UPDATE 09 NOV 2008: Chase has updated how the Freedom Card works since this post.  See the new terms here.

When I was designing my cash back calculator, I decided to include the Chase Freedom Cash Visa Signature card to see what kind of cash back it could generate. I was pleasantly surprised with its results. This card was consistently coming out on top for many spending scenarios, and no less than second place at any level of spend. With these kinds of results, the card earned a permanent spot on my calculator.

Back then, the Chase Freedom Cash card was paying 3% at gas stations, grocery stores, and fast food restaurants, and 1% cash back everywhere else. Since that time, Chase has updated the terms of its Freedom Cash card to make it even more attractive. Chase now offers 3% cash back on the top three categories you earn in a month, out of a possible 15 categories. Whatever 3 categories you spend the most in for a particular month is what you’ll earn the 3% cash back rebate on. Here are the magic 15 categories that can earn you the special 3% cash back:

• Grocery Stores
• Gas & Convenience Stores
• Fast Food Restaurants
• Telecommunications
• Cable/Satellite TV/Internet Service Providers
• Video Rentals
• Department Stores
• Dry Cleaners
• Drugstores
• Movie Theatres
• Commuter Passenger Transportation (including ferries, bridges, tolls, parking garages, taxis/limos)
• Pet Supply Stores and Veterinary Services
• Utilities
• Salons and Spas
• Gym and Recreation Memberships

Chase does however cap the special 3% rebate at the first $600 in spending for your top 3 categories — so you won’t earn more than $18 in a month from the special 3% cash back rate. You will continue though to earn an unlimited 1% cash back on your top 3 categories (and everything else) after the $600 threshold is reached.

Redeeming your rebates on the Chase Freedom Cash Visa Signature card is similar to many other cash back rewards programs — after you’ve reached at least $50 in accumulated rebates you can request a check. One other nice perk about this card is that if you wait to accumulate $200 in rebates before cashing in, Chase will send you a check for $250. That’s an instant 25% bonus cash back.

So to recap, here are the features of this card in a nutshell:

• 3% cash back your top 3 of 15 categories (max $18 in one month, 1% after that)
• Unlimited flat 1% cash back on everything else
• No limit to the total amount of rebates you can earn on the card
• Rebates redeemed by check in $50 increments
• Redeeming $200 in rebates gets you a $250 check
• $50 bonus for new customers (after they make their first purchase)
• No annual fee
• You can choose between cash back and points

The last bullet deserves some discussion. When you apply for this card, you’ll be asked to choose between cash and points. If you choose points, you can accumulate them towards a built-in set of merchandise and airline tickets. Personally, I recommend going for the cash back option because you can use the cash for whatever you want, not just on the limited selection of stuff offered by Chase. For those types that get easily bored and need something extra to pass the time, Chase even allows you to flip between cash and points once every month. So if you like frequently talking to complete strangers, this card gives you the perfect excuse to do that!

Like all other credit cards, you’ll need to activate the Chase Freedom Cash card when it arrives in the mail. After Chase’s automated voice system tells you the card has been activated, you can just hang up. The system will mention something about transferring you to a live rep to finish the card’s setup, but in most cases this step is not necessary. The extra “setup” is just an opportunity to see if you’re interested in a balance transfer, payments insurance and other doodads. If you’re following my system faithfully, you don’t want to accept any of these offers anyway.

All things considered, the Freedom Cash Visa Signature card is a winner. I use this card as a backup to my Blue Cash card, and I have been very pleased with it. Don’t necessarily use this card as a backup in your case though, as the Freedom Cash Visa Signature may be your highest-paying cash back card. You can use the calculator on my blog to see if this card is in fact the one that’s best for you. If this card is your best, naturally you’ll want to use the Freedom Cash Visa Signature for all your purchases, not just as a backup.

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