Posted on July - 15 - 2011
Cash Back Credit Cards: Eat This, Not That Analysis of the Chase Freedom Visa
After the pronounced period of uncertainty that followed the credit crisis, it is now clear that cash back credit cards have returned in full force. Since the fall of 2010, credit card companies have been ramping up not only the quality and size of bonus incentives, but also, the overall quality of the underlying reward programs. This trend has accelerated in 2011 as credit card companies have upped sign-up incentives to unprecedented levels.
In many ways, today’s cash back credit card offerings are as good, if not better than they were before the credit crisis. Nevertheless, there are vast differences in the terms and conditions of these offers, many of which share the same name and rewards structure.
This article is the first in a series of posts that will adopt the approach to food taken in the popular book Eat This, Not That and apply it to credit cards. The goal is to help consumers avoid chasing short term benefits and select a cash back credit card that offers the best value in the long term. In the first installment of this series, we’ll look at the Chase Freedom Visa Card.
The Chase Freedom Visa is perhaps the best known cash back credit card on the market today. However, choosing the right Chase Freedom Visa is not a simple task. The Chase Freedom $200 Visa is by far the most alluring deal of the group, as it offers the largest sign-up bonus of any cash back card. Tempting as this offer may be, the Chase Freedom $100 Visa or the Chase Freedom $50 Visa are better options for any consumer who carries a balance from month to month.
Why? The long term interest rate on the Freedom $200 Visa is 400 basis points higher than what is charged on the Chase Freedom $100 Visa and 600 basis points higher than what is charged on the Chase Freedom $50 Visa. This difference in long term rates can quickly erode the $100 to $150 upfront difference in bonuses and cost consumers a great deal more in the long run. For example, every $1,000 of revolving debt held on the Freedom $200 card could cost a consumer $40 more a year in interest when compared to the Freedom $100 and $60 per year compared to the Freedom $50 offer.
A consumer who carries $3,000 of credit card debt could thus save $120 in annual interest expenses by opting for the Freedom $100 Visa and $180 annually by opting for the Freedom $50 Visa. In three years, the interest savings border on astounding. Carrying $3,000 of debt on the $200 bonus card could cost a consumer $360 more than it would to carry the same debt on the Freedom $100 card Visa $540 more than it could cost on the Freedom $50 Visa. And this doesn’t even take the 0% introductory rates offered by the lower bonus Freedom cards into consideration.
Consequently, if you always pay your credit card balances in full each month, eat this:
If you currently have a small balance, intend to incur some short term debt in the coming months, but typically only carry small balances, eat this:
And lastly, if you tend to carry balances every months and can benefit from a 0% APR balance transfer and lower long term rates, eat this:
Similar Posts:
- New Chase Freedom® Visa – $50 Bonus Cash Back Offer
- Chase Freedom $200 Cash Back Bonus Limited Time Promotion
- Chase Freedom Card $150 Cash Back Signup Bonus
- Chase Freedom Credit Card Offers $100 Sign Up Bonus
- Cash Back Credit Card Promotions
