Choosing the best credit card is a tricky business. There are a myriad of different credit cards out there with different benefits - cash back, points, miles, 0% interest. The card that's best for you will depend on your lifestyle and current monetary situation. For me, because I have no credit card debt and because I am mainly interested in growing my savings, I am torn between two different types of cards - cash back and 0% interest. At first, I thought for sure that the cash back card was the best bet, but then I started considering a few cards that offer 0% interest for up to 15 months. So which is best? I haven't figured it out yet so I'm going to lay out what I feel are the pros and cons of the two cards that I have chosen - the Chase Freedom card and Blue from American Express. Here we go.
Chase Freedom Card - Advantages
- Offers 3% cash back on your top 3 spending categories (recalculated monthly) and 1% on all other purchases
- $100 sign-up bonus
- Cash back rewards are available to withdraw after you earn $50, however, if you leave it until you reach $200, they will give you an additional $50
- No annual fee
Chase Freedom Card - Disadvantages
- If a merchant has not specified their spending category, it will be lumped under "other." My dentist did not categorize himself as "Medical services" so even though it was clearly one of my top spending categories, they claim there is no way to change it in the system so I only received 1% for a cool $1,000.
- 0% interest for 15 months - If you carry the balance (and why not, you're not paying any interest), you could put that money in a high yield savings account and earn 3% on all of your purchases.
- Earn 1 point for each $1 spent and redeem for various rewards. 1 point = approximately $0.01.
- No annual fee
Blue from American Express - Disadvantages
- Carrying a balance could lower your credit score
So, let's calculate the benefits based on spending $6,000 annually on a credit card.
Chase Freedom = $90.00 (50% at 3%) + $30.00 (50% at 1%) + $100.00 (sign-up bonus) + $50.00 (additional money for letting balance reach $200.00) = $270.00
Blue from American Express = $83.19 (savings interest) + $60 (rewards) = $143.19
Looks like the Chase Freedom card would be the best bet, just for the $100.00 sign up bonus. After the first year, it would be a pretty tough call between the two because it would take much longer to reach the $200.00. I was generous giving it 50% at 3% but this could be more or less depending on your spending habits.
After this analysis, I'm pretty satisfied with my decision, although after I reach the $250 rewards, I may consider switching to a 0% interest card. What do you think? Any cards that you are loyal to or that you think have better rewards?