Review: Chase Freedom vs Freedom Unlimited

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The Chase Freedom and Freedom Unlimited are two of the most popular cash back cards.

Both have no annual fee and a tempting cash reward structures. The main difference is that Chase Freedom gives you 5% cash back in rotating bonus categories, while the Chase Freedom Unlimited is a flat 1.5% cash back on everything.

Which one is better for you? We'll do a full run-down comparing the two cards so you can make your own choice.

Overview

Before we get into the meat of the comparisons, let's do a quick rundown of how the cards work:

• Chase Freedom gives you 5% cash back in quarterly rotating categories on up to $1,500 in combined purchases every quarter. All other purchases earn 1% cash back.

• Chase Freedom Unlimited: Double Cash Back: Earn 3% cash back on all purchases in your first year up to $20,000 spent. After that earn unlimited 1.5% cash back on all purchases.

In this review, we will take a more in-depth look at the similarities and differences, as well as why you may like one over the other.

Why Either Card Is Good Choice

• 0% introductory APR for 15 months: Both cards offer 0% introductory APR for purchases and balance transfers for the first 15 months. After that, there is a 17.24% - 25.99% Variable APR. Note: the balance transfer fee is 3% of the amount transferred, $5 minimum.

  The promotional APR is a great way to get a break on high interest rates if you are planning to make some larger purchases or have debt to pay off. Just be sure to pay off any balances before the intro period ends.

• No annual fee.

Why you may prefer Chase Freedom

This is a popular card for good reason. Here is why you may like the Chase Freedom:

• $150 bonus: Chase Freedom offers a $150 bonus after you spend just $500 on purchases in your first 3 months from account opening. This is a generous bonus for a credit card with no annual fee.

• 5% cash back bonus categories. This is the main draw of Chase Freedom. 5% bonus categories are a huge deal. It's hard to find cards that offer more than this, especially with no annual fee.

  This is how it works: Every quarter (every 3 months), there are bonus categories that will earn 5% cash back, while all other purchases earn 1%. You can get 5% cash back on up to $1,500 in combined purchases in the bonus categories, which equals up to $75 bonus cash back every quarter. After that, you go back to the 1% cash back rate.

  Calendar: The bonus categories are usually popular spending categories. For example, in 2017, they had:

  • Q1 (January - March 2017): Gas stations and local commuter transportation
    
  • Q2 (April - June 2017): Grocery stores and drugstores
    
  • Q3 (July - September 2017): Restaurants and movie theaters
    
  • Q4 (October - December 2017): Walmart and department stores

  Categories and merchants are announced before the start of each quarter.
  

• You don't mind changing up your spending to match the bonus categories. You can get a lot more rewards with the 5% bonus categories, but you would need to manage your spending. For example, maybe you'll eat out more often from July to September, and cook more at home the rest of the year.

• You're organized. You must remember to activate the bonus categories each quarter. Or else you won't get the 5% bonus. You can do so online, by phone, or at a Chase bank.

For a lot of people, the 5% bonus potential is just too tempting. But for others, it's too much work. If this sounds like you, read on.

Why you may prefer Chase Freedom Unlimited

If your spending is very varied, you may find that you'll get more rewards with Chase Freedom Unlimited. Here are some reasons why it may be better for you:

• Flat 1.5% cash back on every purchase. This is a higher than average 1% cash back amount. And the amount you can earn is unlimited.

• Your spending is varied and consistent. Every month, you tend to spread your spending between shopping, eating out, gas, groceries, movies, etc.

• The cash back is automatic. You don't have to activate anything. And you don't want to keep track of dates and rotating categories.

Both Do Have Downsides

Beware of these potential downsides for both cards.

• Foreign transaction fee: Unfortunately, both cards charge a 3% foreign transaction fee. So if you're planning on traveling abroad, make sure you also have a card without this fee.

• Balance transfer fee: There is an intro 0% APR for balance transfers for 15 months, BUT there is a transfer fee of 3% (or minimum $5). This can add up to quite a bit. Transferring a balance of $3,000 will mean a transfer fee of $90.

  If you want to pay off debt and have a large balance to transfer, consider a card with no balance transfer fee instead.

• Credit needed: Both Chase Freedom and Chase Freedom Unlimited require good to excellent credit. If your credit score for Chase Freedom Unlimited (or Freedom) is not great, consider taking a look at credit cards for people with fair credit instead.

Which Chase Freedom is Better

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So how much would you need to spend in bonus categories per quarter to come out ahead with the Chase Freedom? We did some math:

Let's assume an average spend of $1,000 a month on your credit card.

• For Chase Freedom: Let's say you manage to spend $375 in the bonus categories every quarter ($125/month), and $2,625 on everything else. This is a total of $3,000 spent each quarter, or $1,000/month.

  You would earn: ($375 x 5%) + ($2,625 x 1%) = $45 cash back per quarter

  $45 cash back each quarter means $180 a year.

• For Chase Freedom Unlimited: You just spend an average of $1,000 a month.

  You would earn: ($1,000 x 1.5%) x 12 months = $180 a year.

In this scenario, you'd get the same cash back amount with both cards. To come out ahead with the Chase Freedom, over 12.5% of your spending needs to be in 5% bonus categories every quarter (whereas you get a consistent 1.5% rewards rate with the Chase Freedom Unlimited).

If you usually spend $1,000 a month, over $125 of that needs to be in the bonus categories. Do you think you can do that?

Should You Get Both?

Having both cards in your wallet is a good strategy too. You can maximize your cash back potential this way. You can use your Chase Freedom for the 5% bonus categories and the Freedom Unlimited for all other purchases.

Chase allows you to pool your points between Chase Ultimate Rewards cards, so you can combine them to get a bigger cash reward. And if you have (or plan to get) one of the premier cards (like Chase Sapphire Preferred), you can even combine points for travel rewards.

But watch out for the Chase 5/24 rule. If you've opened more than 5 cards in the past 24 months (with any bank, not just Chase), you most likely won't be approved. So if you want both cards, make sure you haven't hit this limit.

How it Compares

For 5% Bonus Categories:
Discover It is another card that offers up to 5% cash back in rotating categories. If you travel abroad, you may want to consider it because it has no foreign transaction fees. But keep in mind that Discover isn't as widely accepted as VISA.

For Flat Rate Cash Back:
If you pay your bills on time and always pay the full amount, you could get more cash back with Citi Double Cash. However, it doesn't have a sign-up bonus and there is no intro APR for purchases. And you cannot pool your points with other cards, whereas the Chase Freedom cards let you combine points with other Chase Ultimate Rewards cards.

Bottom Line

It is hard to beat the 5% cash back that Chase Freedom offers, but only if you can spend enough in the rotating categories. Otherwise, the flat 1.5% cash back offered by Chase Freedom Unlimited is more versatile.

At Chase's Secure Site Chase Freedom Unlimited® lets you earn 3% cash back on all purchases in your first year up to $20,000 spent. After that earn unlimited 1.5% cash back on all purchases. There is also a 0% intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 17.24-25.99%. The balance transfer fee is 3% of the amount transferred, $5 minimum. The cash back rewards will not expire as long as your card account remains open. There is no annual fee. Intro APR for Purchases Intro APR for Balance Transfer Regular APR Annual Fee 0% for 15 months 0% for 15 months 17.24% - 25.99% Variable $0