American Express Blue Cash vs. Rotating 5% Cash Back Credit Cards

The American Express Blue Cash family delivers rewards for “everyday” purchases. The Blue Cash Everyday and Blue Cash Preferred give, respectively, 6% and 3% on groceries, 3% and 2% on gas and department stores, and 1% everything else. The Preferred comes with an annual fee of $75, but we believe that the additional rewards for the Preferred outweight the annual fee for typical households.

But why should we care about these two cards when there are a number of credit cards out there promising 5% cash back on all kinds of different categories?

The Blue Cash cards differ from most of these rewards credit cards in that they have no spending threshold, rewards cap, or rotating bonus categories. We weren’t blown away by the complexity of the old Blue Cash, but the newcomers have done away with many of the old card’s hurdles. So we’ve pitted the Blue Cash Preferred up against some of these 5% rewards cards to see which is best, and who would benefit most from these cards.

The players

While the more frugal among us will prefer the no-fee Everyday, we believe the Blue Cash Preferred’s better rewards rates are a no-brainer for most cardholders (if all you put on your card was $50 of groceries a week, you’d still be better off with the Preferred). So we’re going to focus on the Preferred, as it faces the Discover More, the Citi Dividend Platinum Select, and the Chase Freedom, all of which offer 5% back on a set of categories like dining, home improvement and travel that change every quarter. You’ll need to enroll each quarter to receive the additional rewards, and some have caps on bonus or overall rewards.

Update January 2013: The Discover More has undergone an upgrade: Known as the Discover it, the new model gives 1% cash back on all non-bonus spending, nixing the spending threshold that the More had imposed.

Here are the rewards categories for 2011. The cards each earn 5% on applicable purchases, as well as 1% on all other purchases. Quarterly bonus spending limits are listed below the categories; annual reward limits and spending thresholds are below the card name.

*Citi hasn’t released the fourth quarter categories, so we’ve listed those for Q4 2010.

To determine the best card, we’ll bring back our in-house estimated spending profiles from our original AmEx Everyday vs. Preferred post, and guess at their yearly spending. For the sake of convenience, we’ll assume that they spend the same amount in each category for the whole year when deciding if they hit the rewards caps. While it’s likely that someone will spend more on travel in the summer and clothes in the winter, we’ll just assume unchanged spending habits. The figures are in dollars per month.

Since Citi hasn’t released the bonus caps for Q3 and Q4, we’ll say that they’re both $700.

Now we’ll calculate each person’s rewards, less the Preferred’s annual fee, for the net rewards of the card.

*We assumed that 25% of fashion and electronics purchases were made at department stores

The final score

It turns out that for most people, the Preferred is the best rewards credit card. Even though an individual might spend more on, say, travel or entertainment, people tend to spend quite a bit of money on food and gas. Further, the department store category encompasses everything from TV’s to socks to kites, earning 3% back on a wide variety of purchases.

However, the social butterflies out there are better off with the Chase Freedom, which rewards restaurants and department stores and comes with high spending caps. The Discover More suffers for its category caps and base spending threshold, and the Citi Dividend is limited by the $300 overall cap in almost every case. The AmEx Blue Cash Preferred is great for suburbanites who drive and buy groceries for the whole family, but not ideal for those who spend more on clothes or eating out.

In the end, we’ll stick with our original assessment of the AmEx Blue Cash: great for SUV drivers and those who need multiple shopping carts when they go to the grocery store, not so great for twenty-something city dwellers.

American Express Blue Cash Preferred
Details
Earn 150 Reward Dollars after you make $1,000 in purchases in the first three months of Cardmembership. Earn Cash Back: 6% US supermarkets up to $6,000 per year in purchases, 3% US gas stations & select US dept stores, 1% other purchases. Terms and limitations apply. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit. Simple and Straightforward: With the Blue Cash Preferred Card, you can start earning cash back. No rotating reward categories. No enrollment required. Terms and Restrictions Apply.