefit.
(Perhaps the new "no caps or expiration dates" on rewards? Not for me. Caps are not an issue for me, nor for most users, and Chase's expiration dates are something like 24-36 mos.- more than reasonable time for most to accumulate and redeem the rewards.)

I'm unfamiliar w/ the Discover rotating platform. Does this mean, for instance, that one quarter "Gas" would get the 3% rebated, and another quarter it would be "Restaurants"...etc.?

I suppose I'll make a few bigger ticket purchases I would've otherwise held off on in the next month or so, to reach the $200 reward threshold and earn the $50 bonus one last time. (For my expenditure level, the extra 50 is meaningful.) Looks like whether done directly or indirectly, it's "mission accomplished" for Chase in getting me to spend more, sooner.

[Freedom Fighter]

I also received a letter from Chase about the "improvements" they're making to my Freedom card. Very disappointing.

Has anyone tried to change their bill due date to squeeze out extra time to get to $200 for the $250 check before the offer expires June 30? I put in a request yesterday which (I hope) will move my bill closing date to June 25 (instead of June 8). Since I can't access the cash back until the bill closes, I'll only have until June 8 to accrue charges if this doesn't work. I'll post back with results.

Guess I'm in the market for a new card. Current front runners include going back to AMEX Blue (had for years, just changed this year to putting everything on the Chase), the Schwab 2% VISA or one of the Fidelity cash back cards (1.5% VISA, 2% AMEX). I really like the simplicity of one card (a VISA, to pay utilities - living in a cold climate it makes a difference) so maybe the 2% Schwab will be the new winner. Didn't really want to open any more brokerage or checking accounts, though...

[jason]

here is a link to a forum talking about it and an attachment of the chase freedom flyer.

http://forums.slickdeals.net/showthread.php?sduid=38736&t=1344519

if chase freedom is flat 1% on everything...does this make AmEx Blue the better card now?

[Susan]

I got the letter on my Chase Rewards card too ... in addition to the things you all have mentioned, there is now (after no fee the first year), a $30 yearly fee (this was under "important changes to your account" on the first page of the letter).
I'll be switching to something else ...

[Jill]

Bummer - hadn't heard this yet, either about the AmEx Blue Cash. I'll keep using it though as we buy gift cards at the grocery store to max out our 5% reward category...but still, I'm going to miss that 0.25% reward!

[Freedom Fighter]

As promised, I'm posting back with my results to change my billing due date for extra time to earn $200 back for the $250 check before it goes away 6/30/09.

It worked even better than I planned. I put a request in on May 11 to change my bill due date from the 28th of the month to the 15th. I figured my current cycle would just be lengthened. Turns out I actually gained a billing cycle, and therefore an extra cash back bonus period. I maxed out the bonus reward category during those 18 days of my May bill (5/8-5/26). My next bill will close June 26th, just in time for the rewards to post to my account (usually the next day) and order my $250 reward check.

Another unintended benefit - it looks like I also gained time to pay my previous bill. It's been rolled into my bill due June 15. There are no finance charges noted on the bill, so they essentially gave me an extended grace period for previous bill. If you carry a balance, however, there is no grace period, so there would be more finance charges and interest in that case. Although I'm bummed about the Chase Freedom changes, I'm happy the whole thing worked out for me.

For my new card, I decided to go with the Fidelity Investment Rewards Visa. It's only 1.5% back on everything until $15,000 charged, then it's 2%. I'm trying to simplify; I already use Fidelity for a brokerage account, 401(k) and their cash management (checking) account. Having this card automatically dump the cash back into my Fidelity cash account is perfect for me. I didn't want another brokerage account (Schwab for their Visa), nor did I want another AMEX (Fidelity's 2% on everything card) I already have a Blue Cash card, which barely gets used now.