Last Reviewed: 7/23/2010
While this card ranks 2nd out of the 32 cash back credit cards that PlasticIQ currently tracks in our ranking engine, if the Blue Cash card is used properly and in a disciplined manner, it can easily be the top dog—-with potential to earn an affective cashback rate of 3% or even more.

The rewards scheme for this card needs a bit of explaining, so it’s a good thing you stumbled across this article.

*Based on PlasticIQ’s standard spending profile for 3 years of card usage. Includes impact of various fees, including annual fees and international fees.

American Express Blue Cash Rewards

Here’s a quick table summarizing some of the key features of the card:

American Express Blue Cash Rewards Details

The Blue Cash card has a split category tiered rewards structure (that sounds complex!). Basically, AMEX separates out spend into “everyday purchases”, which include spending at supermarkets, gas stations and drug stores, and “all other purchases”, which includes any other purchases not falling into the former bucket. Purchases at superstores or warehouse clubs do not qualify as Everyday Purchases.

On the first $6,500 of spend per year, Everyday Purchases earn 1% cashback, while all other purchases earn only 0.5% cashback. Once you spend $6,500 you move up to the next rewards tier, where Everyday Purchases earn a whopping 5% cashback, and all other purchases earn 1.25%. The table below lays this all out in an easy-to-digest format.

The Best Strategy To Maximize the Value of the American Express Blue Cash Card

As you can see, for your first $6,500 of spend each year, the Amex Blue Cash card is actually inferior to any plain vanilla 1% cash back card. It’s not until you get above that threshold that it becomes a powerhouse–especially if you use it just for Everyday Purchases.

In the hands of the right person, the Amex blue cashback card can be a deadly weapon. The strategy is quite straightforward, as follows:

• Use the card on any and all purchases until you hit the $6,500 ceiling which propels you into the next earnings tier for the year.
• Once you hit the next tier, immediately stop using the card for any purchases except those classified as “everyday purchases”.

If you follow this strategy, you can turn a good cashback program into a great one. The table below shows what the effective cashback rate of the Blue Cash card could be while varying 2 key assumptions: the number of months it takes you to hit the $6,500 spend threshold before moving to the more profitable rewards tier, and the amount you spend each month on Everyday Purchases. The other key assumption that PlasticIQ makes is that once you hit the $6,500 tier, you only use the AMEX Blue Cash card for Everyday Purchases.

As the table higlights, it’s entirely possible to have the American Express Blue Cash card performing at around 2.75% to 3.00% effective cashback for a given year, if used skillfully.  If we use 2% cashback as a minimum threshold for owning this card, and assuming it takes you a full 4 months to reach the next tier, you would only need to spend about $350 per month on Everyday Purchase categories to hit the 2% annualized cashback rate.

American Express Blue Cash Expenses and Fees

The AMEX Blue Cash card has no annual fees or rewards program fees. However, you are charged 2.7% of each international transaction after conversion to USD.

PlasticIQ’s Final Assessment of the American Express Blue Cash Card

Hopefully by now PlasticIQ’s conclusion is clear: if you have the discipline, after getting to the better rewards tier (that is, after spending $6,500 in any 12 month period), to just use the card for Everyday Purchases (supermarkets, gas stations, and drug stores) and you spend at least $350 per month on Everyday Purchases, this card could be the top ranked cashback card for you.

Last Reviewed: 7/17/2010

The Discover Escape credit card (aka Escape by Discover) masquerades as a travel credit card, but is really a cash-back credit card with restrictions on how the cash back can be redeemed. Restrictions aside, this piece of plastic is a heavy hitter, and is PlasticIQ’s top-ranked cash back credit card when examined over a 3-year usage period.

*Based on PlasticIQ’s standard spending profile for 3 years of card usage

Escape by Discover Rewards

Cardholders earn 2 “miles” for every $1 of spend, with no restrictions or earning caps. The reason this card is more like a cash back card than a travel card is because these so-called miles can be used to off-set most types of major travel (airline, cruise, vacation package, car rentals).

These rewards behave much more like a cash back statement credit than airline miles. As long as you do even a modest amount of travel each year, you should be able to take full advantage of these rewards and the card will effectively behave like a cash back card.

Alternate Redemption Options for Discover Escape Card

The only valuable redemption option is applying miles towards travel, since your miles are then valued at $0.01 per mile. But for the sake of completeness, we do mention the other redemption methods.

You can redeem 5,000 miles to get a $25 Discover gift card—a horrible redemption value of $0.005 per mile. Equally bad, you can receive an electronic bank deposit of $25 for 5,000 miles. You can also use your miles to purchase gift cards, but as the table and screenshot below illustrate, the exchange rates are quite bad. The best value you can hope to achieve, if you buy the most expensive partner gift cards, is around $0.0083 per mile–really quite bad even when compared to a basic 1% cashback card.

Discover Escape Rates, Expenses and Fees

Because interest rate charges change so frequently, it’s best to go directly to the Discover Escape site for rate information.

The Discover Escape card has an annual fee of $60. The 25,000 sign-up bonus miles (earned over 25 months) are worth $250, so basically it’s like getting a 4-year suspension of the annual fee. It’s interesting to note that once this 25,000 bonus is used up, you will be better off using the Schwab 2% cashback credit card rather than the Discover Escape card. This is because the Schwab card has no annual fee, and no redemption restrictions related to travel.

The card also charges 2% of the US dollar amount of each purchase made in a foreign country—slightly lower than many other credit cards which charge 3%.

PlasticIQ’s Final Assessment of the Discover Escape Credit Card

The Discover Escape initially has a slight edge over the Schwab Visa cashback card due to the 25,000 bonus miles sign-up offer, but once that offer runs out, you’ll be better off with the Schwab card for sure, as you’ll avoid the $60 annual fee and redemption restrictions that come with the Discover Escape card.

All that said, the Discover Escape card is a first-rate cash back card, and deserves its #1 spot atop the PlasticIQ ranking engine.

Last Reviewed: 7/26/2010

Important note: Around 3/31/10 Schwab stopped offering this card for new applicants (though current users of the card are grand-fathered in for the time-being). This is a loss of the plastic community:( I’ve let my full original review below for those wanting to see what they’ve missed.

The Schwab Credit Card (officially known as the Schwab Invest First Visa) is truly one of the gems of the cash back credit card world—an all-purpose workhorse offering a no-holds-barred 2% cashback. It’s also one of the simplest credit cards to understand—there are no fancy rotating categories, sneaky cash back limits, points expiration games or other redemption tricks.

Note—there have been some persistent rumors that Schwab may pull the plug on the Schwab credit card and just grandfather in those who already have it. PlasticIQ will do some more digging on this, but in the meantime, you may want to consider getting it just to be on the safe side.

*Based on PlasticIQ’s standard spending profile for 3 years of card usage

As the table above shows, the Schwab credit card places 2nd out of the 33 cards that PlasticIQ currently has in its ranking engine (as of 7/17/2010). The only cashback card that beats it is the Discover Escape card, and then, just by a hair. For all intents and purposes, they offer the same upside.

Below is a screenshot of the PlasticIQ ranking engine, where you can see that the Schwab Credit Card places a very respectable 2nd place finish.

Schwab Credit Card Rewards

The Schwab credit card provides a 2% cashback bonus on *all* purchases—no exceptions, no limits, no gimmicks. The only requirement is that you also open up a Schwab One brokerage account, although you don’t need to fund it and there are no annual or other fees associated with it (in other words, it’s free).

Your cashback earnings are regularly swept into your brokerage account (see the screenshot below), at which point you can easily transfer the funds to your Schwab credit card. This structure is an obvious attempt to drive new account creation within their brokerage arm, and perhaps it is working for some percent of users who get the Schwab credit card.

Schwab Credit Card Expenses and Fees

The Schwab credit card has no annual fee. Furthermore, and worth noting, the Schwab credit card does not charge a foreign currency transaction fee. This is very unusual—most credit cards charge a 3% conversion fee. This is a great card if you plan to travel outside of the US!

PlasticIQ’s Final Assessment of the Schwab Credit Card

The Schwab credit card is a true workhorse. If you could only have 1 credit card in your wallet—this might be the one. In general, PlasticIQ would recommend using this card for all purchases where you don’t earn special rewards with a more specific credit card. For example, the Chase Freedom card earns you 5% cashback on very specific categories each quarter—so you should obviously use that first when appropriate.

Last Reviewed: 7/13/2010

If you just read some random Chase Freedom promotional materials, the Chase Freedom credit card probably seems like an amazing offer, paying a whopping 4% bonus cashback (on top of the base 1% cashback!) on rotating spend categories each quarter. However, as with many credit card programs, the devil is in the details. Specifically, the Chase Freedom card has in place spend caps which severely limit the true upside of the card.  Read more below if you want to find out why.

*Values determined by the PlasticIQ Ranking Engine for a 3-year time period, based on our standard spending profile.

Chase Freedom Rewards

The Chase Freedom Credit Card offers a standard 1% cashback bonus on all purchases, and an additional 4% cashback bonus on a pre-defined group of spending categories, which change each quarter. For example, in Q3 2010, the categories eligible for the 4% cashback bonus are: gasoline purchases, air travel, auto rentals, and hotel stays.

Here’s the catch: The Chase Freedom card has specific spending limits each quarter that limit the cash back bonus that can be earned on the 4% component (the 1% component has no such limits). For example, in the Q3 2010 group of categories, only your first $800 of combined spend in those categories qualifies for the 4% cash back bonus. Any spend above $800 in those categories only earns you the standard 1% bonus.

The table below provides a summary of the eligible 4% cashback bonus categories for 2010, along with the spending caps for each quarter and the maximum cashback that can be earned based on those caps.

According to Chase customer service agents I’ve spoken to, the Chase Freedom categories should remain roughly the same going forward, though they may be assigned to different quarters. It also wouldn’t surprise me if they introduced new categories or swapped out some of the existing ones.

If we assume the spend caps will also remain roughly the same, the Chase Freedom cashback bonus is, at a maximum, woth around $128 per year–and this assumes you successfully max out the spend limits each quarter.

Chase Freedom Credit Card Expenses And Fees

Fortunately, this card doesn’t have any annual fees.  Foreign transactions incur a 3% transaction charge denominated in US dollars (fairly standard for most credit cards).  So nothing particularly unusual or sinister about the fee structure here.

PlasticIQ’s Final Assessment of the Chase Freedom Credit Card

While the Chase Freedom Card is clearly superior to a plain-vanilla 1% cashback card, there are several other cashback credit cards that easily outperform this card (check out the PIQ Ranking Engine to find out which ones).

Thus, this card shouldn’t be used as your primary card, but rather as a niche card (part of your arsenal) that you only use when you can get the 4% cashback bonus. And when you max out the 4% bonus for the quarter, simply tuck the card away in your dresser drawer and put a reminder in your calendar to dust it off next quarter.  Of course, you’ll have to decide if the extra monitoring and overhead costs of having another credit card justify the $128 or so of incremental upside.

For those who like to open their presents early, PlasticIQ answers the question “So how much are my Marriott Rewards Points really worth?” with a resounding “$0.0088 per point”. But don’t you want to keep reading to get a glimpse of PlasticIQ’s dazzling logic which enabled us to make this estimate? Of course you do…

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