Chase Q1 2020 rotating categories: Are they worth it?

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Dear Cashing In,

I keep reading about the Chase Freedom card. It sounds like a good deal because you get 5% cash back in different categories. Should I get that card? What’s the catch? – Brian

Dear Brian,

The Chase Freedom is a popular card, mainly for the reason you describe: You earn 5% cash back in spending categories on up to $1,500 in combined purchases that rotate every quarter. You also need to activate the bonus every quarter in order to be eligible for the extra cash back.

Chase released its bonus categories for the first quarter of 2020 a few days before the start of the new year. You can now earn 5% cash back on spending at gas stations, on select streaming services and on internet, cable and phone services.

In addition, Chase also announced that if you use Chase Freedom with Lyft, you’ll earn 5% back – and that feature will stay the same from quarter to quarter until March 2022.

That is impressive because 5% cash back is a high rate of return. The highest flat-rate cash back cards – that is, those that give you consistent cash back no matter where you use the card – offer usually 2% cash back or less.

Check out all the answers from our credit card experts.

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See related: Chase Freedom vs. Chase Freedom Unlimited

What you need to know

One of the nice things about the Chase bonus categories is, for the first quarter, they tend to be on items that most households will actually spend money on.

Unlike bonuses on purchases at department stores or drugstores (where you might or might not spend money in a three-month period), most people will probably spend money at gas stations and on internet and phone services. Streaming services are becoming more popular, as well. Who doesn’t want to receive a rewards bonus for watching Baby Yoda on The Mandalorian on Disney+?

You’ll want to make sure to remember to use that Chase Freedom card at the gas station. And make sure you give your internet, cable and streaming service provider your account information. Streaming services like Netflix and Hulu, for instance, are often set up to bill a credit card monthly – make sure it’s the Chase Freedom before that charge hits.

The quarter lasts from Jan. 1 to March 31. You can check out the full list of what companies are included on Chase’s website. The fine print points out that purchases made at a retail store might not qualify for the bonus. For instance, if you get a new phone and hook it up to AT&T at an AT&T store, charges made in the store might not count towards the 5% back.

Still, before you get too excited about cash back in these categories, there is a little more to the story that you should know.

• First, the 5% back on rotating categories is capped at $1,500 in spending per quarter on specific categories that rotate every quarter. Any other purchases outside those categories earn cash back at a rate of 1%.
• That is a cap of $75 in cash back per quarter from that 5% rate. Any additional spending over $1,500 per quarter on those categories is just 1% back.
• Second, you have to register each quarter for the bonus categories. That means that in order to receive that 5% back for the first quarter, you have to tell Chase that you want those bonuses by activating them online.

Limited rewards

There’s nothing wrong with the Chase Freedom card.

• It has no annual fee.
• There’s a $150 sign-up bonus, after you spend $500 on purchases in the first three months.
• In addition, Chase offers a sister card, the Chase Freedom Unlimited, which also has no annual fee and gives a flat 1.5% cash back (with no rotating categories each quarter).

Just keep in mind that if you use the Chase Freedom, the rewards you earn on those bonus categories are limited to $300 a year.

That’s not bad, but there are a lot of other rewards cards that have perks worth more.

Are there better cash back options?

If it’s cash back you’re after, you might be better off with a card that gives a base rate higher than 1% and that doesn’t cap the rewards – such as the no-annual-fee Citi® Double Cash Card or Fidelity Rewards Visa Signature card (each at 2% with no cap – Citi Double Cash earns 1% as you buy and another 1% as you pay for your purchases).

Depending on how you spend your money, it might make sense to go with a card that gives fixed category bonuses, such as the Capital One® Savor® Cash Rewards Credit Card. The card offers unlimited 4% cash back on dining and entertainment, plus 2% at grocery stores. The Savor also comes with a $300 sign-up bonus if you spend $3,000 in the first three months – but charges a $95 annual fee.

However, there is a way to make the rewards from a Chase Freedom or Chase Freedom Unlimited more valuable. The answer: get a second Chase card.

See related: When rotating categories don’t align with your spending habits

Pair up

If you have a Chase card that earns Chase Ultimate Rewards – such as a Chase Sapphire Preferred Card ($95 annual fee) or the Chase Sapphire Reserve ($550 annual fee) – you may transfer your rewards to one of those cards from Chase Freedom.

That way, you can use the Chase travel portal to pay for flights, hotels and other travel expenses using points – at a greater value than cash back.

Furthermore, if you have the Preferred card, you get a 25% bonus if you redeem Chase Ultimate Rewards points for travel – and a 50% bonus if you have the Reserve card.

Once your points have been transferred to either card, you can also transfer them directly to an airline or hotel frequent flyer program, which can yield a better value than cash back as well.

That option will appeal to you only if you are interested in travel rewards, and if you don’t mind paying the annual fee that those other Chase cards have.

Also, keep in mind that Chase limits the number of cards from any card issuer that you can receive in a 24-month period to five.

Taken by itself, Chase Freedom is a fine card, with the rotating cash-back rewards of 5% a strong draw.

But the card can become even better if you pair it with a second Chase card and use it wisely.