Discover Card vs. Amex "Cash Rebate"
Written: Apr 01 '00 (Updated Apr 01 '00)
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Product Rating:
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Pros: good rebates for purchases > $5,000/yr.
Cons: poor acceptance, lower initial rebates
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| Almighty's Full Review: American Express - Cash Rebate Card |
The Amex Cash Rebate card is structured to be a direct competitor to the Novus Discover Card. While both cards offer you No Annual Fee service, low "introductory" rates, and the ability to carry a balance, their cash payout (the most important aspect) structures are slightly different.
Cash Rebate (%) on purchases:
Annual Spending < $1,000: Discover = .25%, Amex = .25%
Annual Spending > $1,000 < $2,000: Discover = .50%, Amex = .25%
Annual Spending > $2,000 < $3,000: Discover = .75%, Amex = .50%
Annual Spending > $3,000 < $4,000: Discover = 1.00%, Amex = .50%
Annual Spending > $4,000 < $5,000: Discover = 1.00%, Amex = .50%
Annual Spending > $5,000: Discover = 1.00%, Amex = 1.50%
* The Amex card will give you an additional .5% rebate in any month in which your account carries a balance. When added to the maximum rebate of 1.5% you can achieve the advertised "2% cash back".
As you can see from the payout structure above, if your annual credit card purchases are between $0 and $5,000 you are better off using the Discover Card. Actually if you do the math, the break even point for deciding which card to use is $8,000 annually. If you plan on spending more than $8,000 in credit card purchases next year, you might want to consider trading in your Discover Card for an Amex "Cash Rebate" card. If however you think you'll spend less than $8,000, you'd be better off (from a cash rebate standpoint) by using the Discover Card.
In my calculations I assumed you wouldn't carry a balance to get the additional .5% because, in most cases the interest from carrying a balance would more than off set the extra rebate gained. If you get an Amex Cash Rebate Card, I'd recommend you (as with any credit card) pay of the balance monthly to avoid ridiculously high interest charges.
While I understand that cashback schedules are not the only reason to get (or not get) a particular credit card, they do play an important role. Amex does have world class telephone support, however both cards (to some degree) have acceptance limitations. Neither the Discover Card nor Amex are accepted with the regularity of Visa and Master Card, however, some merchants accept these cards exclusively. You'll have to investigate these cards acceptance in your area before determining which might be more useful to you.
However, from a rebate structure standpoint, most credit card users (those spending < $8,000/year) would be better off in choosing the Discover Card instead of using the American Express Cash Rebate Card.
Recommended:
No
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