You may have seen the ads on tv, or on the net about this new Chase Freedom Credit Cards Rewards program. So what is it and how good is it?
Advantages
You can choose between cash or rewards. Your account earns either cash or rewards, and once a month you can switch between the two. The conversion is straight up, 1 point for 1 penny, so you lose nothing.
If you accrue $200 in cash, you will earn a $50 bonus and receive a $250 check instead. Nice!
Chase has a unique feature in that not only you earn 3% in select categories, but those three categories are automatically selected each month out of fifteen categories. The three categories you spend the most, are the ones that earn 3%! This is automatically done by their computers, so you don't need to select or adjust anything in your account! Nice!
Please note that the fifteen categories do not cover every single purchase you make. They cover 15 broad areas, which are: Grocery stores, Drugstores, Gas/Convenience stores, Fast food and quick restaurants, department stores, pet stores/vets, movie theatres and movie rentals, phone/cell bills, cable/satellite/ISP bills, gas/electric/utilities, beauty salons and spas, gym memberships, dry cleaners, and local commuting services. Each store/business must be correctly identified with Chase and categorized as such for the reward to be earned. Otherwise, no 3% reward. This is more evident with some places that sell food but are not listed as quick service or fast food restaurants.
You earn 1% cash back on everything else, unconditionally
Points expire in 3 to 5 years.
The card has the Blink chip so you can use it at some participating locations without swiping. Be aware that there are different "wireless" technologies, and they are not all compatible. You see technology companies never learn. I'm sure eventually they'll all be interoperable but for now, you can only use it at participating Blink locations. Check ChaseBlink.com for more details.
They also have an online shopping program where you visit retailers from a Chase website called Chase Rewards Plus. This ranges from 1% to 20%, usually the smaller and more niche the retailer, the higher the percentage. A number of big chain stores are participating, so if you are shopping online and are not using other referral programs such as Upromsie or FatWallet or eBates, be sure to check out the Chase Rewards Plus program! And Chase is not the only one doing it, there's Shop Discover, Shop AMEX, Citi Bonus Cash center and Thank You Network, etc, etc.
Disadvantages
There is a maximum of $600 per month in purchases that earn the priviledged 3%. For purchases over $600, you will earn the standard 1% rate. For example if you spend $800 in groceries in August, you will earn $600 x 3% plus $200 x 1% = $20.
They do not tell you which individual purchases earns a 3% reward. They do provide the three top categories in the statement but it's up to you to figure out which purchases qualified where. Grab a calculator or your spreadsheet!
Strategy session: Comparison with other rewards programs
Discover has a seasonal 5% Get More rewards that overlaps with some categories. For example right now you can get 5% on restaurants with Discover. So it is more advantageous to earn 5% than 3%. However Discover maxes out your 5% benefit to $400 in purchases for the duration of the promotion ($20 in rewards in a quarter), so do your math to get the most out of it. After the first $400 in purchases in the 5% Get More categories, you will earn your current Discover rate, which could be as low as 0.25%. OUCH! But given that maybe half of the quick service/fast food restaurants take Discover, you will still benefit from using the Chase Freedom card at 3% vs 1% flat from other credit cards.
Citibank's 5% on groceries, drugstores and gas stations is better, but Citi has started rolling back those down to 2%. However, if you are participating in a special Citi promotion or you are still on a 5% card, it earns more to get 5% than 3%. Please note that the difference is close because in order to get a $50 gift card at Citi you need 60,000 points while at Chase you need 50,000. A $100 gift card is $100 in both programs. Still Citi has an advantage when you do the math.
vs 1% flat rewards programs: Chase Freedom wins those by a mile! Because the Freedom card gives you 1% on everything, and 3% on the top 3 categories, vs 1% on everything. You don't need a calculator to figure out what earns you more!
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