Which Amex cash back card is right for you?

The Blue Cash Preferred® Card from American Express is one of my favorite cash back credit cards. It gives a whopping 6% cash back on up to $6,000 in annual spending at U.S supermarkets (1% back after that). The card charges a $95 annual fee. But if you max that out, as my family does, that’s $360 in cash back each year.

There’s a similar no annual fee option: the Blue Cash Everyday® Card from American Express. That one gives 3% cash back at U.S. supermarkets (also capped at $6,000 in annual spending, then 1% cash back after that).

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Focusing just on groceries, the tipping point is $3,200 in annual spending at U.S. supermarkets. Above that mark, you spend enough to come out ahead with the Blue Cash Preferred, even after accounting for the annual fee. The math is even more in your favor if you spend a lot on streaming services, gas and public transit.

That’s because the Blue Cash Preferred also gives 6% cash back on select streaming services and 3% cash back at U.S. gas stations and on transit. The Blue Cash Everyday has a 2% cash back category which includes U.S. gas stations and select U.S. department stores. Other purchases on both cards earn 1% cash back.

Why I’m considering the Amex Cash Magnet

The American Express Cash Magnet® Card is Amex’s other cash back card. It’s very straightforward: Card members earn 1.5% cash back on every purchase with no annual fee. I’m thinking of switching much of my spending over to this card.

While some other issuers have cards that give 2% cash back on everything, I really like the American Express customer experience, and I don’t want to incur another hard inquiry on my credit report by applying elsewhere right now. I already have several within the past two years. I could avoid a hard credit check by requesting a product change from the Blue Cash Preferred to the Cash Magnet.

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The fact that Amex has topped the J.D. Power Credit Card Satisfaction Study in 10 of the 14 years it has been conducted feels more important to me with each passing day. I’ve had a few customer service snafus with other card issuers this past year, and I’ve hit a stage of life in which streamlining the time and effort required to manage my cards is appealing (two young kids, a full-time job, a house … you get the idea).

I also inadvertently erred in opening multiple travel cards right before the pandemic. Between COVID and the recent arrival of my second child, I don’t envision many trips in my near future. Cash back is the way to go.

And as much as I love the 6% grocery rewards on the Blue Cash Preferred, I no longer spend much in the card’s other bonus categories. I used to have a long and expensive commute, but because of the pandemic, I haven’t commuted in a year. I don’t anticipate returning to the office until January 2022 at the earliest.

Running the numbers

If I were to spend $30,000 annually on the Cash Magnet card, I’d earn $450 in cash back. Applying that same $30,000 example to the Blue Cash Preferred, let’s say $6,000 was grocery spending earning 6% cash back, $1,000 was gas earning 3% cash back and the remaining $23,000 earned 1% cash back. That’s $620 in annual rewards. After subtracting the annual fee, I’d still come out $75 ahead of the Cash Magnet.

That actually surprised me. Before running the numbers, I thought earning just 1% on the vast majority of purchases would be a bigger drag on returns. In this example, my total return would be 2.07% on the Blue Cash Preferred (1.75% if you assume $95 worth of rewards are used to offset the annual fee). That’s competitive with the best flat rate cash back cards. It illustrates how amazing it is to get a 6% return on grocery spending, especially since it’s a big spending category for me.

The Blue Cash Preferred also adds a year to original manufacturer’s warranties of five years or less on covered purchases. And the Blue Cash Preferred, Blue Cash Everyday and Cash Magnet all offer purchase protection which covers damages and theft up to $1,000 per eligible purchase for up to 90 days after purchase (capped at $50,000 each calendar year per eligible card).

My decision

I’ll probably stick with the Blue Cash Preferred over the Cash Magnet. It’s a strong complement to my Chase Freedom Flex℠ card. I recently requested a product change from the Chase Freedom, when the Freedom Flex replaced it. Altogether, I’ve had this card for close to 10 years, and it’s definitely a keeper. I like the Freedom Flex’s 5% cash back on travel booked through Chase and 5% cash back on other rotating categories (up to $1,500 in quarterly spending, then 1% cash back after that, activation required). I also get 3% cash back at restaurants and drugstores.

I have even more cash back opportunities via Amex Offers, Chase Offers and the Shop Through Chase portal. I’ve gone from six credit cards to two over the past year. But the Blue Cash Preferred and the Freedom Flex are a strong one-two punch. I feel good about scaling back and the two I’ve chosen to prioritize.

Plus, as my lifestyle continues to evolve, I can always reassess and add new cards as I go. There should be some lofty sign-up bonuses to look forward to as vaccine availability continues to expand and the economy continues to rebound.

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

Source: creditcards.com