Yesterday, a member of our Frequent Miler Insiders group pointed out that the welcome offer on our site (at least at the time of writing) on the Chase Freedom Unlimited is good for “an extra 1.5% back everywhere” (essentially 3x everywhere for the first year on up to $20,000 on purchases), but they lamented that the referral offer isn’t the same (presumably they were looking to refer from Player 1 to Player 2 or vice versa). That led to some internal debate on the Frequent Miler team about which new cardmember offer for this card is “better”. I think the answer will be obvious for many — which is not to say that everyone agrees on which is obviously “better”.
The Refer-a-Friend offer: $200 back (20,000 Ultimate Rewards points) after $500 in purchases
Chase offers the ability for existing cardholders to refer a friend to become a cardholder (and in some cases, it is possible to refer new cardholders to one of several cards within a card family).
At the time of writing, eligible Chase Freedom Unlimited cardholders can go to the Chase Refer a Friend site to log in and generate a link to refer friends and family to open a Chase Freedom Unlimited card.
For instance, when I log in with my Chase Freedom Unlimited and I generate my referral link, that link offers the applicant the ability to earn a bonus of $200 after making $500 in purchases within the first 3 months from account opening. That $200 bonus is actually awarded as 20,000 Ultimate Rewards points. Under the referral offer, the card earns its normal category bonuses — 3x on dining and pharmacy purchases, 5x on travel booked through Chase Travel, and 1.5x everywhere else.
The key with this offer is the low spending requirement. While the bonus is still relatively small when compared to other cards that earn Chase Ultimate Rewards, one only needs to reach a minimum of $500 in purchases within 3 months to earn the bonus with the referral offer. That’s a relatively easy amount of spend even for those with limited expenses.
If you’re playing in two-player mode, it gets a bit better yet. For instance, if I referred my wife and she was approved, I would get a $50 referral bonus (awarded as 5,000 Ultimate Rewards points). That’s a total of 25,000 Ultimate Rewards points between the referral bonus for Player 1 and the new account bonus for the new cardholder. Again, that’s the return on only $500 in spend with this offer.
An extra 1.5x on all purchases for a year up to 30K extra points
The currently welcome bonus listed on our Best Credit Card Offers page (at the time of writing) is good for an additional 1.5% cash back on all purchases for the first year up to an additional $300 cash back. More practically speaking, that offer earns an extra 1.5 points per dollar on all spend up to $20,000.
If you were to do all of your spend in an unbonused category, you’ll essentially earn 3x everywhere on up to $20K spend — that’s the 1.5x base earning rate + the additional 1.5x bonus points per dollar spent. If you spent the entire $20,000 on unbonused purchases, you’d end up with 60,000 total Ultimate Rewards points — that’s the 30,000 base points earned on $20,000 in purchases plus an additional 30,000 points.
- $20,000 in purchases x 1.5x base earning = 30,000 points
PLUS - $20,000 in purchases at 1.5x bonus points per dollar spent = 30,000 points (additional)
In other words, that offer yields up to 30,000 bonus points. However, earning those 30,000 bonus points requires big spend.
Which offer is better?
We’ve listed the offer for an extra 1.5% back listed on our Best Offers page. The general rationale there is that we have assumed that someone pursuing the card would like to earn as many bonus points as possible. For someone with a good deal of otherwise unbonused spend, the chance to essentially get 3x points on up to $20,000 in purchases sounds pretty good. Someone spending on a home remodel or a large tax bill might consider a total of 3x to be superior to the everyday earn on most other cards.
However, on the other hand, one has to consider that $20,000 is a lot of spend to earn a bonus of only 30,000 total bonus points. Many credit cards on our Best Offers page feature opportunities to earn far more points with far less spend. Even if you only want to open one credit card, it wouldn’t be hard to open one where the welcome bonus would yield upwards of 60,000 or 80,000 or even 100,000 points or more with far less than $20,000 in purchases.
Perhaps a more important comparison point is between the total numbers of bonus points as compared to spend. If you open the card under the referral offer, you’ll earn 20,000 bonus points with just $500 in spend. In order to earn 20,000 bonus points with the “extra 1.5% back” offer, you would need to make $13,333.33 in purchases. Note that you would end up with a total of 20,000 points from the ordinary 1.5x base earning rate and also 20,000 bonus points based on the additional 1.5x.
An important point is that you should not think of the “bonus” as being 3 points per dollar. Since the card ordinarily earns 1.5x on all purchases, the bonus points (or extra/additional points) are only the additional 1.5x.
The moral of the story here is that if you would spend less than $13,333.33 on the card int he first year, you would come out ahead with the referral offer for 20,000 points after just $500 in purchases.
To demonstrate that more clearly, imagine that you opened the “extra 1.5% back everywhere” offer and you spent $13,000 on the card. You would earn a total of 39,000 points:
- $13,000 x 1.5 base earn rate = 19,500 points
- $13,000 x 1.5 bonus points for 1 year on up to $1K spent = 19,500 bonus points
- Total = 39,000 points
Instead, imagine you opened the $200 back on $500 offer and you spent the same $13,000:
- $13,000 x 1.5 base earn rate = 19,500 points
- Welcome bonus: 20,000 points after $500 in purchases = 20,000 points
- Total: 39,500 points
- Note that if your significant other referred you, they would also earn 5,000 additional points from the referral.
As you can see, you’d be better off putting $13,000 in purchases on te card under the “$200 back” offer.
The math changes as you exceed $13,333.33 on your way to $20,000 in purchases. Big spenders would do better with the “extra 1.5x” offer. At the top end, $20,000 in purchases would yield a total of 60,000 points (30K base + 30K bonus.
The group member who posted about this card went on to update later saying that despite the fact that the referral offer could be pretty good, they were still considering the 3x offer since they had some big upcoming spend.
However, that group member had been looking to make a referral for their “Player 2” (spouse/partner/significant other). In that scenario, I think the math more heavily favors the referral offer. Consider this:
- Player 1 refers Player 2 and earns 5,000 points
- Player 2 earns 20,000 points after $500 in purchases with the referral version of the new cardmember offer
- Total household points = 25,750 (including 750 points earned from $500 in purchases)
Opening the “extra 1.5x” offer would mean at maximum earning an additional 4,250 points (since the maximum bonus points from that offer is 30K) — but consider that you’d have to make an additional $19,500 in purchases ($20K in total purchases) to reach 30K bonus points!
Personally, if I was in their shoes, and assuming that I had $20,000 in upcoming expenses, I’d likely follow the referral path, picking up 25,000 total points with $500 in spend and then use the remaining $19,500 in expenses to earn another welcome bonus or two or three.
Keep in mind though that if a business card were an option, one could earn far more Ultimate Rewards points with the very similar (but slightly different) Chase Ink Business Unlimited card with less spend, albeit in a shorter time window rather than being spread over a year.
Which offer should be the best offer?
Putting aside for a moment whether your personal situation is better match for $500 in spend or $20,000 in spend spread over a year, which is the objectively better offer for readers?
It’s not necessarily as obvious as it sounds. While those who have the capacity for $20,000 in purchases in a short timeframe have a number of attractive business credit card bonuses to consider, others won’t consider business credit cards and may only spend $20,000 over the course of 12 months and may not be able to spend a large amount within a short timeframe. Still, $20,00 in purchases spread out over a year’s time is an average of $1,667 in purchases per month. A person with that level of spend could probably earn a decent welcome bonus every 3 months for the next year and far outpace 30,000 bonus points. On the flip side, some people don’t want to open a new card every few months and would be happier opening a single card with good return on spend everywhere.
In the end, I think it really comes down to whether you have big upcoming purchases and how much you value the Ultimate Rewards points vs whatever your next best alternative might be and whether or not you have the ability to refer within-household (the additional 5,000 bonus points make a noticeable difference in the math).
Still, I’m curious to hear readers’ opinions: Which should be the “best” offer? Let us know in the comments.
The post Which is better: 3x everywhere or $200 back on $500? appeared first on Frequent Miler. Frequent Miler may receive compensation from CHASE. American Express, Capital One, or other partners.