Discover More and Chase Freedom: 5% cash back is great and two ways to get it is even better

I am a huge fan of Discover’s credit card, and I am certainly not alone. Discover has ranked very well in several customer satisfaction surveys in recent years, receiving an award for best call center in the Credit Card Industry in 2010, and coming out on top in various areas directly related to consumers, including ease of online application and general customer satisfaction. Despite this, however, when I praise the Discover More credit card to friends or family, I often hear the same objection: “but no one takes Discover!”

I am guessing this response was probably the impetus for Chase’s launch of the revamped Chase Freedom card in March of last year. The Discover More card, which offers 5% cash back on purchase categories that rotate every quarter is clearly a good idea. Chase makes it even better by trading in the customer service but offering a card that is accepted almost everywhere.

If you are in the market for a credit card with a permanent place in your wallet, both of these cards are worth considering.  Although eligible purchase categories rotate quarterly, 5% cash back on a credit card is an amazing deal right now, especially when the cards come without an annual fee.

Notably, the rotating calendar for which you can earn 5% cash back is not identical between the two cards, so that owning one of the cards does not necessarily mean there’s no point to owning the other. Here are 5% cash back categories for 2010 Chase and Discover side by side:

Importantly, both of the cards cap the 5% cash back you can earn each quarter. Discover’s varies by quarter, such as $800 spent on the categories in the first quarter (effectively $40 cash back) and $300 in July –September ($15 cash back). The Chase Freedom card, on the other hand, caps the 5% cash back to $1500 spent ($75 cash back) on eligible categories each quarter. So if you are a big spender on the cash back credit card, the Chase Freedom card is probably a better option for you. But if you’re a big big spender, getting both cards is even better since you can charge purchases in the categories that overlap between the two cards to the Chase Freedom card, and then charge purchases in the other eligible categories to the respective card.

Excepting the 5% cash back categories and purchases made through the credit card portal, the Discover More card offers a standard .25% cash back on the first $3000 spent each year, and 1% thereafter. The Chase Freedom card is a step above, offering 1% cash back on every purchase not earning 5%. Nonetheless, you may be able to find cards that offer more value than 1% cash back (such as an airline credit card), making these two cards really good secondary cards, used mainly for purchases eligible for the 5% cash back. Besides, neither of the two cards has an annual fee, so you don’t have to reach any spend threshold to make owning either of the cards “worth it”.

Even though Discover’s card came out first, the Chase Freedom card is coming out ahead for now. Discover has the better customer service, but Chase uses the Visa network and is therefore accepted in many more places. Which card offers the better set of rotating categories will depend on your lifestyle, but Chase’s higher cap on purchases for which you can earn 5% cash back continues to push the Chase Freedom card ahead. And Chase’s current offering of $100 as a sign-up bonus only makes the deal sweeter.

If you are going to get only one of the two cards and are not one of those unlucky people who have to use customer service frequently, the Chase Freedom will probably be the one for you. But given the slight difference in 5% cash back categories between the two cards and the lack of annual fees on both, there may also be no harm in letting the Discover More share in your wallet real estate. If you need a nudge, try calling the Discover call center to sign up over the phone and you will see the difference.

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Cash for a Clunker Appliance

Similar to last year’s cash for clunker program, the American Recovery and Reinvestment Act of 2009 has allocated $300 million for rebates to eligible residential consumers when they recycle their used appliances and purchase new energy-efficient ones (otherwise known as ENERGY STAR appliances).  Each state is in charge of designing  and implementing its own unique Appliance Rebate Program, and the Department of Energy (DOE) has already approved all of them.  A handful of states (Iowa, Kansas, Minnesota, Rhode Island) have started their programs, but most will launch theirs later this month.  Click here for details of the program available in your state. Continue reading

Credit Card Offers Reward the Prudent and the Patient

Over the last few months I received three invitations from American Airlines/ American Express to sign up for a new joint AA-Amex credit card that would not have an annual fee as long as I kept my current American Airlines Citibank MasterCard as well.  As a sign-up bonus, the AA Amex card would give me 20% more miles during the first 12 months.  I assume this offer was sent to all AA Citibank card holders, and although I contemplated signing up for the card, I ultimately decided that 20% was not enough to convince me to add another card to my wallet.

We already wrote about checking your “junk mail” for interesting offers, but here I clarify that statement – don’t jump into any “junk mail” offer you get either.  Weigh the offer and consider your circumstances as well.  Naturally, if you accepted every single credit card invitation that included some kind of reward, you credit score would probably suffer while your wallet would likely be overflowing with cards.  Rather, when deciding whether to switch or take on a new rewards credit card, consider how it fits with your other cards.  Is the new card offering you a 1% cash back on everything when you already have a card that offers that?  Does it make sense for you to take on a new credit card with a different rewards program and split up your point accumulation?  That’ll largely depend on whether each of the reward schemes offers something unique and valuable to you, the reward rate of each card, as well as how much you put on your credit card each month.  If your credit card bill is small and it already takes you a while to accumulate enough points for a reward, for example, splitting your purchases between two cards will mean it’ll take even longer. Continue reading

With Discover, March Brings Some Generous Cash Back

Starting tomorrow and until March 31, 2010, Discover More cardholders can earn 5% cash back on purchases made at grocery and drug stores.  This bonus applies to up to $200 in purchases – effectively $10 in cash back, – and, to be eligible, users must sign up when logged into their Discover account.

This promotion is also in addition to this quarter’s 5% bonus on travel purchases.  That is, if you haven’t maxed out the $800 on airlines, hotels, car rental, and cruise charges that are eligible for a 5% cash back ($40) from January-March, you still have another month to go.  And with the new March deal that kicks in tomorrow, your more mundane purchases at grocery and drug stores will get that same great cash back rate.

Better Save Now than Later

The recession might have ended, but we are still a long way from recovery.  Back in July, we wrote about some of the better online savings options that were available.  We hope that you took advantage of those “high” interest rates then, because since then all the institutions covered have reduced their savings interest rates.

Here are the current rates (APY) as of November 1, 2009:

There are, however, still a few institutions that offer interest rates over 2.00% APY, such as SFGI Direct’s Online Savings at 2.25%  with a $500 minimum deposit and ShoreBank’s Direct’s Online Savings at 2.15% with a $1 minimum deposit.  These places may be unfamiliar to you, but rest assured that they are FDIC-insured.  So if you haven’t started saving yet, start today before these interest rates fall as well.

If you have already opened a savings account and are discouraged by the falling interest rates, remember that your money still worked harder for you sitting in a savings account and collecting some interest rather than in a checkings around collecting no interest.  And nothing is standing in the way of closing your current account and opening a new one with a higher interest rate.  Happy Savings!

Give Your Credit Card “Junk Mail” a Chance

It goes without saying that, for security reasons, you should never throw away any regular mail you receive from your credit card company without opening it – you do not want PIN numbers or new credit cards on your name going straight to the dumpster where someone can find them.  But sometimes you might even find a useful announcement inside those envelopes.  As I wrote a while back, Discover at least once notified its customers through mail that it would be giving 5% cash back on restaurants for a month.  If you did not open that letter, you probably would only have found out about it if you diligently visit your online account.

For the same reason, emails are worth a glance.  Not only do credit card companies usually send “online alerts,” such as a notification of a new statement or a payment reminder, but they can also offer some exclusive customer deals.  In September, for example, my Citibank/ AAdvantage credit card was offering bonus miles and an extra package of channels on DirecTV for customers buying the NFL Sunday Ticket; and in October customers can get 2,500 miles for joining Netflix, a better deal than just going through AA.com, which gives just 1,500 miles (and in the webpage sent to credit card members, it is unclear whether you actually have to use your Citi/AA card to take advantage of the offer).  Besides miles offers, though, every month I also receive some potentially useful coupons for the same credit card – the latest ones include 20% off at Ann Taylor, 15% off at Charles Tyrwhitt, and $10 off a $40 purchase at Origins (the latter is valid until 10/31/2009 – just use your Citi/AAdvantage card and coupon code CITIAAOCT).

And not treating your credit card emails as spam does not have to mean having your inbox clogged – many people have a “junk mail” email they check periodically.  Alternatively, if you have Gmail, you can filter your credit card emails so that they bypass your Inbox and go straight to a “credit cards” or “junk mail” folder, which you can check every month (settings > filters > create new filter, and click “Skip the Inbox”).  And regardless of how choose to arrange your email so that you get around to the offers, you may come to find that not everything you get from your credit card company is bad news.

Start Lining Up Your Date Nights

For the last quarter of the year (October 1 to December 31, 2009), Discover is offering a 5% cashback bonus on up to $400 in purchases made at grocery stores, restaurants, movie theatres and video rental services.  If you make the maximum amount of $400 in eligibile purchases, you will get $20 in cashback, which can be turned into a $25 gift card from certain retailers such as Banana Republic and Brooks Brothers.  So remember to sign up.  Then get out there and start making plans for some great date nights!