Discover and Chase are the two most popular card issuers offering 5% cash-back cards, which gives savvy spenders opportunity to maximize their earnings in rotating categories.
If the cards' bonus categories match up with your spending, it can be smart to take advantage of these cards. The rewards you earn during those periods could outweigh what you'd receive using a flat-rate card that only earns 1% to 2% cash back year-round.
Below, CNBC Select reviews both cards to help you choose the one that provides the most benefit for your spending habits.
While both cards have no annual fee, the introductory 0% APR for each card lasts for different periods of time.
The Discover it® Cash Back offers a 0% APR for the first 14 months on purchases and balance transfers (then 13.49% to 24.49% variable APR), while the Chase Freedom® offers a competitive 0% APR for the first 15 months on purchases and balance transfers (then 16.49% to 25.24% variable APR).
The Chase Freedom® charges a 3% fee on foreign transactions, whereas the Discover it® Cash Back has no foreign transaction fees. The Discover it® Cash Back also automatically waives your first late payment fee.
Winner: It depends on what you're looking for. Though the Chase Freedom® has a longer 0% intro interest period, you can get dinged on the foreign transactions fees. Customers with the Discover it® Cash Back avoid those foreign transaction fees and also benefit from no late payment fee the first time you miss a bill.
Both cards come with strong welcome bonus offers:
Winner: Discover it® Cash Back, since there is no minimum spending requirement for the welcome bonus.
Both the Discover it® Cash Back and Chase Freedom® credit cards provide 5% cash back on eligible purchases in rotating categories on up to a $1,500 quarterly maximum. Cardholders must enroll each quarter to activate bonus categories at the select merchants. Both Chase and Discover allow you to save activation reminders to your calendar and set up email alerts to help you remember to enroll.
After you reach the $1,500 spending limit, you get 1% back on all other purchases. If you maximize your spending in these bonus categories, you could earn $75 cash back each quarter on top of the 1% cash back you earn in all the other categories.
Since the reward rate for each card is the same, the bonus categories offered may help you choose which card to sign up for. Discover released its full 2020 cash-back calendar in late December 2019, allowing cardholders to plan their spending months in advance. But Chase has only announced the bonus cash-back categories for the first quarter of 2020. The remaining categories will be released throughout the year.
*Eligible streaming services include: Disney+, Netflix, Hulu, Sling, Vudu, FuboTV, Apple Music, SiriusXM, Pandora, Spotify, YouTube and ESPN+.
So far in 2020, Discover and Chase both included common spending categories, such as gas stations, in their calendars. Plus, Discover included grocery stores and restaurants, and it's yet to be announced if Chase will, too. In 2019, Chase included grocery stores but not restaurants.
CNBC Select worked with the location intelligence firm Esri, who provided us with a sample annual spending budget of $22,126. We used this sample budget to break down how much money you could earn (less than annual fee) if you optimized using each card over the course of five years. Calculations also assume you take full advantage of the welcome bonus.
The budget includes six main categories: groceries ($5,174), gas ($2,218), dining out ($3,675), travel ($2,244), utilities ($4,862) and general purchases ($3,953).
While the five-year estimates we've included are derived from a budget similar to the average American's spending, you may earn a higher or lower return depending on your consumer habits.
Winner: Discover it® Cash Back, since you earn $226 more in rewards over the course of five years and you know the card's bonus categories ahead of time.
Rewards earned on these two cards can be redeemed in similar ways. There is no minimum to redeem cash back for either card and, as long as your account is open, the rewards don't expire.
For Discover, you can redeem your rewards at any time for statement credits, gift cards, merchandise and more. For Chase, your rewards can also be transferred to a Chase Ultimate Rewards® card, such as the Chase Sapphire Preferred® Card, which allows you to redeem rewards for travel through the Ultimate Rewards portal and receive 25% more value.
Winner: Chase Freedom®, since travel redemption made via Chase Ultimate Rewards® can receive 25% or 50% more value if you also have a Chase Sapphire Preferred or Chase Sapphire Reserve®.
Chase's recently rolled out added benefits, so Chase Freedom® cardholders can take advantage of 5% cash back on Lyft purchases through March 2022, making this a competitive card for anyone who frequently takes rideshares. The Chase Freedom® also offers a three-month complimentary DashPass membership, then a 50% discount for the next nine months, through DoorDash.
While Discover it® Cash Back offers identity alerts to its cardholders at no cost, Chase Freedom® cardholders can benefit from purchase protection and extended warranty protection.
Winner: Chase Freedom®, if you are someone who would take advantage of Lyft rides and food delivery through DoorDash.
The Discover it® Cash Back and Chase Freedom® are two of the best 5% cash-back credit cards to have in your wallet. Since both cards have no annual fee, the card that's best for you depends on how you spend your money and the bonus categories you would like to maximize.
If you like to plan your spending months in advance, the Discover it® Cash Back is the better choice as Discover has released its full cash-back calendar for the year, whereas Chase has only announced Chase Freedom®'s bonus cash-back categories for the first quarter of 2020.
While some bonus categories have overlapped this year and last, such as gas stations and grocery stores, Discover includes restaurants while Chase has not yet.
If you don't plan your spending ahead of time but ride Lyft often, the Chase Freedom® could be the better choice with their 5% cash-back partnership. Plus, you can take advantage of transferring points to other Chase Ultimate Rewards® cards and receive up to 50% more value on travel redemption.
At the end of the day, the best cash-back card for you is the one that fits your spending habits and allows you to maximize desired rewards.
While both of these cards are good options for a lot of cash back without paying an annual fee, there are alternative options that may be a better fit for your needs. Check out CNBC Select's round up of the best cash-back credit cards of 2020 for online shopping, food and groceries.
If you want to optimize the amount of cash back you can earn with either the Discover it® Cash Back or Chase Freedom®, the Citi® Double Cash Card ranks as our No.1 cash-back card with no annual fee and earns cardholders an effective 2% cash back: 1% when you buy and 1% when you pay for purchases.
5% cash back at different places each quarter after you activate bonus categories (on up to $1,500 in purchases, then 1%). Plus, unlimited 1% cash back on all other purchases.
At the end of your first year, Discover automatically matches all the cash back you earned
0% for the first 14 months on purchases and balance transfers
13.49% to 24.49% variable on purchases and balance transfers
3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*
*See rates and fees, terms apply.
5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate (then 1%), 1% cash back on all other purchases
$200 cash back after you spend $500 on purchases in your first 3 months from account opening
0% for the first 15 months on purchases and balance transfers
16.49% to 25.24% variable on purchases and balance transfers
3% intro balance transfer fee when you transfer a balance during the first 60 days your account is open, with a $5 minimum. After, 5% ($5 minimum).
See our methodology, terms apply.