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May 12, 2009


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I have the Amex Green Cashback card and they are still showing the old cashback percentage tiers- 5% on everyday & 1.5% on everything else after $6K. I'll keep an eye on it to see if it drops.

I have a Chase Freedom card and received my letter yesterday with the same changes.

Yet more evidence that chasing credit card deals (like chasing credit scores) is wasted energy that could be better spent on matters of greater importance to your financial well being.

The entire credit industry is driven by manipulation of moving targets, now being assisted by meddlers in Washington.

The Costco AmEx card just changed the gas from 5% to 4% with a $10k limit. Someone evidently took this one to the extreme. It's still a good deal especially when you buy gas at Costco which is already cheapest in town.

I received my statement on the 8th and there was nothing about it yet. I don't think I can get to the $200 threshold by June 30th, so I may be out of luck when it comes to getting another $50 bonus. Might be time to consider ordering a bunch of $1 coins ;-) and prepaying some bills if you're close enough to get to that threshold.

I will be interested to see the terms of the quarterly bonus categories. While unlikely, they could still make a pretty enticing deal depending on the categories and, more importantly, the limit on rewards. I switch to the Discover Card for some spending during certain times of year because their limit on rewards is higher even though the categories are a little more restrictive.

The letter shown in the images linked in your article is exactly like the one I got. There are also many people on Fatwallet and Slickdeals reporting that they got the same letter. I no longer trust customer service reps regarding information on upcoming changes; they don't seem to have a clue about anything. I suspect that everyone who has a Chase Freedom card is going to be receiving this letter in the near future, if they have not already gotten one. Some people on the forums I mentioned above have reported getting an offer for an "upgrade" to a supposedly higher level card which (of course) has an annual fee.

The tidbit I particularly liked was the last line of item 1 on the back: "See Rewards Program Rules and Regulations which will be mailed after your account is updated." That one line tells us precisely how we can expect to be treated by this company (keep us in the dark and feed us you-know-what).

What do you expect. With increasing number of credit card defaults and new regulations that both increase risk of lending and reduce profits,certainly they would cut rewards. Higher risk + lower profit = less rewards.

When most bloggers were saying how happy they are with the new regulations, I warned that it would mean fewer rewards.

Yes, I got the same letter. And apparently over a year ago they switched to only gas/groceries/fast food as the categories. Which I never knew about!

I'm switching to Driver's Edge. 3% gas/groceries/pharmacies with $1 for every 100 miles you drive.

With 12 months promotional of 6% on those categories.

I asked my friend who has the card and he reported getting a letter recently too.

I got the same letter, FMF. Came in a separate mailing yesterday, not with the monthly statement. I wonder if it's worth the hassle of finding a new card or if the glory days of reward programs are over....

I have the Chase Freedom card but am also a Chase checking customer. I called the 800 number on the back of the card and the service rep said she saw no changes coming on my card. She said that people who applied and got the card without a Chase checking account had 6 months to open a checking account, or else the reward point structure goes down. Is anyone else a Chase checking customer AND got this letter?

Has anyone been offered the "Chase Sapphire"? Interestingly, my wife and I both have separate Chase Freedom cards - so we could use six categories :-)

My wife got the letter that you posted in your article, and I got an "invitation to upgrade my card to the new Chase Sapphire - at no cost."

I'm more than a little bit skeptical. I can't find any info about it on the web, except for a thread on Fat Wallet.

Never mind, it is now reflected on the Chase site. If you are a checking customer, on decrease in reward benefits :-)

I found a pretty interesting ABC News report about rewards credit cards. Among the topics discussed, Melody Hobson points out that many rewards cards are scaling back the 'value' of their rewards programs.

You can find the story here:

I also got the same letter. The rewards categories are gas/grocery/fast food, they are getting rid of the $50 bonus for redeeming $200, and THEY ARE ADDING A $30 ANNUAL FEE, although it is waived this year. We already had the schwab card to use in conjunction with this one, so we will be cancelling this one. Unfortunately, we are $50 away from the $200 level and probably won't make it by June 30.

My Chase Freedom only gives me 1% back (I would cancel it, but this is the oldest credit card I have). But I have a Chase Rewards Card that allows me to earn 5% on gas, grocery and drug store purchases and 1% on everything else with a max of $300 a year in rewards (so far they haven't changed the rewards and I have the card for about 4 years). My Costco Amex gives me 3% on gas and restaurants, 2% on travel, and 1% on everything else including Costco purchases. I also have a card from Emigrant Direct that gives me 1.4% on everything as long as I have an average of at least $10k in my EmigrantDirect Savings Account(s) for the past 6 billing cycles (hey, I need an emergency fund , right?).

Yep, I got the letter yesterday, not with my bill. I had set up all my telecommunications bills (cable, internet, landline phone, cell phone, pager) with this card and was using it for groceries only. I will probably drop this card and just use my Schwab card for all these purchases. Bummer! I didn't have it long enough to get to $200 either.

Brook --

Maybe that's it! I'm a Chase checking customer as well. Hmmmmmm.

I got a similar letter two days ago. Mine actually tells me that I can continue to get 3% back on gas, etc., but I must pay a $30 annual fee. When I called customer service, I was told I would need to call back in June (30th) to get my account in order where it wouldn't have an annual fee because "all the accounts roll over at one time" and he didn't have any control over it!

Anyone think it's possible that they're dividing customers up into groups? Some getting a $30 annual fee, some getting reduced benefits, some being offered other cards, some having no changes at all? Looks like a lot of varied information so far -- quite confusing.

I don't remember seeing anything about an annual fee but maybe I didn't read it carefully?

I have not received a notice yet, but have read about it on other sites already mentioned. Hopefully, we will have enough of a rebate this month to push us over the $200 so we can grab the $250 before it changes. If not, then we will use it just enough next month to put us over and get the request made after our statement cuts on the 19th. Once we get the rebate, then both of our Freedom cards will be cancelled.

My letter says nothing about an annual fee either. And it also says there are "More details to come"....which worries me. I wonder if those details will come before 6/30?

One positive is that you can use the cash back to directly reduce the account balance which I hadn't noticed before.

It says there will be 3% cash back in "new spending categories throughout the year". I wonder if they will change from month to month?

Kevin --

That's what I would guess -- that they'll rotate the categories. Not great for me as I only spend anything worthwhile in a few of their categories.

I believe you could use your rebate to reduce your balance before as long as it was in $50 increments and not the $250.

I haven't gotten the letter but just two days ago I cashed in for $200 + $50. I guess I will cancel this card. I have had it for about a year and a half, it is not my longest line of credit.

I'll be interested to see what card is now ranked "best". I'm thinking of getting a blue cash card, but maybe the Costco card would be better, I am already a Costco member. I put about $1k a month on my card and pay it off in full each month. Any advice?

I got the "CHANGES ARE COMING!" letter. I think what really bothered me the most about how Chase is handling this is the way the letter was framed. Look, I know times are tough, I understand rewards are going to get cut just like the interest rates on my savings accounts. But to package it as some sort of improvement or exciting change is disingenuous to say the least. I would rather them feed me the truth and say "Times are tough, we're cutting back" than this BS.

I recently converted my AMEX blue to Blue cash, and that seems like good timing on my part. I'll probably be looking into the Schwab for my Visa card - perhaps even my primary.

I have been a freedom customer for a long time. I have a very high limit on the card. I put most of my charges on this card (about 2k per month) which results in tons of merchant fees for them. There is zero chance of me ever defaulting on the card and they may know that based on my past patterns (my credit score is through the roof and the card is on auto pay each month).

I think FMF might be on to something with dividing customers up into groups. I too got a separate letter a few days ago offering me the sapphire card. I immediately told my wife what a joke that was because clearly they were trying to encourage us to a less valuable card. I tried to find info on that card and could find nothing on it. It appears to be totally brand new. So far they have said nothing to me about changing the card, adding an annual fee, reducing benefits, or taking away the 50 dollar bonus.

That's not to say that they won't change mine too, but the first thing they have done is tried to trick me into switching the card. If that doesn't work (it won't) maybe they will "take it up a notch" :)

I also agree with someone else here that playing pin the tail on the credit card rewards donkey is a frustrating merry go round that isn't worth chasing every little change. If freedom changes today, schwab could change tomorrow. It's just too much of a hassle to keep chasing cards in this volatile environment. After things settle out and its more likely something might last for a year or two it might be worth it but for now its just a blind man's bluff.

I will also repeat what I said on another post a few days ago. We would all be far better off if merchant fees were lowered to 0.5% instead of the customary 2% (thats more than enough to make a good profit on clearing transactions) and then the rewards were all dropped and CC companies charged appropriate interest to make up for bad borrowers. That's what interest rates are for and then over time that 1.5% saving would result in cheaper products at the store and we wouldn't have to play rewards games to get our money back that we were over-charged in order to get the goods we buy. Its a messed up over-charging system that supports these concepts of rewards in the first place.

Jason --

I think it's the Schwab card. See this:

I might be leaning towards the Blue Cash card for the following reasons.

1) I've always wanted an AmEx. Dumb reason I know, I guess it is that darn member since on the card. Also I have a Capitol One Mastercard as a backup in case someone won't take AmEx

2) I'm not sure I want to open a brokerage account. Another account to open and manage isn't super appealing to me. Also I fear I would be tempted to trade some stocks with my rewards and just loose it all since I don't know jack about stocks. Yeah I should have some self control, but why tempt myself.

3) Also, while a waiting a year w/ AmEx to get my cash back is a long time, I feel like I would squander the monthly payments from Schwab.

Oh indecision...

I agree wtih Apex about wanting the credit card transaction fees reduced. However, I don't believe that the transaction fees are charged by the credit card companies themselves, but by Visa / MasterCard. I do know that some cards have higher transaction fees than others, which does indicate a portion of the fee is charged by the card company itself. However, I'm pretty sure that Visa and MasterCard charge the majority of the ~2.5% fee that gets charged to the merchant as an interchange fee.

I got the "$30 annual fee" letter with a twist. The fee is waived for the first year.

I have pretty high balances (2-4K) which I pay off each month. Not sure if that has anything to do with the letter I got.

I plan to keep the card for at least the first year. I think we can expect to see alot of things happen in the industry that may make this the standard course of action. Good deals come with a price apparently.

I was checking my account online to see if there were any announcements or whether things had changed already (didn't find any) and came across this posted on the side of my rewards details:

Did you Know?

As an active Chase Checking customer, you get exclusive benefits!
MORE REWARDS. Chase Freedom gives you 3% cash back on your top 3 Everyday categories. As an active Chase Checking Customer, you'll earn 3% cash back on your top 5 Everyday categories – a Chase Checking account lets you earn in 2 extra Everyday categories!
NO EXPIRATION. Rewards don’t expire when you have an active Chase Checking account, so save up and redeem when you’re ready.
REWARDS QUICKER. You can redeem at the standard $50 level, or as an active Chase Checking Customer redeem $10 in rewards for a $10 check!

To those of you with the 'Chase Cash Plus Rewards' card that used to get 5 points for every dollar spent on gas, groceries and drug stores... it looks like they changed this to 3 points per dollar spend on those categories.

I have had this card since 2005 and I know things changed a while back for members who did not have the card for awhile but it looks like it has affected us who have had the card a longer time.

I guess this only makes sense for these companies to do this

This is very interesting. I got a similiar letter to the one that you scanned, but like some people have commented above, on my offer they are offering 3% back a year on gas, groceries and fast food for a $30 annual fee that will be waived for the first year. Thanks, but no thanks, Chase. I wonder how they decide who gets what offer?

My favorite thing about the letter--the envelope that it came on said something like "Exciting new changes to your Chase account!".

So glad I decided against the Freedom card. I ran an analysis based on our spending, and even maxing out the $600 cap for 3%, it showed we would come out better with the 2% Schwab. I ruled out Amex because Sams Club does not take it, and Amex does not give you the 5% at Walmart. Those two stores account for a chunk of our groceries. Sam's also does not take Visa credit cards (only debit), but the wife devised a way around that. She buys a gift card at Walmart (which Sams does accept) with our 2% Schwab. Based on our first month of use, they rebated the full amount we spent ($2347) for a nice cash back of around $47. Not bad for stuff we buy anyway. Thanks FMF for the past columns on the Schwab card. Highly recommend it!

This comment by Rick got me thinking:

"However, I'm pretty sure that Visa and MasterCard charge the majority of the ~2.5% fee that gets charged to the merchant as an interchange fee."

I have always felt these fees are too high but I don't actually know who gets them. So I decided to dig a little bit. It turns out that the information is spelled out on the IRS website.,,id=187075,00.html

The break down is as follows:

1. Visa/Mastercard get a small processing fee. The amount is not listed but it appears to be negligible.
2. The Merchant/Acquiring Bank gets approximately 0.5% (less the Visa/Mastercard processing fee). This is the bank that is working on the merchant end to create the Merchant account that the Merchant (read store) uses to process their transactions. This 0.5% is actually negotiated between the merchant and the Acquiring Bank. Bigger merchants get better deals than smaller ones generally.
3. The issuing Bank (thats the one who gives the consumer their credit cards, Chase, Citi, etc) gets 1.5% This number is fixed by the credt card network (visa/mastercard/etc) but it is retained exclusively by the issuing bank.

As described on the IRS page it works as follows:

If a consumer charges $100 on their card, the following things occur:

1. The merchant submits a charge to its Merchant/Acquiring bank for $100 and receives $98. This results in receiving $2 less than the price sold for and thus having to charge the consumer that extra 2 dollars in higher priced items.

2. The Acquiring bank submits the charge of $100 into the Visa/Mastercard system and receives $98.50 in return (less the small processing fee) having paid $98 to the merchant and retaining the $0.50 cents.

3. When the cardholder pays their full bill the issuing bank receives the full $100 having paid out only $98.50 to the merchant bank, thus retaining $1.50.

So it's pretty clear that almost all of the credit card fees are split between the 2 banks on opposite ends of the transaction with most of it going to the bank that issues the card.

That 1.5% Interchange fee that the issuing bank receives allows them to pay out their rewards.

I am glad Rick's comments lead me to research this because it now confirms my belief that fees for cards should reduce down to close to 0.5%. Most of this Interchange fee is not need as evidenced by the 1%+ rewards that most cards offer. This fee should not be used to cover bad debts. It should cover simply the cost of transacting the business. At most 0.5% fees on both sides of the transaction should squeeze a full 1% out of the credit card fees. Likely I suspect both sides of the transaction could make profit on fees even smaller than that. What business couldn't make money simply providing small fees for electronic clearing for 95% of transactions in a 15 Trillion dollar economy of which 67% is retail spending? Thats 10 Tillion dollars in transactions.

10 Tillion with 0.25% fees for clearing would equal 25 billion dollars. This is a massively huge number. Realize that this means the merchant banks are receiving 50 Trillion dollars in fees and the issuing banks are currently receiving 150 billion dollars in fees just to clear the funds. Thats why they can give 2/3 of that back in rewards. It's clear it could all be squeezed out and if Visa/Mastercard/Am Ex didn't have a alligopoly on the clearing network it would get squeeze dout just as 10-10 numbers squeezed long distance from 25 cents a minute to 3.

I am convinced a similiar competitive aspect to the credit clearing network would do the same thing for clearing fees and all this reward non sense would just go away, just like free steaks for windshields went away when they stopped the glass companies from over-charging the insurance companies and then passing on the bonus to customers via free steaks.

Interestingly a new group has just started advertising and lobbying to get credit card interchange fees drastically reduced. They started an 8 state advertising campaign last month, as they describe here:

There is also a website which describes the fees and their effects:

These sites all confirm the data I posted above about the fees (although it appears my estimate of 150 billion in interchange fees is 3 times too high. Apparently there is still a fair amount of things not on credit cards (cars, homes, mortgage payments, I guess it makes sense). But the point they make is that its still way more money than they need to clear the transactions. In fact they make the point that only 13% of the Interachange credit card fees go to the cost of the electronic clearing network. That would mean that the cost of clearing is not 2% of the gross sale but 0.26%. So my estimate that 0.5% in total fees leaves plenty of profit seems correct. That would still give them nearly a 50% profit margin on the cost of clearing the transaction.

The real kicker is that the claim is being made that a good portion of the rest of the fees is going to fund credit card advertising. There are many reasons why it would be great to reduce this advertising. Junk mail, waste of environmental resources, encouraging people to make poor credit decisions, etc.

So given that people are starting to actively campaign to reduce these fees, maybe eventually they will come down. These things tend to move very slowly but its possible that rewards and interchange fees days may be numbered.


I also have my Chase Cash Plus Rewards card since 2005, but they haven't changed the rewards. When did they change to 3%? On my last bill, I got 5% for gas and groceries. I have also checked my account online and this is what they have:

"Your Chase Cash Plus RewardsSM card earns rewards 5 times faster on everyday purchases. With your Cash Plus Rewards card, you earn 5 points for every eligible dollar spent on gas, grocery and drugstore purchases. Plus, you earn 1 point for every eligible dollar spent on purchases made elsewhere."

I have the Chase Rewards and did not receive the letter nor could I find a change in the terms online, still getting 3% on my highest spending categories. On my most recent statement however, they reduced my minimum payment to $0, even though the new balance is over $900.

Liz, Chase offered the same thing to me for my last Chase Freedom bill.

"You have the flexibility to skip a payment. You must pay
past due and overlimit balances immediately. However,
the remaining minimum payment for this month has been
reduced to $0."

My balance was well over $3000. They haven't made a nickel off of me yet, but they try things like this all the time to get me to pay some fees or reduce my rewards. The ability to redeem my reward directly to my card balance in $10 increments was another trick to get me to cash in before I hit the "free $50" threshold. I guess not enough people fall for these tactics, so they are now targetting the rewards more directly.

My favorite thing about receiving this letter is that the envelope said something like "Exciting new features to you Chase Freedom!".

Yeah, pretty exciting that you're taking away $50 every 8 months and not giving me 3% on stuff.

Luckily I'm at 196.99 and my statement closes May 15th.

I have a chase perfect card - 3% cash on gas, 1% on everything else...just got the letter tonight that I have been "upgraded" to the new chase Sapphire card with ultimate rewards which gives me less rebates and earns "points". Explain how my being "one of our most valued cardmembers " results in my being "upgraded" to a less valuable card? I guess I will start using my costco amex card for everything now....

If one doesn't charge a whole lot on a credit card (under $300/month), and the chief expense categories are gas, disocunt store, and online, what cash-back card would be the best choice? The Visa Pen Fed card ( is highly recommended on, but most folks here are promoting Chase Cash Plus Rewards or AmEx Blue Cash. Is there a site in which compares all such programs?

I would say it all depends on the person for the question of best cash back card.

Here's my story:

I have been using AMEX Blue Cash for most of my spending except where places dont accept AMEX, then I use my Chase Freedom. Both I've been using since 2007.

For AMEX Blue Cash (2007-2008):
Charges: $20063.16
Cash Back: $298.60
Percentage: 1.49%

For AMEX Blue Cash (2008-Now):
Charges: 19959.28
Cash Back: $265.38
Percentage: 1.33%

I guess I'm going to apply for Charles Schwab Invest First 2% on all charges. At least it gives me exact 2% and its a VISA, its accepted everywhere.

This card is no longer a good deal unless you're a large spender in the "flavor of the quarter" bonus categories. The 3% bonus offers don't kick in until you spend a large amount (i.e. over $500).

I have this card for a year now. Recently, they reduced my credit limit even when my credit score was excellent. Reason: "used only a limited amount of your credit access line". I have a amex card for few years now and I don't use it for more than a couple hundred dollars and "never" had amex complained about it.

I think these are signs of things to come.

Chase can take their cards and SHOVE IT where the sun don't shine. They are nothing but LIARS. They tack on all sorts of fees to the card and paying the minimum or even half of the card balance isn't good enough for them. They will just close your account after a couple of times of you only paying half the card balance, report you to the credit bureaus as "delinquent" and send 10 different debt collectors after you. I'm not kidding about this.

There is NO negotiating with them. It's either you pay the card in full or you will be paying through the nose with their miscellaneous fees. I wouldn't recommend Chase to a dog for Christ sakes.

Don't get a card with Chase and certainly DO NOT open a bank account with Chase. You will be SORRY beyond belief if you have an account with Chase. Chase will close your bank account without warning if you don't keep more than $12 in it at any given time. $12 that goes towards their "monthly service fee". And after they close your bank account, your name gets listed in Chex System and you have NO choice but to get a second chance checking account. There is NO way of getting your name out of the Chex System.

If you have an account with Chase, CLOSE IT NOW. DO NOT WAIT. DO NOT PATRONIZE THEM. Don't patronize businesses that practice deceptive tactics. I will HATE Chase forever and a day. I don't want anyone to go through what I went through with Chase. It's mind blowing the way they operate.

I just received a letter from Chase today that they are changing my Freedom card to a Sapphire card automatically, now more 3% cash back and no more $250. checks when you save up $200. in rebate credits!

My question now is, is this card better than AMEX Blue Cash or should I switch to AMEX?

UPDATE - I noticed the small print on the letter I received stated, "If you wish to keep your current Chase Freedom card, please call by October 15th, 2009". And they list a special 800 number to call.

I called today and requested to stay with my current Chase Freedom card plan and they confirmed that I will now remain there. I hope this is the case going forward. I've received over 4 $250. checks in the last 2 years.

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