Mar 06 2017

Why the Chase Freedom and Freedom Unlimited cards are so valuable

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At first, I dismissed the Chase Freedom cards. The sign-up bonus was ok, but nothing spectacular (15,000 Ultimate Rewards points when you spend $500 in 3 months). The 5x points in rotating categories sounded ok, but did I really want to mess with that? The Freedom Unlimited card has a flat 1.5x points on all purchases, so at least there’s no categories to keep track of. But, is 1.5x all that special, especially when I can get 1.75% on my PNC Visa?

Oh, self. I should have grabbed the Freedom card years ago.

For starters, these cards have no annual fee, so it makes sense to get them, keep them, and use them long-term.

On their own, they are decent cards. But when you also hold a premium Chase card (so yes, that means a card with an annual fee), you can get some crazy high redemption values out of your spending. Even when you factor in the annual fee, this combo gets you a much higher rate of return than you could get with no-fee or straight cash back cards.

I basically blogged in the comments section at Miles for Family, but I want to flesh out those examples here to demonstrate why the Freedom cards are so much better than even a 2% card.

Let’s say I spend $1,200 in three months on groceries¬†during the 5x bonus period quarter (coming up this April-June). At 5x per point, I would get 6,000 Chase Ultimate Rewards points for that grocery spending. I could cash it in for $60, but I wouldn’t do that.

Since I also now have a premium Chase card, a Sapphire Reserve, I can pool all of my Ultimate Rewards points across my cards. I can also then transfer my points to participating partners. Let’s look at the Southwest points I needed to book a round-trip ticket to D.C.

I needed 5,997 Southwest points (which I had on my account already). If I didn’t have those points, thanks to having the Reserve I could transfer 6,000 Ultimate Rewards points to my Southwest account at a 1:1 ratio.

The cash fare for the same flight was $118.

So, a flight for $118 could be mine for spending $1,200 on groceries. $118/$1200 = 9.83% value back on that spending. Wow!

For the Unlimited, to get enough points for that $118 airfare, I’d need to spend $4,000 on something (4,000 x 1.5= 6,000). That puts the rate of return at 118/4000= 2.95% which is still pretty good. $4k in a year is pretty much my electric, gas, water, cell phone, and internet bills.

Let’s look at what I might get if I want to book a free night at a category 1 Hyatt. I chose a Hyatt Place near the airport and picked a weekend night in April for my example. I’d need 5,000 Hyatt points to book a room with several room types available, or I could pay $203 for the cheapest room available.

To get 5,000 Ultimate Rewards points to then transfer 1:1 to Hyatt, I’d need to spend $1,000 on 5x bonus categories on my Freedom card. That’s $203/1000 = 20.3% return on that spending. TWENTY PERCENT. What in the world! If you wanted to factor in the annual net fee of the Reserve, that’s still getting 17% on that redemption ($203/1141 = 17.7%). I’m figuring a $141 net fee in that calculation, assuming you use the $300 travel credit in full.

For Freedom Unlimited, I’d need to spend $3,333 to get 5,000 points. $203/3333 = 6% return.

Depending on how you redeem your points, you can spend very little and still get tremendous value. Would I spend $203/night at a Hyatt? No, I’d pay less at some other hotel or shift my dates perhaps. But sometimes, you need to stay at a certain area on specific dates. Sometimes your options are limited, and if you have 3 kids sometimes cheaper hotels in your path simply won’t fit a family of 5. That leaves you with getting two rooms, or get a room that can fit you all.

Would I redeem 5,000 points to stay at a Hyatt? Yep. Getting those points for spending only $1,000 during the grocery quarter? Easy decision.

 

Do you have these cards? Did I help persuade you of their potential? Do you see why the annual fee is worth it? Let me know if I can send you a referral :)


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Hey! I'm Kacie, wife to Shane and mother to Jonathan (8), Vivienne (6) and Amelia (3) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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