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Chase offers an impressive array of personal credit card products, ranging from the ultra-premium Chase Sapphire Reserve all the way to the “cash-back” Chase Freedom and Chase Freedom Unlimited cards. With so many options, picking the right card can be difficult. Thanks to Chase’s 5/24 rule (which means that you’ll automatically be rejected for most Chase cards if you’ve opened 5 or more cards in the last 24 months) it’s incredibly important to have a clear strategy about which Chase cards you want to add to your wallet.
The Freedom and Freedom Unlimited often get thrown around interchangeably because of the overwhelming similarities between them. In fact, other than earning rates and sign-up bonuses, the two cards are identical. Here are the key features they have in common:
- No annual fee
- Redeem points as cash back, OR transfer them to Ultimate Rewards points if you also hold a premium Chase card (Chase Sapphire Reserve, Chase Sapphire Preferred Card or Ink Business Preferred Credit Card)
The first difference lies in the earning structure. The Chase Freedom Unlimited earns an unlimited 1.5% back on all purchases, while the Chase Freedom earns 5% back on your first $1,500 spent in rotating quarterly categories, and 1% back on everything else. The rotating categories for 2019 have included gas stations and drugstores in Q1 and grocery stores in Q2. It’s worth noting that you have to register your Freedom card every quarter in order to earn 5x on the bonus categories, but that process is incredibly simple and Chase will send out multiple reminder emails when it’s time to do so.
The other key difference is the sign-up bonus. Until recently, both cards offered an identical bonus of $150 (or 15,000 points) after spending $500 in the first 3 months. This is still the offer on the Chase Freedom, but new applicants to the Chase Freedom Unlimited will get a slightly less conventional bonus: Earn 3% back/3x on all purchases for the first 12 months of card membership on up to $20,000 spent. So if you maxed this out by spending the full $20,000 and you also have an Ultimate Rewards-earning Chase card, you’d earn 60,000 points, worth $1,200 based on TPG’s valuations.
Both cards are also identical in terms of redemption options. Your cash back will be issued in the form of “points” that are worth 1 cent each, but you can potentially get twice as much value from them. Chase lets you pool points between cards, so if you also hold a premium Chase Ultimate Rewards-earning card (those that carry annual fees, such as the Sapphire Reserve, Sapphire Preferred or Ink Business Preferred) you can transfer your points there and turn them into full-fledged Ultimate Rewards points. TPG values Ultimate Rewards points at 2 cents each thanks to Chase’s impressive list of hotel and airline transfer partners, meaning you really can do much better with these cards than simply settling for cash back.
By the Numbers
I think a lot of people are drawn to the Chase Freedom because the 5x bonus categories sound flashy, but the math doesn’t really back it up. There’s a reason I recommend the Freedom Unlimited as a starter card to my friends instead of the Freedom. Let’s take a look at a few different scenarios to see why the Freedom Unlimited is better for most people, for the first 12 months and in subsequent years.
Scenario #1: You max out your 5x on the Freedom every quarter of the year. This means you earn 7,500 bonus points a quarter (5 points x $1,500 spend), or 30,000 a year (7,500 x 4)
Scenario #2: You max out 3 of the quarterly bonus categories, but don’t spend anything on the fourth. Maybe you’re out of town, or the category that quarter is one you don’t spend in.
Scenario #3: You’re not a big spender, but you still manage to earn 80% of the available 5x bonus each quarter of the year. That means you spend $1,200 on each 5x category, and earn 6,000 points a quarter, or 24,000 points a year.
The table below summarizes these options, as well as how much you would have had to spend during the first year on the Freedom Unlimited to come out ahead with its 3x earning rate.
|Scenario||Yearly Points Earning With Chase Freedom||Breakeven First Year Spending With Freedom Unlimited|
|#1: Maxing out all 4 quarterly bonuses||30,000||$10,000|
|#2: Maxing out 3/4 of the quarterly bonuses||22,500||$7,500|
|#3: Earning 80% of each quarterly bonus||24,000||$8,000|
As you can see above, even if you earn every available bonus point with the Chase Freedom, you still come out ahead spending less than $1,000 a month on the Freedom Unlimited during your first year with 3x bonus points on the first $20,000 spent. I’ll assume that most people (myself included) aren’t able to max out every quarter, which is something you’ll need to consider when deciding for yourself.
Of course it’s not fair to compare one card’s sign-up bonus to another’s everyday performance, since the Chase Freedom will also earn 15,000 bonus points during that first year thanks to its sign-up bonus. Let’s take a look at how the numbers hold up in the second and third year, when the Freedom Unlimited is back to “just” earning 1.5x points on every purchase:
|Scenario||Yearly Points Earning With Chase Freedom||Breakeven Spending Point With Freedom Unlimited|
|#1: Maxing out all 4 quarterly bonuses||30,000||$20,000|
|#2: Maxing out 3/4 of the quarterly bonuses||22,500||$15,000|
|#3: Earning 80% of each quarterly bonus||24,000||$16,000|
In this case, it takes just over $1,500 in monthly spending for the Freedom Unlimited to beat out the Freedom, even if you’re maxing out the 5x bonus categories every quarter and earning every available bonus point.
Why You Should Still Get the Chase Freedom
I’ll admit that I created a bit of a false dichotomy here — you don’t necessarily have to choose one over the other. If you have multiple 5/24 slots left with Chase and want both of these cards, by all means consider holding both. You can put bonus spending on the Freedom, taking advantage of the 5x whenever you can, and use the Freedom Unlimited for a nice 1.5x return on all non-bonus spending.
This same logic applies if you have another card you prefer to use for everyday spend. While the Freedom Unlimited is one of the most rewarding options for non-bonus spending, cards like the Blue Business℠ Plus Credit Card from American Express and the Capital One Venture Rewards Credit Card give it a run for its money. If you wouldn’t be using the Freedom Unlimited heavily, the Freedom becomes a much better choice. If you think you can max out all 4 bonus categories, an extra 30,000 Ultimate Rewards points a year would be very nice to have.
If you max the Freedom Unlimited’s 3x bonus on up to $20,000 spent during the first year, it’ll come out ahead in the first 12 months compared to the Chase Freedom. But these two cards’ real value comes from long-term earning potential. Between that and the 5/24 rule, it’s incredibly important for you to run the numbers and have a clear strategy in place before you decide which of these cards to apply for.
Know before you go.
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