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Discover it Cash Back vs. Chase Freedom: Which is the better 5% cash-back card?
The Discover it Cash Back and Chase Freedom are two of the most popular 5% cash-back cards. Here's a side-by-side comparison of the card offerings.

Twenty/20

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.

But which 5% cash-back card should you choose: Discover it® Cash Back or Chase Freedom®?

Below, CNBC Select reviews both cards to help you choose the one that provides the most benefit for your spending habits.

Overview

Discover it Cash Back vs Chase Freedom

Discover it® Cash Back Chase Freedom®
Annual fee$0$0
Variable APR13.49% to 24.49%16.49% to 25.24%
Intro APR0% for first 14 months0% for first 15 months
Rewards5% 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.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
Welcome bonusAt the end of your first year, Discover automatically matches all the cash back you earned$200 cash back after you spend $500 on purchases in your first 3 months from account opening

Annual fee

There is no annual fee for either the Discover it® Cash Back or Chase Freedom®. Both cards charge a 3% intro balance transfer fee and up to 5% fee on future balance transfers (see terms).

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.

Welcome bonus

Both cards come with strong welcome bonus offers:

  • Discover it® Cash Back: Discover automatically matches all the cash back you earned at the end of your first year. There is no limit to how much Discover will match.
  • Chase Freedom®: Earn $200 cash back after you spend $500 on purchases in your first three months from opening an account. (That's like earning 40% back.)

Winner: Discover it® Cash Back, since there is no minimum spending requirement for the welcome bonus.

Rewards

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.

Discover it® Cash Back cash-back bonus categories for 2020:

  • January to March (activate now): grocery stores (excluding Target and Walmart), Walgreens and CVS
  • April to June (activate starting Feb. 1): gas stations, Uber, Lyft and wholesale clubs
  • July to September (activate starting May 1): restaurants and PayPal
  • October to December (activate starting Aug. 1): Amazon.com, Target.com and Walmart.com

Chase Freedom® cash-back categories for 2020:

  • January to March (activate by March 14): gas stations, select streaming services* and internet, cable and phone services
  • April to June (activate starting March 15): TBA
  • July to September (activate starting June 15): TBA
  • October to December (activate starting Sep. 15): TBA

*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).

We found you could earn an estimated $2,120 over five years with the Discover it® Cash Back versus $1,894 with the Chase Freedom®.

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.

Redemption

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®.

Added perks

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.

Bottom line

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.

For those looking to spend outside the bonus categories, we recommend using an alternative cash-back or rewards credit card, so you earn at least 2% or 2 points per dollar spent.

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.

Discover it® Cash Back

  • Rewards

    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.

  • Welcome bonus

    At the end of your first year, Discover automatically matches all the cash back you earned

  • Annual fee

    $0

  • Intro APR

    0% for the first 14 months on purchases and balance transfers

  • Regular APR

    13.49% to 24.49% variable on purchases and balance transfers

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    Excellent/Good

  • *See rates and fees, terms apply.

On Discover's secure site

Chase Freedom®

  • Rewards

    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

  • Welcome bonus

    $200 cash back after you spend $500 on purchases in your first 3 months from account opening

  • Annual fee

    $0

  • Intro APR

    0% for the first 15 months on purchases and balance transfers

  • Regular APR

    16.49% to 25.24% variable on purchases and balance transfers

  • Balance transfer fee

    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).

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

  • See our methodology, terms apply.

Information about the Chase Freedom® Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.