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Recession times bring leaner rewards to Chase

Bad news for all the Chase Freedom card holders myself including. Chase has just announced a launch of Ultimate Rewards, an inferior program aimed to replace the current lofty rewards structure offered to existing Chase Freedom cardholders.

I just called Chase customer support and the representative confirmed that changes are afoot however declined to give any details suggesting that I will receive a ‘Welcome’ package with all the information I need to know about the new program.

Reports however have been surfacing all over the web since as early as November of 2008 from card holders who received the “upgrade” package. The bits of information I have put together so far confirm a couple of important facts:

  • The $250 Chase Freedom Cash Check which you could get for $200 in cash back is being phased out
  • The 3% cash back spending categories will be rotating every quarter - very much like the current structure offered by Discover More

WSJ says that all Chase Freedom cardholders will be moved to the rewards program throughout the year. Chase hasn’t spared the $30 per year Freedom Plus card either, according to the customer service rep I spoke with tonight. Too bad because this has been my primary card.

What is next?

I am going to look into a couple cards that I know offer straight 2% cash back rewards: one from Schwab and one from Fidelity. I think I prefer to have to open an investment account (even if it comes with $1000 minimum balance requirement) to the tiered rewards structure of AmEx Blue Cash (another alternative consider).

Chase Freedom Plus – received third statement

Ever since I switch to Chase Freedom Plus as my primary credit card, I have been trying to keep an eye on my spending and accumulated rewards. Last week I received my third statement and can share some more details on the benefits the Plus upgrade offers compared to the regular Chase Freedom card.

First of all, when I signed up, the card came with miles rewards and I have still not been able to switch to the cash rewards mode. I called the customer service a couple times but several weeks later I still see miles in my account rewards page. The whole procedure also resulted into some mess in the rewards reported online. Last month reporting was partially frozen and I now see those rewards credited back to me as an adjustment.

Difference between miles and points

The main difference is in the options available for redeeming rewards. In the miles mode, a $50 Shell Gift Card in exchange for 5,000 reward miles is probably closest you can get to cash. There are more options if you are willing to travel, for example an unrestricted round trip ticket to any destination (max value $350) for 25,000 rewards miles looks very interesting. In the cash mode your best option is to wait till you collect 20,000 points and exchange them to a $250 check. This is what I have always done with the old card.

Charging travel on Chase Freedom is not a good idea

My total bill this month came to $3719. We are planning a trip to my friends’ wedding for June, hence more expenses than usual. A big chunk of it is the tickets from United Airlines. They were correctly categorized as “Travel” on the account activity page but are missing from the Top Purchase categories on my bill due to the fact that “Travel” is not one of 15 categories currently covered by Chase (scroll down for the complete list of covered categories). I would have gotten a better deal if I used my Costco American Express for this purchase since it offers straight 2% on travel related expenses.

On average this card pays 3.75% straight cash rewards

My overall bonus earnings this month came to 2,222 miles (or points) which means 30% of my spendings qualified for bonus rewards. This is much less than I had during the first month (48%). If I exclude travel (tickets and car rental) then the percentage goes up to 52%. Looking back at the last 3 months, 42% of my spendings qualified for bonus rewards, 55% if I exclude this month’s travel. This overall means that the card pays back approximately 3% straight rewards, or slightly more (3.75%) if you wait to convert 20,000 points into $250 check.

Spending categories eligible for bonus rewards

Here is the complete list of 15 categories that qualify for Chase Freedom bonus rewards. Out of these, the top 6 categories by spending will be used to calculate your rewards.

  • Department stores
  • Utilities
  • Fast food & quick service restaurants
  • Gas & convenience stores
  • Drugstores
  • Cable/Satellite TV, internet providers
  • Pet supply stores/veterinarian
  • Phone/cell phone bills
  • Movie theaters
  • Grocery stores
  • Gym memberships
  • Beauty salons/SPAs
  • Movie rentals
  • Dry cleaners
  • Local commuting

Please share your own experience in the comments. Have you had problem switching from miles to cash like I did? What is your average cash back rewards rate on this card?

Comparing Chase cards (replying a comment)

My regular readers know I advocate Chase Freedom Plus card, the best all around cash rewards card out there. One of the readers asked a great question on my original blog post about the card:

I have looked into both these cards and my question is: Does anyone know how much you must spend per year in order for the plus card with the $30 fee to be a better deal? Thanks

The main problem I had with the old card was the $12 cap it had on the bonus rewards. One only needs to spend $600 a month in qualified categories to hit it, and I had been hitting it every month I had it. I have yet to verify it on my next statement but the new card supposedly lifts that limit.

In addition, the new card has more qualified categories (up from 3 to 6) which means more of your spendings result into bonus rewards. Last month about half of mine qualified.

Let’s assume the trend stays, also let’s assume you put around $2000 on your card each month (this is my typical bill). The old Chase Freedom card will give you $32 in rewards each month ($20 regular and $12 bonus). The new Chase Freedom Plus will give you $40 ($20 regular and $20 bonus). That is $8 savings right there. Accumulated over 12 month it will be $96 (a total $480 annual reward vs. $384 with the old card).

Now back to the reader’s question, what the bill should be for the extra rewards from new card to cover the annual fee. It is hard to answer this question in general since it depends on your spending habits. The more of your spendings fall under those qualified categories the faster the new card will beat the old one.

I did some math based on my past account activity and it looks like the breaking point for me is around $1000-1200 in monthly spending. Your number may however vary.

What part of your total credit card bill qualified for bonus rewards? What was the ratio on the old card (if you had one)? Please share your experience to help us better understand how this card works.

Merchant categories on Chase Freedom statement

Update 05/06: Some readers suggested in the comments that the categories displayed online may be not what the Chase Credit Card department is actually using when calculating rewards. In other words, don’t believe your eyes when you see “Other” as the category. You might still be getting that bonus reward! ;-)

I have been keeping an eye on the activity on my Chase Freedom Plus card and I noticed that many popular merchants get to the “Other” category implying these transaction will not result to the bonus cash back (2% on top of the normal 1%).

I understand this is up to the merchants to properly categorize the transactions when reporting them to Chase and so the bank can’t really do much about it (and this is probably why the customer support is ignoring my emails to them). That said however, I decided to build a list of popular merchants that systematically get to this “Other” category so I could possibly get advantage of other credit cards when shopping at these places.

Popular merchants reported as “Other” by Chase Freedom Plus

Albertson Michaels
Bed Bath & Beyond Old Navy
Burlington Coat Factory Party City
Butera Presbyterian Hospital
Caputo & Sons Market Sears
Dick’s Clothing & Sports Sunflower Farmer’s Market
Dillards Target
Dominicks The Home Depot
Harvest Fresh TJMaxx
JC Penney Toys R Us
Jewel Osco Trader Joe’s
Kohl’s Walgreens
Linens N Things Wal-mart
Meijer

I will try to keep this list up to date as I collect more activity on my card. If you want to add to it - just comment to the blog post and I will include your names as well. Just make sure that the merchants you report are truly categorized as “Other” on your statement.

Chase Freedom Plus – received first statement

I recently signed up to Chase Freedom Plus, a new credit card from Chase which seems to be a pretty good all around rewards card (at least judging from what I currently know). Last Friday I received my first statement and can now take a closer look at what this card is really worth.

First of all, the Chase Freedom Plus offer comes with 10,000 miles ($100) sign up bonus rewards which are correctly reflected in my statement. Now let’s look at the other rewards.

Bonus rewards categories

Chase doesn’t give you a lot of details as to where your rewards come from. All you can see from the statement is the total of your regular rewards (1% of your total statement balance) and your bonus earning (2% of what you spend in the top 6 categories). You also get to see what categories were used in your bonus earnings calculations. Here is my list for this month:

  • Department Stores
  • Drug Stores
  • Gas & Convenience Stores
  • Grocery Stores
  • Local Commuting
  • Quick Service Restaurants

Unfortunately there is no way to see how the bonus rewards are split by category, nor can you see what category your sale transactions are assigned to, which really sucks. I wish I could verify my Local Commuting expenses. I don’t recall ever using public transportation last month. (update: the transactions categories are recorded on the Current Activity page, read the discussion in the comments)

Bonus rewards cap

The old Chase Freedom card had a $12 per statement period cap on your bonus rewards. The Plus card is supposed to lift that cap. Since I just signed up, my statement period is shorter than usual and my bonus rewards came in just 92 miles (92 cents) short of the old limit, which means I can’t verify if this cap is in fact lifted. I will do so next month.

My total bill came to $1,165 which means that 48% of the total amount was used in the bonus rewards calculations. Chase distinguishes a total of 15 spending categories. 6 of these are used in bonus rewards calculations which leaves me with 9 categories that were used for the remaining 52% of my bill.

I am somewhat disappointed with this number. I expected top 6 categories to cover at least two thirds (66%) of my spending. Could it be that Chase doesn’t categorize some/many transactions?

Redeeming rewards

I still have to figure out how I can redeem my rewards. With the regular Chase Freedom card I called the customer service and changed my account from points/miles to cash back and then just received checks. I have not yet done so for Chase Freedom Plus. I did click however at the Redeem Rewards link in my account to find that the closest thing to cash that I can buy online for my miles is a $50 cash card for Starbucks, Shell, or ExxonMobil, each is priced at 50,000 miles. There are also $25 cards that go for 30,000 mies.

Another thing I want to clarify as well is if I can redeem $200 accumulated rewards for $250 in cash like I could do it with the old card effectively increasing my rewards rate. I will try to get a hold of a customer rep. this week to find it out.

Conclusion

All in all, it is too early to say if this card is really better than the old one. If Chase Freedom Plus indeed doesn’t have a rewards cap like the old card does then it might indeed be the card of choice for me, even if I can’t get the $250 for $200 deal which I suspect is the case. Also, one shouldn’t forget about the $30 annual fee that kicks in after introductory year is over, which throws in yet another variable into this equation.

Have you signed up to this offer? What is your experience? Please share in the comments.




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