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Chase Freedom’s rotating categories: Are they worth it?

You can earn up to $300 a year in cash back, but there are ways to do even better

Summary

Chase Freedom is a fine card that gives you 5 percent on rotating categories every quarter – but the key to maximizing the card is to pair it with a second Chase card.

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Dear Cashing In,

I keep reading about the Chase Freedom card. It sounds like a good deal because you get 5 percent cash back in different categories.

Should I get that card? What is the catch? – Brian

Check out all the answers from our credit card experts.

Ask Steve a question.

Dear Brian,

The Chase Freedom card is a popular card, mainly for the reason you describe: You earn 5 percent cash back in spending categories that rotate every quarter.

That is impressive because 5 percent cash back is a high rate of return. The highest flat-rate cash back cards – that is, those that give you consistent cash back no matter where you use the card – offer usually 2 percent cash back or less.

There is a little more to the story that you should know.

  • First, the 5 percent back is capped at $1,500 in spending per quarter on specific categories that rotate every quarter. Any other purchases outside those categories earn cash back at a rate of 1 percent.
  • That is a cap of $75 in cash back per quarter from that 5 percent rate. Any additional spending over $1,500 per quarter on those categories is just 1 percent back.
  • Second, you have to register each quarter for the bonus categories. That means that in order to receive that 5 percent back – for the second quarter of 2019, it’s at grocery stores and home-improvement stores – you have to tell Chase that you want those bonuses.

See related: New Chase Freedom bonus categories: Back in the game

Chase Freedom: Are there better cash back options?

There’s nothing wrong with the Chase Freedom card.

  • It has no annual fee, which is another draw.
  • Plus, it has a $150 sign-up bonus, after you spend $500 on purchases in the first three months.
  • In addition, Chase offers a sister card, the Chase Freedom Unlimited, which also has no annual fee and gives a flat 1.5 percent cash back (with no 5 percent rotating bonuses).

Just keep in mind that if you use the Chase Freedom, the rewards you earn on those bonus categories are limited to $300 a year.

That’s not bad, but there are a lot of other reward cards that have perks worth more.

And if it is cash back you are after, you might be better off with a card that gives a base rate higher than 1 percent and that doesn’t cap the rewards – such as the no-annual-fee Citi Double Cash or Fidelity Rewards Visa Signature (each at 2 percent with no cap).

Depending how you spend your money, it might make sense to go with a card that gives fixed category bonuses, such as the Capital One Savor Cash Rewards Credit Card – unlimited 4 percent on dining and entertainment, plus 2 percent at grocery stores. The Savor card also comes with a $300 sign-up bonus if you spend $3,000 in the first three months, but charges a $95 annual fee, waived the first year.

Using Chase Freedom rewards to save on travel

However, there is a way to make the rewards from a Chase Freedom or Chase Freedom Unlimited more valuable. The answer: get a second Chase card.

If you have a Chase card that earns Chase Ultimate Rewards – such as a Chase Sapphire Preferred Card ($95 annual fee) or Chase Sapphire Reserve ($450 annual fee) – you may transfer your rewards to one of those cards from Chase Freedom.

That way, you can use the Chase travel portal to pay for flights and hotels and other travel expenses using points – at a greater value than cash back. Further, if you have the Preferred card you get a 25 percent bonus if you redeem Chase Ultimate Rewards points for travel – and a 50 percent bonus if you have the Reserve card.

Once your points have been transferred to either card, you can also transfer them directly to an airline or hotel frequent flyer program, which can yield a better value than cash back as well.

Chase Freedom: Is it worth it?

That option will appeal to you only if you are interested in travel rewards, and if you don’t mind paying the annual fee that those other Chase cards have.

Also, keep in mind that Chase limits the number of cards from any card issuer that you can receive in a 24-month period to five.

Taken by itself, Chase Freedom is a fine card, with the rotating cash-back rewards of 5 percent a strong draw.

But the card can become even better if you pair it with a second Chase card and use it wisely.

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Published: March 15, 2019

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Credit Card Rate Report Updated: July 17th, 2019
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