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

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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 it, 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. The Discover it and Chase Freedom limit 5% cash back rewards to $1,500 spent per quarter, while the Citi caps total rewards at $300 cash back per year.

So which one’s better?

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 often gives rewards on restaurants and department stores and comes with high spending caps. The Discover it is great for online shopping, but 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.

  • http://twitter.com/sunkcosts slug

    Does this projection make any assumptions about gift cards you can buy during 5% category times and use during periods where the category is not in play (i.e. buy a grocery gift card for $500 during the grocery 5% period to use later). You’re front-loading your costs, but you’re only paying 95% of the costs of those future purchases.

    • http://www.nerdwallet.com/ Tim

      No, we didn’t take that into account. If you do that every quarter, then
      you can assume that most of your spending goes in the 5% categories, and
      you’ll likely overtake the Amex Blue Cash cards.

      We tried to run an analysis that would cover most average families, since
      the real rewards hackers out there have probably already figured out the
      best way to game it ;-)

  • harvson3

    I have a question on the categories “groceries” and “department stores” that Amex uses.  We plan to use the card to sign-up for a CSA share.   In specific terms, we are buying produce.  Does this count as grocery shopping?  Does Amex have standards written anywhere for what does and does not fall into these categories?

    • http://www.nerdwallet.com/ Tim

      Unfortunately, none of the credit card companies post specific guidelines, because they want to maintain as much flexibility as possible. 

      Plus it’s not completely up to the card issuer. It’s the merchant’s responsibility to use the correct identifying code on their payment terminals, to tell the credit card company if they are a grocery store, department store, etc.  Then the card issuer has the option to decide whether those purchases actually qualify.  And most of them spell out in their cardholder agreements that they have the right to make any claims they want about what’s “eligible.”

      So in your case, you should ask the CSA how they are going to process your transactions, and whether they are reporting themselves to the payment network as a “grocery store” or something else. Then keep an eye on your statements to see how the rewards are being attributed. 

  • Jane

    Thanks for a great site! I have just opened a Blue Preferred card now that Chase have changed the terms of the Freedom Card.
    1. Chase have ended the $250 rewards check for $200 worth of points. I had got used to that!
    2. The new 5% rotating categories don’t work for me. Life is complicated enough without having to time major purchases to work with these categories. It’s just plain silly to restrict cardholders to 5% travel rewards only the summer, for example.
    3. I spend a lot on groceries and gas, very little on dining out and movies. So again, the rotating categories even when they are applicable don’t hold much benefit for me.
    4. I don’t want the added work of remembering to sign up for categories.
    5. I shop a lot online and in boutique stores and I’m not sure whether the department store category would even apply for the three months it is in rotation.
    Finally, in principle, I object to Chase changing the terms of the original card I signed up for. I’m sure they have calculated that the changes will work in their favor…

  • Ram

    Can someone please list specific examples of Department Stores, in northern NJ area? Does KMart, Walmart, Costco, BJ’s etc qualify as Department stores?

    Thank you NW, for researching this card.