Chase Freedom vs. Discover it: Which is the best 5 percent card?

If you’re looking for a no-annual-fee card that gives 5 percent cash back on purchases, two of the most popular options are:

  • Chase Freedom
  • Discover it

Both are common features in reward-chasers’ arsenals, and both are very similar in their rewards structures — but which is the best? We’ve got a head-to-head comparison:

Chase Freedom

Chase Freedom Rewards:

  • 5% in categories that change quarterly (including gas stations, movie theaters, home improvement stores, restaurants and Amazon.com). You have to enroll each quarter to earn 5 percent on category spending.
  • 5% to 15% via “Cash Back Boost,” a feature that gives you bonus cash back if you shop at certain online retailers that partner with Chase
  • 1% on other spending

What you can get: In addition to cash back (via a statement credit or direct deposit ), you can redeem for a lot of things via Chase Ultimate Rewards, including gift cards, merchandise, travel and experiences.

Limitations: Your 5 percent earnings are capped; only $1,500 in category spending each quarter qualifies for 5 percent cash back. Once you reach the limit, you’ll earn 1 percent on all category purchases. Also, you must have at least $20 worth of rewards piled up before you can redeem for cash back.

Discover it® Cashback Match™Discover it card

Rewards:

  • 5% cash back in rotating categories (including restaurants, movie theaters, home improvement stores and online shopping) that change every quarter. You have to enroll every quarter.
  • 1% on other spending

What you can get: You can redeem rewards for cash back (via statement credit or direct deposit), gift cards, online purchases and charity donations.

Limitations: You can earn 5 percent on only $1,500 in category spending each quarter (after that, you’ll earn 1 percent).

Which is best?
You probably noticed that these cards are very similar. In fact, they’re almost identical, when it comes to the quarterly rewards structure, the boosts they give for shopping with partner retailers and the limitations on 5 percent earnings. Chase has a slight edge if you’re redeeming for cash back, as it lets you cash out sooner. However, if you’re keeping the card for the long term (and you easily can because neither carries an annual fee), that might not be very important —  you’ll have plenty of time to reach both those thresholds and not have to worry about cancelling the card before an annual fee kicks in and leaving money on the table.

So, which card should you pick? That’s actually a trick question: Your best rewards tactic is to get both, if you can.

Here’s why:

You’ll cover more ground:  For cards with no annual fee, 5 percent is currently the highest cash-back rate in the rewards card industry. However, the fact that you have to spend in certain categories limits your options. By having two cards, each with different categories, you’re maximizing your chances to earn 5 percent cash back.

For example, if you don’t spend much on movies or restaurants, those categories would probably be duds for you. But if you have a long commute and have another  card in your wallet offering 5 percent on gas stations that same quarter, you’d still be earning 5 percent on something.

You raise the 5 percent ceiling:  With both cards, your 5 percent earnings dry up as soon as you hit the $1,500 mark each quarter. That puts you at a disadvantage when it comes to the big-ticket categories, such as home improvement stores. If you’re doing a major renovations project, you could burn through that in a single trip to The Home Depot or Lowe’s.

Both the Chase Freedom and the Discover it offer a home improvement category (usually they overlap in the spring, which is what has happened this year). If you have both cards, you get to earn 5 percent on up to $3,000: That’s $150.

Want to get even more strategic?
If you don’t mind having an annual-fee card, consider pairing the Chase Freedom card with the Chase Sapphire. By transferring those 5 percent rewards you earned with the Freedom to the Sapphire, you have the opportunity to convert them to points with 10 frequent flier and hotel loyalty programs on a 1-for-1 basis.

 
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