In a continuation of what seems to be a growing trend toward simplicity and everyday value, American Express and Bread Financial (formerly known as Alliance Data) are teaming up on a new no-annual-fee 2 percent cash back card.
A surprisingly high number of similar cards have debuted over the past 18 months, including the Wells Fargo Active Cash® Card (earns cash rewards), the SoFi Credit Card and the TD Double Up℠ Credit Card. These join stalwarts such as the Citi® Double Cash Card and the Fidelity® Rewards Visa Signature® Credit Card. (To get the 2 percent rate on the SoFi, TD and Fidelity cards, cardholders need to redeem their rewards into another eligible account held with the same financial institution. And the Citi Double Cash technically gives 1 percent when you make a purchase and 1 percent when you pay it off.) The SoFi Credit Card earns 3% cash back rewards for a year when you set up direct deposit with SoFi. After that, earn 2% unlimited cash back on purchases when redeemed toward investing, saving, or paying down an eligible loan with SoFi.
The main differentiator for the Bread Cashback™ American Express® Credit Card is its generous purchase protection benefit. This covers eligible purchases for up to $1,000 per loss within 90 days of purchase (capped at $50,000 per cardholder every 12 months). I once saved $299 on an Apple Watch repair thanks to purchase protection coverage with a different card.
The Bread Cashback Amex provides identity theft insurance and travel emergency assistance, too. Cardholders can also access exclusive merchant, dining and entertainment deals and discounts through the Amex Offers program. And unlike many of its rivals, this card does not charge foreign transaction fees.
Cash is king
At first glance, it seems like a strange time to launch a new cash back card, since travel demand is surging as the COVID-19 pandemic appears to be receding. But as important as travel rewards are to the credit card industry, it may surprise you to learn that cash back was Americans’ favorite credit card perk before the pandemic.
Who couldn’t use a little more cash? Especially now with inflation at a 40-year high. And part of the beauty of cash is that you can use it for anything. So if you want to earn 2 percent cash back on your routine expenses and save those rewards to fund a future trip, that’s great. You could also use the money to defray day-to-day expenses or for whatever else you choose. The Bread Cashback Amex makes it easy to redeem for a statement credit or a direct deposit into your bank account.
Most people don’t like paying annual fees or juggling too many cards, either. As I’ve written before, I’m a big fan of no-annual-fee 2 percent cash back cards. If you want to keep things especially simple, you could use one of these as your daily spending driver. Or if you have other cards with higher rewards in certain categories, you could mix and match those as appropriate and pull out the 2 percent card on the many occasions when you’d earn less with your other cards.
Carrying a balance is a no-no
It’s best, of course, to pay your credit card bills in full each month to avoid interest. If you don’t, the Bread Cashback American Express card assesses a variable interest rate of either 15.74 percent, 23.24 percent or 27.24 percent, depending on your creditworthiness. Like most other rewards cards, that would wipe out the value of your cash back very quickly.
For now, the card only charges traditional credit card interest. It’s not currently eligible for American Express Pay It, Plan It, an installment program that lets cardholders pay off purchases in predetermined increments with a lower plan fee than the typical card rate. I suspect this card will offer an installment payments option at some point, since Bread Financial also has its own twist on the buy now, pay later concept.
The bottom line
The 2 percent cash back, no-annual-fee credit card space is becoming crowded. The Bread Cashback American Express card stands out for its purchase protection coverage and lack of foreign transaction fees.
The lack of a sign-up bonus is a bit of a drawback. Similar cards often give new customers at least $100, but the Wells Fargo Active Cash® Card is especially generous with a $200 bonus, after new cardholders spend $1,000 in their first three months.
Still, the Bread Cashback Amex is worth considering, especially if you’re earning less than 2 percent cash back on many of your current purchases. Cards such as this one can fill the gaps in an existing cash back rewards strategy or serve as a straightforward, everyday go-to.
Have a question about credit cards? E-mail me at email@example.com and I’d be happy to help.