August 13, 2008

Which is the better AmEx card: Blue cash or TrueEarnings?

If you have a Costco membership then you may have seen their TrueEarnings AmEx cards advertised there. But theres also the Blue Cash rewards from AmEx that has pretty good cask back rewards as well. Both of these cards could net you a pretty high cash reward. But which is really going to be better for you, the TrueEarnings or the BlueCash??

The cash rewards for the two cards are:

TrueEarnings card from Costco and American Express

  • Earn 3% cash back for gasoline.
  • Earn 3% cash back for restaurants.
  • Earn 2%cash back for travel.
  • Earn 1%cash back everywhere else, including Costco.
  • No minimum on how much you have to spend.
  • No limit on what you can earn with the TrueEarnings Card.
  • Cash back earnings accumulates over the course of the year and the total is issued to you in your February billing statement.
  • The TrueEarnings Card serves as both your American Express Credit Card and your Costco Membership Card

Blue Cash

  • Unlimited Cash Rewards
  • No Annual Fee
  • Rebates are:
Year to Date Purchases Cash Back on Everyday Purchases* Cash Back on All Other Purchases
$0 - $6,500 1.0% 0.5%
$6,500.01 or more 5.0% 1.5%

'Everyday purchases' are for Gasoline, supermarkets and drugstores.

Comparing the two, the TrueEarnings card is a great deal for restaurant and travel spending. The Blue Cash card gives you really good reward value for higher spending and for spending at supermarkets and drugstores. Both give a great reward at gasoline purchases and have no annual fee. However note that the TrueEarnings card doubles as a Costco membership so the Costco annual membership fee is tied to the card.

First a couple rules of thumb: If you don't spend at least $6500 then don't even bother looking at the Blue Cash cards. For those to be worthwhile you have to spend more than $6500 to get the high % reward rates to kick in. Because of the Costco membership fee, If you don't have a Costco membership then the TrueEarnings cards probably aren't a good option.

In general if you spend a lot more in restaurants and travel then the TrueEarnings card is probably your better bet, but if you spend a lot more at grocery and drugstores then Blue Cash will likely get you more.

Its best to estimate your annual spending then compare the actual rewards you'd get from each card.

How to figure the rewards:

The reward with TrueEarnings is fairly straight forward to figure:

TrueEarnings reward = (restaurant *.03) + (gas * .03) + (travel * .02) + (other * .01)

The Blue Cash reward is more complicated to figure given that a portion of the reward is below $6500 and a portion is above and theres different % rewards for each. I'd recommend just using the Blue Rewards calculator at the AmEx site.

Example: Lets say you spend $2400 a year on eating out, $3000 a year on groceries, $4000 a year on gasoline, $1000 a year on travel, $500 at drugstores and $2500 a year on other expenses.

The True earnings reward would be :
(2400 * .03) + (4000*.03) + (1000*.02) + (6000*.01) = 192+20+60 = $272

But if I plug the values into the Blue Rewards calculator then I get a reward of about $286 for the Blue Rewards card.

In this case the Blue Cash card would be better. Of course this is just an example. Your mileage may vary. I would consider your own spending and compare the two cards.

I compared the figures for myself and found that the TrueEarnings card will give me a better reward. I'd get about $60 more each year with TrueEarnings. I do better with the TrueEarnings primarily because I have a fairly high budget for restaurants.

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