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The Best Cash Back Credit Card Analysis For The Happy Rock

by The Happy Rock on March 31, 2008

About a month ago, I switched my only credit card from my Sunoco Mastercard which I have had since college to the Chase Freedom card. Why? Because I was leaving money on the table since I wasn’t taking advantage of the new breed of cash back cards that have come out in the last few years.

Using my spending history I was able to quickly see how my Sunoco Card matched up to my other options. My Sunoco card offered 4% cash back on all Sunoco purchases and 0.5% up to $7,500 then 1% on everything else. It should be noted that when I called to cancel, they offered me six months of 5% back on gas and groceries. I probably should have taken that deal and waited to switch, but I was to intent on canceling. It is at least good to know that even credit card rewards can be bargained through a simple call and some competition.

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The Chase Freedom Card offers 3% back on $600 a month in your three highest spending categories and 1% on everything else. They also allow you to save your cash back until you hit a $200 balance and then they will send you an check for $250, an extra 25% reward. You also gets $50 cash back after your first purchase.

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The Amex Blue Cash offers 5% cash back on gas, groceries, and drugstore purchases and 1.5% on everything else after you spend $6,500 for the year. Before that you earn 1% on gas, groceries, and drugstore and 0.5% on everything. This would be the best single card if you could spend $6,500 really early in the year, but for my calculations I assumed distributed spending.

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In the final analysis I chose the Chase Freedom card not only because it would earn me the most cash back for my spending habits and a $50 first purchase bonus, but it is also accepted everywhere credit cards are accepted, unlike the Amex Blue Cash. I know that I could do better using the Blue Cash or using both of them, but my general principle is to keep the system simple. I personally don’t want to waste any mental energy on trying to extract an extra few dollars in credit rewards. I would rather focus on things like income generation, family, and giving that all provide much better returns on my energy. I have been happy so far with the new card, and the $50 was quickly applied to my account. The website is solid and the Chase Freedom connects directly with Quicken to save me time. I am quite The Happy Rock with my new card. Plus it is shiny and new!

If you have COMPLETE control of your spending it is probably worth looking in getting a decent cash back credit card. I probably cost myself $2,000 in the last 5 years by not switching sooner.

Just to keep the record straight, despite my affinity for Dave Ramsey’s principals I slightly disagree with his views on credit card for those that have firm control of their spending. For those that are getting out of debt or don’t have control of their spending I would recommend canceling the card until you have complete control over your expenses, spending, and bill paying. For me, I didn’t understand the responsibility of that credit requires early in college, but I learned from my defaulted Sears card experience and have not paid a finance charge or fee in 10 years. That is the kind of spending history that I would recommend attempting to use a credit card to their benefit, otherwise it will probably costs you more than the measly rebates will gain you.

Note : For those that Drive a lot the Citi Driver’s Edge offers 6% on gas, groceries, and drugstores for the first year and 1% on everything else, plus a penny for each mile you driver. With a long commute that could add up to big bucks. The one caveat is that the cash back must be used for a car purchase within 5 years.

{ 8 comments… read them below or add one }

Credit Crunch April 4, 2008 at 7:28 pm

Hmm..

Very nice analysis. I wouldn’t of thought you would save that much from getting cash back but I suppose it adds up quickly these days. I’m actually looking to find a credit card which will fit more of a students needs and I have found some very nice ones but still unsure of which to try and apply for as I don’t want to be denied and hurt my credit.

-Scott

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Finance Advisor Tim April 7, 2008 at 3:48 pm

I have a Chase Rewards Plus Visa since 2006. I haven’t counted how much it already saved me, but I’m sure it’s a lot. I mean 5 percent cashback are pretty sweet. :-)

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The Happy Rock April 7, 2008 at 11:58 pm

@Tim – Nice job, as long as you aren’t spending more because you are buying on credit.

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Brandon April 10, 2008 at 10:08 am

RE: Citi Driver’s Egde
For this card, your rebates on purchases (1%-6%) and rebates for miles that you drive ($.01/mile) can be used as a statement credit to offset the costs of a vehicle purchase, or for vehicle service (oil change), OR can be converted to Thank You points (thankyou.com).

Just wanted to clear that up!

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The Happy Rock April 12, 2008 at 10:33 am

@Brandon – Thanks for the clarification on the use of the points.

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Mark April 26, 2008 at 2:17 am

Nice analysis.There is always a third party involved in the credit card transactions for your business. This gateway account is often referred to as merchant account. If you are serious about doing business online, it is imperative that you have a way to accept credit cards .Nice Posting ,so informative. Thanks

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Brad November 18, 2008 at 8:15 pm

I have had the Citi’s Drivers Edge Card since college(been 8 year with this card). I get the 2% back on a new car purchase or lease. I’m thinking about switching to a cash back card mainly because I’d rather have the money in my hand then sitting in a account for 3 years waiting until me lease goes up.

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Josh June 11, 2009 at 10:22 pm

Great review! You should have included the annual fee on each card as this will lower your real savings

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