American Express Blue Cash Everyday vs. Blue Cash Preferred
February 13, 2013
If you look at all the cash back reward cards, you will find there are three distinct types. Some offer a fixed rate on all purchases, usually around 1-2%. Others combine a fixed rate on most purchases with increased rates of cash back that apply to selected categories merchants that change each quarter.
Recently, I drew a comparison between the major cards of this type, all of which offer 5% cash back on eligible transactions and place limits on the amount you can receive. But my favorite way to maximize my cash back bonus from my reward credit cards is by choosing a card that offers elevated levels of cash back on certain types of purchases with no limits. In this field, two of the best products are the American Express Blue Cash Everyday and their Blue Cash Preferred. With these cards, it is not so much a question of which is best, but which card is ideal for your particular needs. Let’s put them head to head and see which comes out on top.
American Express Blue Cash Everyday
As a cash back credit card, the American Express Blue Cash Everyday starts off users on the right foot by offering $100 as a sign up bonus after cardholders use it to spend $1,000 in their first three months after opening an account. Cardholders earn 1% cash back on most purchases, 2% back at gas stations and in department stores, and 3% back at supermarkets. Cardholders receive their rewards as a statement credit each month that their cash back balance reaches $25 or more.
As with most American Express cards, customers also receive car rental and travel accident insurance, extended warranty coverage, and roadside assistance. There is no annual fee for this card, but there is a 2.7% foreign transaction fee on all charges processed outside of the United States.
Should You Get It?
The defining characteristic of this card is that it offers bonus cash back on key categories of “everyday” spending, without charging an annual fee. This makes it a no-brainer for cardholders who don’t charge enough on their cards each year to justify an annual fee, or those who simply refuse to ever pay an annual fee for a credit card.
American Express Blue Cash Preferred
Think of the Blue Cash Preferred as being like the Everyday version, but much more so. Instead of $100 as a cash back bonus, it offers $150. Rather than getting by with a decent 3% cash back at grocery stores, it offers an astounding 6%. And it even bumps up the nice 2% cash back that at gas stations and grocery stores to an even better 3%. The only downside is a $75 annual fee and the same 2.7% foreign transaction fee.
Should You Get It?
When it comes to two nearly identical cards that offer different rates of cash back and different costs, the best card can be determined simply by mathematics. If a cardholder spends at least $2,500 per year at grocery stores, or about $48 a week, the Preferred card will always be a better deal. That is because for each $2,500 spent at grocery stores, the Everyday card will only earn $75, while the Preferred card will earn $150. And that extra $75 is equal to the cost of the annual fee. Furthermore, this calculation doesn’t even take into account the extra 1% cash back that the Preferred card offers for purchases at gas stations and department stores.
Finally, applicants should also consider that the additional $50 sign up bonus for the Preferred card reduces the difference in price to a mere $25. In fact, American Express is essentially paying Preferred card holders $75 to use this card for their the first year. Another way of looking at it is that the first two years annual fees are refunded in advance as a sign up bonus. Unless a cardholder just hates the idea of annual fees on principle, it is hard to justify going with the Blue Cash Everyday over the Blue Cash Preferred.
Both of these cards feature a 0% introductory APR on new purchases for 12 months. As with all reward cards, these two products have higher standard interest rates than other, more competitive cards. In this case, the standard APR will be 17.24%, 20.24%, or 22.24% depending on the applicant’s credit worthiness. Therefore, I always recommend that anyone who tends to carry a balance skip reward cards. If those who carry a balance must use a credit card, find one with the lowest possible interest rate. In addition, both have American Express’s onerous 2.7% foreign transaction fee. When you consider that, and the fact that not all merchants take American Express, it is best to have a Visa or a MasterCard as a backup, preferably one without foreign transaction fees.
Another consideration is the fact that not all purchases are eligible for the higher levels of cash back. The terms for these cards exclude purchases from warehouse stores and discount clubs such as Costco and Sam’s Club. In addition, only fuel purchases from stand alone gas stations earn more than 1% cash back. Be sure to keep these restrictions in mind when using these cards.
Maximizing Cash Back
There is one really cool trick that reward card gurus have discovered. Cash back at supermarkets is earned on all purchases made there, including gift cards. And since most supermarkets now stock a wide variety of gift cards from other merchants, it is possible to extend your cash back savings far beyond groceries. In fact, a clever ‘hack’ is to purchase prepaid Visa debit cards at the supermarket using the Blue Cash Preferred. When purchased in $500 denominations, the 6% cash back ($30) will far outweigh the typical $4-$6 fee.
By selecting the version of this card (the Blue Cash Everyday or Blue Cash Preferred) that offers you the most possible cash back, it is easy to use either one to earn outstanding rewards without having to remember what the bonus categories are every time you use it.
Which card sounds best to you? Leave a comment!
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All posts by Jason Steele