Thread: I chose Blue Cash over points

Originally Posted by Kadman

I'm a new member but wanted to thank those that run and contribute to this site as I used it in my process of analyzing the best card for my needs. I built a spreadsheet to analyze the "mystery" of points vs cold hard cash on a few cards, notably the Gold Premier Rewards and the Blue Cash cards.

In my case, the Blue Cash really does maximize the return. I know the cash percentages are much lower for the first $6,500 but I should reach that either at the end of the first month or mid-second month at the latest. btw- The review shows that +$6,500 "all other" purchases earn 1.5% but it's actually 1.25% - or at least now it is.

If I traveled a ton I might have gone for Gold Rewards (and possibly Platinum) but we're pretty boring people and don't travel much. lol The one thing I really couldn't get over is that (if my calculations were correct) spending points really brought the value down to .5% for most things with the notable exception of specific store gift cards that usually worked out at 1%. Have others gotten different computations?

Also, I was a little surprised by what I consider to be a relatively low credit limit on this card. I have an 822 FICO and the limit was setup at $20,000. Do they typically start out relatively low for the first xx months? I won't regularly hit this with monthly spending (counting grace period for previous month) but it might be an issue for large ticket items from time to time.

Also, when I signed up they gave me $100 cash to start with. That's quite a change from the AmEx I'm used to. Not only did they not take my money, but they actually gave me some! Crazy world!!

I agree with you; most points programs suck. Though there are some exceptions, most point-based programs, once you distill them down to the ratio of actual cash value earned to cash spent, turn in some pathetic returns. BofA's WorldPoints program is an example. On any WorldPoints card I've looked at, you are earning a fraction of a percent cash back, until you've earned some ungodly number of points, at which time you start to see some redemption options which approach 1%. Citi's Thank-You Points system has been devalued over time, and to make matters worse, some of the cards that Citi used to offer that gave a good return of TYP have either been reigned in (e.g. Citi Platinum AmEx) or are no longer offered (e.g. citi Driver's Edge), so again at low point levels the redemption cash values are pathetic and as point levels rise, the options only approach the mediocre. The Citi Forward card is an exception; you can still do pretty well, at least in the first year, in terms of cash back returned vs. cash spent. With most of the point systems (including WorldPoints and TYP), you can achieve slightly better return by redeeming your points for store-specific gift cards, but the returns are still meager.

I've found that point-based cards from Chase are an exception; generally their points are worth a penny, thus 5,000 points=$50. Strangely, they also offer store gift cards, but at the same redemption level; 5,000 points=$50 gift card. I don't know why anyone would opt for that, since you can typically buy those gift cards at many locations and thus earn cash back on the purchase. In many cases, they are available at grocery stores, drug stores, office supply stores, etc., where with the right rewards card, you're earning 3%-6% on the gift card purchase. Seems to me you'd always want to opt for the cash redemption and buy the gift cards on your own.

The same is true, at least in my case, for every miles-based credit card rewards program I've looked at, whether through a specific airline or a non-branded miles card. I've yet to find a realistic case where, once I redeemed my rewards for a ticket, then calculated what that ticket would have cost me in cash, and compared that to what I had to spend in purchases to get to that point level, that a miles card is worthwhile. Typically, I find that they can never earn me much over 1% in true cash-back value. By contrast, I get 2% cash back value on my least-valuable cash-back card, and 3%-6% on many purchases using other cash-back cards. For an miles card example, typically the minimum points required for a domestic coach-class award ticket is 20,000 points (actually, in many cases more), if you can get the ticket. On a card that earns you 1 point per dollar (the typical earning rate), that would be $20,000 of purchases. What that ticket would cost you in cash, of course is the tricky thing. As for me, I typically pay about $250 for a ticket. I don't think I've ever in my life paid more than $300 for a domestic ticket. So let's go with $300. For $20,000 of purchases on a miles card, I got $300 of value. But if I had put $20,000 of purchases just on my flat 2% card, I'd have gotten $400 back. With that $400, I could buy the $300 ticket and have $100 to spend on something else. Not to mention that I'd earn an additional $6 of cash back on the ticket purchase that I wouldn't have if I had redeemed miles. And I'd probably have earned interest on that $400 of cash back over time as I received it in cash, rather than accumulating it in airline rewards. Even if that ticket would have otherwise cost me $408, I'm just breaking even on the miles card (not considering the interest advantage). And with a miles card I'm typically limited in my choice of flight and airline. And in most cases, I'd be paying a (often hefty) annual fee for the miles card, which would eat into my profit more, for as many years as it took me to reach 20,000 points. And again, this is based on my worst-case cash-back rate of 2%. If any of the purchases I had made on that card were on groceries, drugstores, gas stations, restaurants, office supply stores, home improvement stores, pet stores, dry cleaners, movies, restaurants, or about a half-dozen other categories at any given time, my cash-back on that $20,000 in spending would have been considerably more (I average well over 3%).

So, like you, I generally prefer cash-back cards to points or miles-based systems. If I were to pick a single card to use for all of my purchases, the AmEx Blue Cash might be it. It is a great over-all card. The new Chase Freedom program would be another contender: no tiers, 5% back on a quarterly-revolving set of categories, 1% back on everything else, and an extra 10% point bonus and 10 points per purchase for being a Chase checking customer. I'd have to run the numbers to see which one would work out better for a single-card approach. But instead, I prefer a multi-card approach, where for each purchase I use whichever card gives me the most cash back. Using this approach, I averaged 3.73% cashback in 2009, 4.23% in 2008. That's much more, I daresay, than I'd average on the AmEx Blue Cash, but at the price of the complexity of carrying multiple cards. To each his own.

Chris.

P.S. I don't know about you, but $20K would be a big credit limit for me! I've got >$250K total credit limit, but spread over many cards, most of which have considerably less than $10K of limit. Granted, my score is more like 760. Still, I don't think $20K is too bad of a credit limit. Are you buying entire cars using this card?