When 1.5% Cash Back Is Better Than 2%

Whereas I imagine virtually everybody ought to have a no-annual-fee 2 % money again bank card, there are some cases by which selecting a money again card with a seemingly decrease payout can really present extra worth, at the very least for a time. Right here’s what you have to know:

When 1.5% is best with Chase

The Chase Freedom Limitless® has a base rewards price of 1.5 % money again on all purchases, nevertheless it does even higher in sure classes. Cardholders earn 5 % money again on journey booked by means of Chase Journey and on Lyft rides (by means of March 2025), plus 3 % money again on eating and at drugstores. Should you spend rather a lot in these classes, that might doubtlessly enhance your general money again earnings over 2 %. With that in thoughts, this Chase card may very well be higher than a flat-rate 2 % money again card within the following conditions:

You wish to earn heightened rewards on journey redemptions

Should you even have a Chase card that lets you switch Final Rewards factors to Chase airline and lodge companions — just like the Chase Sapphire Reserve®, Chase Sapphire Most well-liked® Card or Ink Enterprise Most well-liked® Credit score Card — you may get much more worth out of your Freedom Limitless card. That’s as a result of you’ll be able to mix Final Rewards factors earned throughout numerous playing cards, and whenever you switch factors to airways and lodges, you may be capable of get a considerably greater redemption worth than the usual 1 cent per level.

Final Rewards factors are value round 2.0 cents apiece on common when transferred to high-value journey companions, in accordance with Bankrate valuations. Typically you may get much more worth should you discover a candy spot in an airline or lodge award chart.

You need bank card and journey protections

The Freedom Limitless additionally has beneficiant buy safety, prolonged guarantee protection and journey cancellation and interruption insurance coverage. It’s a flexible card that’s one of the vital invaluable no-annual-fee choices available on the market.

When 1.5% is best with Financial institution of America

Financial institution of America has two no-annual-fee bank cards that provide 1.5 % money again on each buy. The best is the Financial institution of America® Limitless Money Rewards bank card, which offers precisely that: limitless 1.5 % money again.

There’s additionally the Financial institution of America® Journey Rewards bank card. Whereas technically not a money again card (you earn 1.5 factors per greenback on all eligible purchases), you redeem these factors for assertion credit score to offset eligible journey or eating purchases. These two playing cards may present extra worth than a 2 % money again card if:

You’re keen on maximizing rewards by means of Most well-liked Rewards

For each playing cards, your 1.5 % rewards price may develop to as a lot as 2.625 % (2.625 factors per greenback) when you’ve got at the very least $100,000 in deposits or investments with Financial institution of America or Merrill Lynch.

The financial institution’s Most well-liked Reward program boosts your bank card rewards by 75 % on the highest tiers, by 50 % when you’ve got between $50,000 and $99,999 in eligible deposits or investments, and by 25 % when you’ve got between $20,000 and $49,999. Should you’re a loyal buyer, you possibly can earn 2.625 %, 2.25 % or 1.875 %, respectively, in money again or assertion credit.

When 1.5% is best with Uncover

Uncover’s typical welcome provide is to match all the rewards a brand new cardholder earns on the finish of the primary 12 months. With the Uncover it® Miles card, meaning an efficient 3 % money again on the whole lot for the primary 12 months. This may be higher for you than a 2 % money again card if:

You need a no-fuss journey card that gives money again redemptions

The Uncover it Miles is marketed as a journey card, and whereas these miles can be utilized to offset eligible journey purchases, they will also be used for extra simple money again redemptions. No matter the way you redeem, you get 1 cent per mile. What looks as if a 1.5 % money again card really offers an efficient 3 % money again on all purchases on the finish of that first 12 months due to the cardboard’s Cashback Match provide.

The underside line

Don’t get me incorrect — I nonetheless love 2 % flat-rate money again playing cards with no annual charge, such because the Wells Fargo Lively Money® Card (which earns 2 % money rewards on purchases) or the Citi Double Money® Card (which technically offers 1 % money again whenever you make a purchase order and one other 1 % whenever you pay it off). These each provide a stable, simple return.

If you wish to preserve it actually easy, you possibly can obtain a positive final result through the use of one in every of them for your whole spending. Or should you’re prepared to tackle a bit extra complexity in alternate for a better profit, you’ll be able to mix flat-rate playing cards with playing cards that provide higher rewards in sure classes. Playing cards with bonus rewards classes might provide decrease rewards outdoors of these classes, which is the place the two % money again playing cards think about.

However, as you’ll be able to see, there are additionally some cases by which a 1.5 % money again card may doubtlessly be even higher.

The details about the Financial institution of America® Limitless Money Rewards bank card and the Financial institution of America® Journey Rewards bank card was final up to date on July 12, 2024.

Have a query about bank cards? E-mail me at ted.rossman@bankrate.com and I’d be completely happy to assist.