If you're looking for a cash-back credit card with no annual fee, the Chase Freedom and Chase Freedom Unlimited are options you'll want to consider. The two cards have many common features, but they let you earn cash-back rewards in very different ways.
Here's everything you need to know to decide between Chase Freedom and Freedom Unlimited.
Keep in mind that we're focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which will far outweigh the value of any points or miles. It's important to practice financial discipline when using credit cards by paying your balances in full each month, making payments on time, and only spending what you can afford to pay back.
Chase Freedom vs. Freedom Unlimited: the biggest differences
The Freedom and Freedom Unlimited cards have more similarities than differences. The biggest difference is how the cards earn cash-back rewards. The Chase Freedom card gives you 5% back on purchases in rotating bonus categories on up to $1,500 in quarterly purchases when you activate and 1% everywhere else. The Freedom Unlimited card comes with a flat 1.5% back on all purchases.
Both cards reward you for every purchase. Freedom Unlimited starts giving you 1.5% on every purchase from day one with no additional steps required to earn. Chase requires Freedom cardholders to click an email link or login to activate the 5% bonus every quarter.
Rotating categories or flat-rate rewards?
The deciding factor for which card is better for you is how you prefer to earn rewards. If you get the maximum bonus every quarter with the Chase Freedom, you can earn 5% back on $6,000 in annual purchases. That's $300 from bonus categories and 1% on everything else.
The Chase Freedom Unlimited card's 1.5% gives you an extra 0.5% compared to non-bonus purchases with the Chase Freedom. The better card depends on how much you spend in total per year and if you would maximize the 5% bonus from Chase Freedom.
The trick is that you don't know what categories the Chase Freedom card will use for the 5% bonus in advance. They change every quarter and every year. In my experience, some quarters we use the bonus categories a lot and others not at all. The Chase Freedom bonus categories in 2019 included gas stations, tools, drugstores, grocery stores, home improvement stores, gas stations, streaming services, and department stores.
It takes $20,000 in purchases, or an average of $1,667 per month, on the Freedom Unlimited to earn $300 cash back, the maximum you could get from the bonus categories per year with the Chase Freedom. If you spent $20,000 with Chase Freedom and earn the maximum 5% every quarter on $6,000 of those purchases, you would earn $300 in bonus category cash-back plus $200 on other purchases. In this case, you would be better off with the Chase Freedom's $500 in total cash back.
But are you really going to get the maximum 5% back every quarter? Probably not. Depending on what you spend per month in the bonus categories, you might earn half or less of the potential. When in doubt, it may make more sense to lean toward the Freedom Unlimited card's 1.5% back on all purchases.
The same bonus and benefits
Outside of the purchase category bonus, the two cards are virtually identical. Both feature a $150 cash-back bonus after you make $500 in purchases in the first three months after opening a new account. Both come with 0% APR for 15 months on purchases and balance transfers (then a variable rate of 16.49% to 25.24%). They have the same interest rates, pricing, and terms.
But both cards also have a trick up their sleeve if you're into travel and want to boost your rewards. More on that in the next section.
Pair either with a Chase Sapphire card for increased travel rewards
When you earn cash back with Chase Freedom or Freedom Unlimited, you can cash out at any time. But the cards are also connected to the Ultimate Rewards program, which can give you even more value for travel if you also have the Chase Sapphire Preferred or Chase Sapphire Reserve credit cards.
If you have a Freedom card (either version) and a Sapphire card (again, either version), you can convert cash back into Ultimate Rewards points at a rate of 1 cent to 1 point. Sapphire Preferred gives you 1.25 cents per point toward travel booked through Chase and Sapphire Reserve gives you 1.5 cents per point. That's an instant 25% to 50% increase in rewards.
Read more: I dreaded trying to transfer Chase points between cards until I tried it, and I still can't believe how easy it was
I have the Chase Freedom card myself and my wife has the Freedom Unlimited. We try to max out the 5% quarterly bonus from Freedom, use our Sapphire Preferred card for travel and restaurants, and the Freedom Unlimited everywhere else. Chase allows you to combine awards in the same household, so everything comes together in one big balance. That gives us at least 1.5 points per dollar, with up to 5 points on some purchases.
Bottom line
As long as you pay your balance off in full every month by the due date, these cards offer decent rewards with little downside. With no annual fee, any cash back you earn is profit in your pocket.
The better card for you comes down to how much you would spend per quarter in the 5% bonus categories with the Chase Freedom card. But if you're in doubt or think keeping track of rotating categories is too much work, you won't go wrong with Freedom Unlimited.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
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Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.
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