Oh how quickly things change. For years, the American Express Blue Cash was my credit card of choice. It offered 1% cash back on gas and groceries and 0.5% on all other purchases up to $6,500 in annual spending, but that’s not what made it so impressive. After $6,500, bonus cash back terms kicked in, taking the base cash back rate to 1.5% and the gas-and-groceries rate to an impressive 5%. Needless to say, the Blue Cash was hard to beat…at least until something in the market changed and the Blue Cash lost its appeal.
You see, other products emerged that had rewards structures able to not only compete with the Blue Cash’s earning rate but also beat this once-dominant spending vehicle in terms of rewards earning simplicity. There’s the Bank of America Accelerated Cash Rewards Card, which offers 1.25% on all purchases; the Capital One No Hassle Cash Rewards Card, with 2% on gas and groceries and 1% else; the Chase Freedom Visa, with up to 5% cash back on rotating spending categories; and last but not least the Capital One Venture Rewards card, which is basically a 2% cash back credit card when miles are redeemed for any travel-related purchase.
These cards, along with many other similar offers, gave consumers something the Blue Cash didn’t: generous cash back earning rates without the complexity of multiple tiers. In other words, their heightened usability transformed the Blue Cash from THE cash back credit card to just one of many.
However, this still doesn’t fully explain why the AmEx cash back card essentially became the Dinosaur of the cash back rewards landscape. You see, American Express, more than any other card network, has the leverage to offer unbeatable cash rewards. This leverage is based on the fact that American Express charges merchants significantly higher interchange fees than any other credit card network (Visa, MasterCard and Discover). The company therefore had room for improvement in terms of its cash back rates, yet simply chose not to make that move.
Its relevance among people with excellent credit—the demographic most sought after by credit card companies—declined rapidly as a result. That was then.
Fast forward to present times, and AmEx is back in the game. Yesterday, the company introduced two new cash back rewards credit cards that leave it well positioned to regain some of its previously-elevated market share. First, there’s the Blue Cash Everyday Card, which has no annual fee and offers 3% cash back on purchases made at supermarkets, 2% cash back on purchases made at gas stations and department stores and 1% cash back on everything else. Then there’s the Blue Cash Preferred. While this card does have a $75 annual fee, it also offers a remarkable 6% cash back on supermarket purchases, 3% on gas and purchases made at department stores, and 1% on everything else.
Ultimately, it’s refreshing to see AmEx display a little fighting spirit. And do you know who benefits from the increased competition this creates? Us, the consumers. Credit card companies prize consumers who maintained excellent credit throughout the Great Recession above all else. So let’s sit back, watch the rewards earning rates grow as issuers compete for our favor, and count the savings that this will eventually translate into.
[Disclosure: Some of the links within this article point to CardHub.com, which is owned by the same parent company as Wallet Blog.]