Key takeaways

  • While a 2 percent cash back credit card with no annual fee is a great option for most people, there are some instances where a card with seemingly lower rewards can actually provide more value.
  • Chase, Bank of America and Discover offer 1.5 percent cash back cards that boost rewards over limited-time offers, in specific categories or on travel — saving you more than a typical 2 percent card.
  • For a stronger rewards strategy, combine or rotate multiple cards to earn even more on your everyday spending.

While I believe almost everyone should have a no-annual-fee 2 percent cash back credit card, there are some instances in which choosing a cash back card with a seemingly lower payout can actually provide more value, at least for a period of time. Here’s what you need to know:

When 1.5% is better with Chase

The Chase Freedom Unlimited® has a base rewards rate of 1.5 percent cash back on all purchases, but it does even better in certain categories. Cardholders earn 5 percent cash back on travel booked through Chase Travel and on Lyft rides (through March 2025), plus 3 percent cash back on dining and at drugstores. If you spend a lot in those categories, that could potentially boost your overall cash back earnings over 2 percent. With that in mind, this Chase card could be better than a flat-rate 2 percent cash back card in the following situations:

You want to earn heightened rewards on travel redemptions

If you also have a Chase card that allows you to transfer Ultimate Rewards points to Chase airline and hotel partners — like the Chase Sapphire Reserve®, Chase Sapphire Preferred® Card or Ink Business Preferred® Credit Card — you can get even more value from your Freedom Unlimited card. That’s because you can combine Ultimate Rewards points earned across various cards, and when you transfer points to airlines and hotels, you might be able to get a significantly higher redemption value than the standard 1 cent per point.

Ultimate Rewards points are worth around 2.0 cents cents apiece on average when transferred to high-value travel partners, according to Bankrate valuations. Sometimes you can get even more value if you find a sweet spot in an airline or hotel award chart.

You want credit card and travel protections

The Freedom Unlimited also has generous purchase protection, extended warranty coverage and trip cancellation and interruption insurance. It’s a versatile card that’s one of the most valuable no-annual-fee options on the market.

When 1.5% is better with Bank of America

Bank of America has two no-annual-fee credit cards that offer 1.5 percent cash back on every purchase. The simplest is the Bank of America® Unlimited Cash Rewards Card, which provides exactly that: unlimited 1.5 percent cash back.

There’s also the Bank of America® Travel Rewards credit card. While technically not a cash back card (you earn 1.5X points per dollar on all eligible purchases), you redeem those points for statement credit to offset eligible travel or dining purchases. These two cards could provide more value than a 2 percent cash back card if:

You’re interested in maximizing rewards through Preferred Rewards

For both cards, your 1.5 percent rewards rate could grow to as much as 2.625 percent (2.625 points per dollar) if you have at least $100,000 in deposits or investments with Bank of America or Merrill Lynch. The bank’s Preferred Reward program boosts your credit card rewards by 75 percent at the highest tiers, by 50 percent if you have between $50,000 and $99,999 in eligible deposits or investments, and by 25 percent if you have between $20,000 and $49,999. If you’re a loyal customer, it means you could get 2.625 percent, 2.25 percent or 1.875 percent, respectively, in cash back or statement credits.

When 1.5% is better with Discover

Discover’s typical welcome offer is to match all of the rewards a new cardholder earns at the end of the first year. With the Discover it® Miles card, that means an effective 3 percent cash back on everything for the first 12 months. This can be better for you than a 2 percent cash back card if:

You want a no-fuss travel card that offers cash back redemptions

The Discover it Miles is marketed as a travel card, and while these miles can be used to offset eligible travel purchases, they can also be used for more straightforward cash back redemptions. Regardless of how you redeem, you get 1 cent per mile. What seems like a 1.5 percent cash back card actually gives an effective 3 percent cash back on all purchases made at the end of that first year thanks to the card’s Cashback Match offer.

The bottom line

Don’t get me wrong — I still love 2 percent flat-rate cash back cards with no annual fee, such as the Wells Fargo Active Cash® Card (which earns 2 percent cash rewards on purchases) or the Citi Double Cash® Card (which technically gives 1 percent cash back when you make a purchase and another 1 percent when you pay it off). These both offer a solid, straightforward return.

If you want to keep it really simple, you could achieve a favorable outcome by using one of them for all of your spending. Or if you’re willing to take on a bit more complexity in exchange for a higher benefit, you can incorporate both flat-rate cards and those with better rewards in certain categories (but lower in others, which is where the 2 percent cash back cards factor in as a strong foundation).

But, as you can see, there are also some instances in which a 1.5 percent cash back card could potentially be even better.

Have a question about credit cards? E-mail me at [email protected] and I’d be happy to help.

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