Chase Freedom Unlimited

I’m generally of the opinion that cards with annual fees often have better opportunities to get outsized value from them.  However, a lot of people are very averse to paying annual fees for a card, which is completely understandable.  It wasn’t until my fourth credit card (the American Express Green Card) that I got a card with an annual fee, so I understand the logic.  I’m still largely of the opinion that pure cashback cards (that don’t offer any credits to offset the annual fee) generally should be no annual fee.  Otherwise, to me, it’d feel like a race to make sure you spend enough on it to get the annual fee back. 

All that being said, I’m going to look at one of my favorite no annual fee cards, the Chase Freedom Unlimited.  This card is advertised as being a 1.5% cashback card, but it is actually a bit more nuanced than that.  The card actually earns its cashback in the form of Chase Ultimate Rewards points, which can be redeemed at a rate of 1 ¢/point, so it’s the same thing, right? Let’s see.

I provide the information here just to give readers a vague idea if the rewards offered by the card might make sense for them to consider the card.  All information should be confirmed with the card company before applying.

Welcome Offer

The Chase Freedom Unlimited currently has a welcome offer of $200 (20 000 Chase points) after spending $500 in the first 3 months.  In addition, it also offers 5% cashback (5x points) on gas purchases for the first year (on up to $6 000 of spend).  A previous welcome offer was an additional 1.5% cashback (1.5x points) on the first $20 000 of purchases in year 1, which would be worth $300 (30 000 Chase points) if maximized, but that’s a lot harder to maximize (or even meet) a simple $200 back off $500. 

Earnings

The main feature of the Freedom Unlimited is that it earns 1.5% cashback (1.5x points) on everyday spending.  Interestingly, at the end of 2021, Chase added a few bonus categories to the card.  The card earns 5% cashback (5x points) on travel booked through the Chase Portal.  It also earns 3% cashback (3x points) on drug store purchases and on dining, which is awesome for a no annual fee card.  Interestingly, these categories mean the card rivals the Chase Sapphire Preferred, which has a $95 annual fee. 

So, what the key difference? The CSP lets points be redeemed for 1.25 ¢/point towards travel and/or lets the points be transferred to transfer partners, such as United, British Airways, or Hyatt. 

The major drawback of the card is that it has a 3% foreign transaction fee, which is not uncommon for no annual fee cards. 

Benefits

The main benefit for this card is the cashback/points it offers.  As is standard for a no annual fee, non-co-branded card, the benefits are a bit light by itself.  However, when combined with a Chase Sapphire (Preferred or Reserve) card, the benefits of the Freedom Unlimited grow substantially.  Specifically, the points earned through the Freedom Unlimited card can be moved to your Sapphire card and then redeemed as if they were earned on the Sapphire card.  The ability to move the points around is why the nuance of the Freedom Unlimited earning points instead of straight cashback is key to its value proposition. 

How to use the points

The simplest way to use Ultimate Rewards Points is to redeem them for a statement credit at a rate of 1 pt = 1¢ for any purchase.  However, the major benefit of this card is that these points can be redeemed at a rate of 1 pt = 1.25¢ towards travel through the Chase Portal.  Realistically, this is the minimum value points from this card should be redeemed for.  Redeeming the points this way has the big plus of the tickets counting as revenue tickets for the purpose of earning redeemable and tier qualifying points on the airline.

A more advanced technique is to transfer the Chase points to one of the transfer partners (e.g. British Airways, United, or Hyatt), which can unlock more value out of the points.  Based on how I’ve redeemed transferrable points in the past, I peg the value of Chase points at around 1.5¢/pt on average when used to book award travel (which doesn’t earn tier qualifying points).

Examples of using the card

All these examples assume that purchases are made domestically because the 3% foreign transaction fee would completely wipe out any rewards earned from using this card.  I always recommend a no foreign transaction fee card be used abroad wherever possible.

Spend per month

	Example	A	Example	B	Example	C	Example	D
Groceries (1.5x)	$300	450	$200	300	$600	900	$400	600
Gas (1.5x) (5x welcome)	$0	0	$100	150	$200	300	$100	150
Airfare (1.5x)	$700	1050	$200	300	$0	0	$400	600
Hotels (1.5x)	$1 000	1500	$200	300	$0	0	$300	450
Gen Travel (1.5x)	$400	600	$0	0	$300	450	$100	150
Dining (3x)	$600	1800	$300	900	$300	900	$0	0
General (1.5x)	$1 000	1500	$500	750	$500	750	$400	600
Total	$4 000	6900	$1 500	2700	$1 700	3300	$1 700	2550
Average points/$		1.73		1.8		1.94		1.5

The key value proposition from the Freedom Unlimited is its 1.5x back on everyday purchases, which means that for several of these examples, this card provides better earnings than the CSP.  The deciding factor is basically how much is spent on travel (or not).  The average points earned is around 1.5 – 1.94 points/$, which is worth 1.5 – 1.94 ¢/$ by itself.  These points earnings could also be interpreted as being 2.25 – 2.91 ¢/$, with the valuation of 1.5¢/point for Chase Ultimate Rewards points if you hold a CSP. However, it wouldn’t make sense to use the Freedom Unlimited for Airfare, Hotels, or General Travel since the CSP earns 2x points instead of 1.5x. 

What this means is that an average return of over 2.25 ¢/$ on the Freedom Unlimited is potentially misleading or meaningless.

Specific examples

Card	World Traveller ($750)  (% return)	Marriott Hotel night ($230/night)	Points values (WT/Hotel)
No rewards card	2 728 (4.9%)	2 200 MP (7.3%)	$37.10 / $17.60
General 1% cashback card	2 728 + $7.50 (5.9%)	2 200 MP + $2.30 (8.3%)	$44.60 / $19.90
Chase Freedom Unlimited (cashback)	2 728 Avios + $11.25 (6.4%)	2 200 MP + $3.45 (8.8%)	$48.35 / $21.05
Chase Sapphire Preferred	2 728 Avios + 1 500 UR (7.9%)	2 200 MP + 460 UR (10.3%)	$59.60 / $24.50
The Ritz-Carlton Card	2 728 Avios + 2 250 MP (7.3%)	3 880 MP (13.5%)	$55.10 / $31.04

Is this credit card right for you?

This card is great for two types of people.  The general target audience is people that want a relatively simple card with a good return on everyday spending without an annual fee.  The second, more advanced target audience is for the group of people who don’t mind doing a bit of work and research to optimize their redemptions.  When combined with a Chase Sapphire card, new doors open for both cards.  Holding a Chase Sapphire card increases return of the Freedom Unlimited card (by 50% on average) when the rewards are redeemed toward travel.  Holding a Freedom Unlimited card fills a gap on the Sapphire cards, where they only earn 1 point/$ on everyday spending (increasing the point earning by 50%). 

Given that the Freedom Unlimited has no annual fee, the card is a good one to hold onto for the long-term to maintain a long credit history and help maximize your credit score.