Freedom Flex deepens Chase’s loyalty strategy

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The Chase Freedom Flex card, which will begin accepting applications on Sept. 14, is a great option for new cardholders.

I’m especially intrigued by its 5% cash back payout on up to $12,000 in grocery purchases (excluding Target and Walmart) within the first year. That’s worth up to $600, plus new cardholders get an additional $200 after they spend $500 within three months of opening the account. That’s a staggering $800 return from a card that doesn’t charge an annual fee.

The Freedom Flex’s perks also include 5% cash back on travel purchased through Chase Ultimate Rewards, 3% on dining, 3% at drugstores, a free ShopRunner membership and cellphone insurance.

Plus, the Freedom Flex offers rotating 5% cash back categories (along the same lines as the soon-to-be-discontinued Chase Freedom* card). They’re capped at $1,500 in spending per quarter after activation. Cardholders get 1% cash back after that, which is the card’s base rate for most purchases.

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There’s something for everyone, and it’s an interesting mix of pre- and post-COVID favorites. In the short term, the Freedom Flex is ideal for stay-at-home spending such as groceries, takeout and delivery. And because it focuses on cash back, you don’t need to have any upcoming travel plans to find it worthwhile.

In the longer term, the card has even broader appeal. It reminds me of the investing barbell strategy, which emphasizes two extremes (in this case, groceries are the primary benefit right now and travel and dining will hopefully bounce back over time).

See related: Travel deals to watch out for post-coronavirus

The Chase trifecta

Travel enthusiasts love to pair a Chase travel card (such as the Chase Sapphire Reserve or Chase Sapphire Preferred Card) with a Chase cash back card (such as the Freedom, the Chase Freedom Unlimited or now the Freedom Flex). They often throw in a business credit card as well.

Chase Ultimate Rewards points are traditionally worth 1 cent apiece when redeemed for cash back, but they’re worth 50% more when Sapphire Reserve cardholders redeem them for travel, and 25% more on the Sapphire Preferred. Through Sept. 30, Chase is also applying that higher rate to offset eligible grocery, dining and home improvement purchases.

If you have the Sapphire Reserve and the Freedom Flex, your 5% cash back purchases could yield the equivalent of at least 7.5% in travel value (potentially even more if you transfer to Chase’s airline or hotel partners). The Freedom Unlimited gives a flat 1.5% cash back on most purchases, which would be worth at least 2.25% when paired with the Sapphire Reserve and applied toward travel (and again, for a little while longer, the available options extend beyond travel).

Traditionally, travel has been the most mouthwatering credit card reward for many cardholders. With travel crippled by the pandemic, I suspect a driving force behind the Freedom Flex announcement was Chase’s desire to get frequent travelers excited about something. This tends to be an affluent, creditworthy group. I suspect the news behind the news is what this means for more premium Chase cardholders who have multiple accounts with the bank.

Overall card applications and approvals are way down. Lenders don’t want to take much risk right now. I don’t think Chase is doing this just to get an average cash back user. Many of these are loss-leader kinds of perks.

I think this is all about feeding that flywheel and keeping the big travel spenders happy and creating some buzz even though they’re not traveling. The Freedom Flex announcement should accomplish that, both now and in the future.

See related: How to use travel card benefits if you plan to travel in 2020

Don’t forget about the Freedom Unlimited

The new Chase trifecta might actually be a Chase superfecta. Many cardholders could opt for four different Chase cards – for instance, the Freedom Flex, the Freedom Unlimited, one of the Sapphire cards and perhaps a business card as well.

Many of the Freedom Flex and Freedom Unlimited rewards overlap, although one key difference is that the Freedom Unlimited’s base rewards rate is 1.5% versus 1% on the Freedom Flex. The Freedom Flex stands out for its 5% rotating cash back categories and World Elite Mastercard benefits (cellphone insurance, ShopRunner membership, Boxed, Lyft and Fandango discounts and more).

I think this is what Chase is really after – a more holistic play that attracts loyal customers, particularly affluent travelers. They have been the most aggressive issuer at adapting their cards to fit the new normal. I think it will pay off for them.

Have a question about credit cards? E-mail me at ted.rossman@creditcards.com and I’d be happy to help.