Cash Back Smackdown: Discover it vs. Chase Freedom

Recently readers have been asking me which card offers the best cash back rewards, Discover it or Chase Freedom Visa – $100 Bonus Cash Back. Since I carry both and have used their cash rewards, it seemed like a great question to address.

At first glance, it would seem that the two cards are about equal. For example, both offer cash rewards of up to 5%. Like so much in life, however, things aren’t always as simple as they first appear. So before we evaluate these two cards, let’s make sure we get the facts straight:

Discover it® Chase Freedom® - $200 Bonus Cash Back
Top Cash Back Reward 5% on select categories that change each quarter 5% on rotating categories
Cash Back on other purchases 1% on all purchases 1% on all purchases
Intro Offers 0% balance transfer for 14 months and purchases for 14 months 0% intro for 15 months on purchases and balance transfers
Cash Bonus None $100
Annual Fee $0 n/a
Cash Back at select online retailers Up to 20% Up to 10%
Regular APR 10.99% - 22.99% Variable* 13.99%-22.99% (Variable)
Official Website Discover it® Chase Freedom® - $200 Bonus Cash Back

As you can see from the above details, picking a cash back winner is not so simple. The best card will depend on how you will use the card. So let’s evaluate the key features, which should enable you to pick the best card based on your specific purchases.

5% Cash Back

The first consideration is to what extent you’ll take advantage of the top tier cash back offers. For the Discover it®, here are the 5% categories:

October – December

• Grocery Stores
• Movie Theaters
• Restaurants
• Movie Rentals

January – March
• Airlines
• Car Rentals
• Hotels
• Cruises

March
• Grocery Stores
• Drug Stores

April – June
• Home Improvement Stores
• Department Stores
• Clothing Stores

July – September
• Gas Stations
• Movie Theaters
• Hotels
• Movie Rentals

We go on vacation during the summer, so this past year we saved 5% on hotel costs. For us, just saving 5% on hotels each year makes the Discover More Card the best choice for us. The key is to determine to what extent you’ll take advantage of the 5% cash back categories. For those that spend a lot within these categories each year, the Discover it® is difficult to beat.

With Chase Freedom® - $200 Bonus Cash Back, the categories also change each quarter. For 2013, here is a listing of the categories by month:

Chase Freedom 5% Cash Back Categories 2013

Cash Back on Everyday Purchases

At one point, the Chase Freedom® - $200 Bonus Cash Back had the edge here because the old Discover More Card didn’t pay out at 1% until you had spent $3,000. With the new Discover it® card, however, it pays out 1% on all purchase. So on this feature, the cards are equivalent. I guess Discover got tired of those Chase commercials!

0% Intro Rates

If cash back is your only consideration, the 0% intro offers aren’t all that important. If you do care about this feature, then it’s a toss up as both cards offer similar 0% introductory rates. But the Chase card does give you one extra month of no interest.

If getting a no interest card is important, you may want to check out our list of 0% APR credit cards and list of 0% balance transfer offers.

Up to 20% with Online Retailers

Both Discover and Chase have developed relationships with online retailers who offer cash discounts of up to 20%. As a result, this factor is basically a tie. It is worth noting that Discover’s website is extremely easy to use.

Interest Rates

The regular APR is less on Discover it® than the Chase Freedom® - $200 Bonus Cash Back by a couple of percentage points. If you plan to carry a balance from month to month, the Discover® More® Card is the better option. If you pay off your card in full every month, the difference in interest rates won’t matter.

Final Thoughts

I carry both Discover it® and the Chase Freedom® - $200 Bonus Cash Back to maximize cash back rewards. Frankly, both cards are excellent, and which one works best for you will depend on your spending habits. Or you could just get both cards.

Discover it®
Discover it®
Apply Now...
at Discover's
secure site
  • 0% intro APR on purchases & balance transfers for 14 months-then a variable purchase APR applies, currently 10.99% - 22.99%. A 3% fee applies to each transferred balance.
  • Over 5,000 cardmembers rated 4.8 out of 5 stars* and now Discover "Ranked Highest in Customer Satisfaction with Credit Card Companies in a Tie" by J.D. Power*.
  • 5% cash back for online shopping and department store purchases on up to $1,500 - Oct. through Dec. 2014 when you sign up*. 1% cash back on all other purchases.
  • Free FICO® Credit Score online and on monthly statements*.
  • No annual fee, no late fee for your first late payment - APR won't go up for paying late, no overlimit fee and no foreign transaction fee*.
  • Each Discover purchase is monitored. If it's unusual, you're alerted by e-mail, phone or text-and never responsible for unauthorized Discover card purchases.
  • 100% U.S.-based customer service-anytime, day and night.
  • *See rates, rewards, free FICO® Credit Score terms and other info by clicking "Apply."
Purchases Balance Transfers Regular APR Annual Fee
Intro APR Intro APR Period Intro APR Intro APR Period
0% 14 Months 0% 14 Months 10.99% – 22.99%* Variable $0
691 Average credit score approved for this card† 658 Lowest credit score approved for this card†

Published or Updated: April 25, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. I miss the days when the Chase Freedom card gave 3% back on all purchases. Ever since they stopped, I stopped using the card. I haven’t done a comparison yet, but I think my airline card gets me more rewards than the Chase card. I also have the American Express Blue Card but that’s not good unless you spent a fortune each year at places that take American Express.

  2. DaK says:

    Freedom gives 3% in the Top 3 categories that you spend in, so it works out better.

    Haven’t used a hotel in a few years, so having quarters where my drugstore visit or groceries are earning 0.25 or best case 1% makes no sense.

  3. Roy says:

    Be wary. Discover has an upper limit on the 5% cash back. Its pretty low. $20

    • DR says:

      Roy, that’s not true. I’ve used the Discover More card for some time, and there is no $20 limit. In fact, I just cashed in $50 worth of cash back rewards today and applied it to my statement.

      • DR – Roy is right, at least for some of the 5% offers. Last year, the home improvement 5% was capped at the first $400 in expenses in the category, meaning the cashback only came to $20.00.

        • DR says:

          Fred, thanks for point this out. I just went into my Discover account and you are correct that there are limits. The appear to vary from category to category and even from merchant to merchant. January to March 2010 is travel, for example, and the limit is $800 in purchases. Thanks for clarifying this important point.

  4. Kate says:

    I have to go with Chase Freedom, only because there are still so many places that don’t accept Discover.

    • DR says:

      Kate, that’s a good point, and I wonder how many people share your view. I use the Discover Card everyday, but it is frustrating when a merchant won’t accept it. Of course, I have the Chase Freedom as a backup!

  5. I would probably lean towards the Discover More Card although I am personally not a huge fan of cash back cards with rotating categories (although having multiple cards and using them responsibly is smart as you are doing). I prefer my American Express TrueEarnings Card with 1% to 3% cash back and no rotating categories.

  6. Smac20 says:

    Wow, these cards offer some serious cash back. I am from Canada and am happy to receive my 2% cash back on my visa. I get 2% on groceries, gas and regular bills and 1% on the rest. Any type of rotating system seems like a lot of work for the credit card companies and ultimately will lead to lower profits.

    • DR says:

      Smac20, the rotating system for Discover Card does require a bit of effort on both their part and a card holder’s. Since I tend to use it for most purchases, though, I don’t really give it much thought.

  7. First time visiting here – great looking site, and good article. The question I was looking to answer is what are the upper limits on the premium categories. Last year, Discover offered 5% back on home improvement purchases only up to the first $400 in expenditures – or $20 as one of your commenters noted. I think the limits go up for other types of benefits.

    I was thinking that if Chase’ 3% was unlimited, or very high-limited, it might actually work out better for us.

  8. Travis Crabtree says:

    I had always paid my credit card balance off each month my entire life until my wife lost her job recently. I quickly discovered how a credit card, even one like CITI Bank Master card a customer such as I had had for many years, could raise the interest rate practically as high as they wished.A few weeks ago I discovered your website and on it read about the credit card companies that you could transfer an account balance with your current card to one with a 0% interest rate for a specified time frame. I went with Discover Card because it appeared to be the one that your site thought was best. After I completed their on line form, I submitted it and several days later received and email from them saying they had only transfered a portion of the balance from CITi Bank. The entire balance at CITI was about 15,000.00. The problem is that Discover Card did not give a reason for not transfering the entire balance and they give me no way to contact them. We have never had a late payment of any kind and have paid for 4 cars and a house since we have been married. There are no blemishes on our credit report. If you know how I can contact Discover Card please let me know. I do realize that Discover Card delibertly made it impossible for me to cantact them but I would rather not turn the matter over to the Alabama Attorney Generals Consumer protection division if at all possible. Thank you and I in no way hold your website responsible for a mess I never should have allowed myself to get into.

    • DR says:

      Travis, with most credit cards you don’t know how much credit they will extend until you apply. Sometimes that don’t give you what you want. I’ve had that happen before, which is why I’ve applied for multiple balance transfer offers before. Anyway, the contact number for Discover should be on the back of your credit card and is available on discover.com. That said, the number is easy to remember: 1-800-DISCOVER (347-2683)

  9. Gillgirl says:

    A couple of other key difference between Discover and Chase Freedom that are worth noting:
    – Discover doesn’t give cash back EVER for your spend at discount stores, like Target, Walmart, Kmart, Costco, Sam’s Club, etc. — so if you do a bunch of shopping there (like me, at Target), you lose with Discover.
    – Discover’s $3000 minimum to move from .25% to 1% cash back resets every year. So you start over every year. And, any money you spend in the 5% cash back categories doesn’t count toward your $3000 “hurdle”. All fine print that they never talk about…

  10. Gator Shane says:

    you are mistaken on your take with Discover – READ the Fine print from these lying credit card companies — we spend\t $2000 + this last month on our 2 vacations (thinking we would get $125 back in reward dollars– only to find the $300 limit on cash back netted us just $15). Always assume that ALL Credit card companies will do their Best to F you. READ THE FINE PRINT.

    • DR says:

      Gator, not sure why you say Discover is lying. They do place caps on the 5% rewards. All cards that offer 5% place caps. And they tell you they do. You may not like the terms and as a result choose a different card, but they are up front with the terms.

  11. Loralee Bruggman says:

    This is a extremly valuable post, I came across it searching through MSN. I believe majority of people will agree with your point. Finally – someone with common sense!
    PS I quite like the template you are using – where did you get it from?

  12. Janiece Whaley says:

    This is a extremly valuable post, I found it searching through Google. I believe most people would agree with your point. At last – someone with common sense!
    PS I quite like the theme you are using – where did you find it?

  13. Robert says:

    Hello DR. I want to get the chase freedom and the Discover More, but I’ve heard Chase has been doing a lot of shady things to their customers. Do you agree with this and do you think I should take a chance and get a Chase Freedom. I’m almost afraid to because I don’t want them to screw me.

    • Rob Berger says:

      Robert, I have both cards and have never had a problem with either Discover or Chase.

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