When it comes to big cash-back rewards credit cards, you’ll often hear of two that offer 5% cash back — the Chase Freedom & the Discover it.
Like the Chase Freedom, the Discover it offers 5% cash back on up to $1,500 spent each quarter at select companies and categories of merchants, and 1% cash back on all other charges. Furthermore, these cards have many other things in common, so it can be difficult for cardholders to choose between them. Here’s how the two current offers for these cards stack up, and some tips for making your choice between the two.
Chase Freedom: The Original
For many years, Chase has offered its Chase Freedom card with a tried-and-true formula. Each quarter Chase offers a new selection of merchant categories and/or specific stores eligible for 5% cash back on up to $1,500 in purchases. For example, in the fourth quarter of 2015 (October through December), Chase is offering the bonus on purchases from Amazon.com, Zappos.com, Audible.com and Diapers.com. To receive these bonuses, cardholders must go online to “activate” the bonus categories, which they can do until shortly before the quarter ends and have all of their eligible purchases earn the additional rewards, even those previously made. According to the Chase representatives that I spoke to, this requirement is to promote and reward active engagement of cardholders, rather than just offer the bonus to all cardholders. Think of it like the television and radio advertisements that ask customers to “mention you heard it here to receive your discount.”
Freedom also offers new applicants generous incentives in two ways. First, new applicants can earn $100 cash back after spending $500 in purchases within the first three months of applying. Cardholders also receive an additional $25 when they add an authorized user who makes at least one purchase within the same three-month period. In addition, new cardholders receive 15 months of 0% APR financing on both new purchases and balance transfers, with a 3% balance transfer fee. The standard rate for new purchases is 13.99%, 18.99% or 22.99%, depending on the creditworthiness of the cardholder at the time of application. (You can read a full review of Chase Freedom here.)
Finally, Freedom cardholders have access to Chase’s Blueprint program that allows the cardholder to avoid interest charges by paying off some purchases in full, while carrying a balance on others. There is no annual fee for this card, but there is a 3% foreign transaction fee imposed on all charges processed outside of the U.S. This card requires a good or excellent credit score. (If you’re not sure where your credit scores stand, Credit.com’s free credit report summary can tell you.)
Discover it: The Newcomer
In 2013, Discover stopped offering all of its existing cards to new applicants and replaced them with a single card designed to appeal to many different segments of the market. The Discover it card’s formula begins with the same 5% cash back on up to $1,500 in purchases quarterly from select merchant categories and/or specific stores, and 1% cash back on all other purchases. (You can read the full Discover it review here.) For example, during the fourth quarter of 2015, the featured bonus categories are home improvement stores, department stores and Amazon.com. As with the Chase Freedom, Discover it cardholders must go online each quarter to register for the bonus categories. Yet for a limited time, the Discover card is offering double cash-back rewards for the cardholder’s first year only for new cardholders. The additional cash back is received after the cardholder’s first anniversary of account opening, so long as the account is still open and in good standing.
From there, the similarities between these two competing cards end. Discover offers no sign-up bonus, but it gives new applicants their choice of promotional financing offers. You can get 12 months of 0% APR financing on both new purchases and balance transfers, or six months of 0% financing on new purchases and 18 months for balance transfers. (A 3% fee applies for balance transfers.) The Discover card also features a range of innovative benefits such as the Freeze it function that acts as an on/off switch for accounts whenever a card goes missing or when customers just want to take a break. This card has no penalty APR, and cardholders will have their first late payment fee automatically waived. Finally, the Discover it card is highly regarded for its customer service, which took the highest award for credit card customer satisfaction from J.D. Power and Associates. The standard interest rate is 10.99% to 22.99%, based on the cardholder’s creditworthiness. There is no annual fee for this card, and no foreign transaction fees. It requires an excellent credit score.
Which Card Should You Get?
Each credit card has its own pros and cons when stacked against each other, so it’s more important to look at the type of credit card user you are. Here are some of ways to compare these two credit cards:
- If you have good credit, but aren’t quite in the “excellent” credit category yet, it may be hard to qualify for the Discover it.
- If you don’t want to pay interest on new purchases with your card, Chase Freedom’s 15 months of 0% interest trumps Discover’s two offers (and it includes a generous sign-up bonus).
- If you’re looking to maximize your cash back, Discover it’s current offer to receive double cash back for the first year may be more up your alley.
- And for cardholders who often miss payments or want a simpler credit card, the Discover it card makes a compelling case by offering less punitive terms such as no penalty interest rate, no foreign transaction fees and a waived first late-payment fee.
By closely examining the features and benefits of these two strong competitors, you can choose the right card for your needs.
At publishing time, the Discover it and Chase Freedom cards are offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
More on Credit Cards:
- Credit.com’s Expert Credit Card Shopping Tips
- An Expert Guide to Credit Cards with Rewards
- How to Get a Credit Card with Good Credit