2% Cash Back Rewards Card: Escape By Discover vs Capital One Venture

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Except rewards redeemable only at specific places (airline miles or hotel points), 2% cash back seems to be the high watermark for credit card rewards on “everything else” spending outside special categories. If you are not earning 2% cash back on your “everything else” spending, you are not getting the most out of your rewards cards.

2% cash back is also the point many cards fail to sustain over time. The most visible failure is probably the Schwab Visa. Schwab gave up on it after a year and half. More recently there was a Sallie Mae card that didn’t even last a year at 2%.

Currently there are two no-annual-fee 2% cash back cards: Fidelity American Express and Priceline Rewards Visa. Because I use an American Express card for grocery and gas, I want my catch-all card on a different network (not all places take American Express). Nobody knows how long Priceline Rewards Visa will stay at 2%.

Two other 2% cash back rewards cards more likely have staying power: Escape by Discover and Capital One Venture. Both give rewards in “miles” but these miles are really just points that directly translate into dollars. The miles don’t transfer to any airline programs. There isn’t a “fixed number of miles per ticket” redemption option as airlines do with 25,000 miles = 1 domestic round-trip ticket. The miles areĀ  redeemable for gift cards and statement credit against travel purchases at a miles-to-dollars ratio.

Escape by Discover

Every $1 you charge on Escape by Discover earns 2 miles all year long. There are no rotating categories or caps. $60 annual fee.

Besides redeeming for statement credit at 100 miles = $1 against a travel expense, the miles can also be redeemed at 100 miles = $1 for buying at Amazon. Given the large selection of items and good prices at Amazon, that’s almost like cash and you don’t need that many miles before you get a reward.

The card comes with primary car rental insurance. This is quite unique. The car rental insurance on other cards are secondary, which means it only pays the deductible on your auto insurance. You still have to file a claim with your own insurance for the rest, which may increase your insurance premium down the road. Primary car rental insurance is much better than secondary.

The card also offers trip cancellation insurance for illness and injury and trip delay insurance for weather and airline equipment problems. That’s also very nice.

All Discover cards offer the Money Messenger service, which you can use to pay another person electronically at no fee to both you and the recipient. You actually earn rewards on it.

All Discover cards have the one-time credit card number generator. This makes online shopping safer because you are not giving out your real card number.

Capital One Venture

Capital One Venture is a Visa Signature card. It also gives 2 miles per $1 charged. Similar to Escape By Discover, the Capital One Venture card also has a $59 annual fee but it’s waived in the first year. You get a bonus of 10,000 miles worth $100 after spending $1,000 in the first 3 months.

Redeeming the miles is at the same 100 miles = $1 statement credit ratio against travel purchases but it’s all-or-nothing. If your travel charge is $500, you will need 50,000 miles. You can’t just redeem 20,000 miles against a $500 charge. There are options for gift cards though.

Capital One’s claim to fame is its “no foreign transaction fee” policy although the actual benefit depends on how much you really charge in foreign countries. I rarely use credit cards overseas. I just withdraw cash from ATMs and spend cash.

Winner: Escape By Discover

The annual fee and the slight friction in redeeming rewards make Escape By Discover and Capital One Venture more likely to stand the test of time for 2% rewards on “everything else” spending.

Between these two similar 2% cash back cards, I would choose Escape by Discover. It has better features.

Redeeming rewards from Escape by Discover in small increments for Amazon purchases just makes it so much easier than redeeming for statement credit against large infrequent travel purchases. Primary car rental insurance, trip cancellation insurance, trip delay insurance, Money Messenger person-to-person payments, and one-time card numbers offered by Escape by Discover are all very valuable.

Capital One Venture on the other hand has more places accepting it because it’s a Visa card. Discover is accepted by more merchants than American Express but not as many as Visa or MasterCard. Capital One Venture also has the benefit of no foreign transaction fee if you charge a lot overseas.

If I didn’t already have Priceline Rewards Visa, I would go with Escape by Discover. I don’t know how long Priceline Rewards Visa will stay at 2%. If Priceline Rewards Visa ever stops giving 2% rewards, I will get Escape by Discover.

Some links are referral links. If you use them to apply for a card they will pay me a referral fee but you are not getting any less than if you go to them directly.

[Photo credit: Flickr user wonderwebby]

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Comments

  1. Rohit @ The Money Mail says

    Discover also has a great cashback portal and generally offers more cashback than any other cashback sites. So that should be an added plus for going for a discover card.

  2. White Coat Investor says

    Personally I like the combination of Pen Fed Visa (5% back instantly on gas) and Fidelity AmEx (2% almost instantly on everything.) I might be leaving a little money on the table by not having a card with more than 2% back on groceries, but there are no annual fees and it’s only 2 cards to keep track of. If I end up someplace that doesn’t take Amex, at least I get 1% back from the PenFed card.

    Too bad neither of them has an affiliate program. :)

  3. Harry says

    I have a calculator on the post about AmEx Blue Cash Preferred. Depending on your groceries/gas ratio, the AmEx Blue + Discover Escape combo may very well beat the PenFed + Fidelity AmEx combo. Still two cards, still at least 2% on everything.

  4. Harry says

    RDT2 – It won’t help if you do it as an individual. If all consumers stop using credit cards, we will all be better off with lower prices. If only you don’t use it, you are still paying higher prices but you are not getting any compensation. Offering discounts on debit or adding surcharge on credit would be the way to go. I hope more retailers start doing that. Until then, we are still better off using rewards cards for selfish reasons.

  5. Steve says

    I have an Escape but only use it for my offspring’s day care expenses. I use a Fidelity-linked Visa for all other purchases, which only gives 1.5%, though it’s basically pure cash (deposited into my brokerage account). I think both offer rotating bonus categories, but I am too lazy to sign up every quarter. Still, it’s irrational to prefer the Visa over the Discover card; I should start using the Discover wherever it is accepted. (The Visa does go to 2% above a certain annual amount, which I hit in the 11th month if at all)

  6. Harry @ PF Pro says

    Alas, I don’t have either of these cards. I currently just use my AMEX gold for groceries(2%) and my b of a cash rewards for 3% on gas. I just don’t like paying an annual fee to try and get 2% back since I’m always going for spending bonuses. I can’t guarantee that I’ll be able to use a calculator like yours to figure out if the annual fee will be a wash or not.

  7. KS says

    One caveat about the escape card, is that it’s not a TRUE 2% “Cashback” card. If you redeem in 10,000 point increments for travel purchases or for a purchase on amazon, then it’s a 2% cash equivalent. But in order to get cash back in the form of a check or statement credit, it’s 200 points per dollar cash back. Thus making this card 1% true cashback, and 2% earnings for travel purchases and amazon. Despite reading all the fine print on this offer, I did not realize that, and ended up signing up for a card I didn’t need (since I already have the chase sapphire which earns two points per dollar on travel related purchases).

    In fact, even now I tried to find WHERE I learned it was only 1% cashback for true cash, and I cannot find this information in any of the promotion materials, on the website, or in my actual account pages. Which makes my point, that this information is so buried, I cannot find it again after finding it once.

  8. Harry says

    KS – Chase Sapphire earns 2% on travel charges. This card earns 2% on everything if you redeem against travel or Amazon purchases. It’s not the same as earning 2% only on travel and Amazon purchases. You can earn on everything else all year long and only make one travel purchase or one purchase at Amazon to redeem the rewards. Because Amazon carries a large selection at good prices, a credit against Amazon purchases is pretty much cash to me.

  9. Rohit @ The Money Mail says

    Harry this is true. Credit against amazon is pretty much cash like. If you look at gift card sales on ebay, amazon gift cards sell for almost the same price unlike a gift card from GAP, that would go for about 85 cents on the dollar

  10. KS says

    Yes agreed. 2 miles earned per every dollar spent. Those miles can be exchanged at 1 cent per mile for travel (10,000 miles or $100 minimum) or at amazon (no minimum as far as I can tell). I do realize that sapphire is only 2% earned on travel/dining purchases.

    If one equates Amazon with cash, then this is essentially a 2% cash back card. But I don’t value Amazon spending 1:1 with cash. Others might. However, I’m only trying to point out that despite advertising liberally that points can be redeemed as a deposit to one’s checking account or as a statement credit, they do NOT advertise that the redemption is only half as valuable as travel/amazon. This information is very hard to find (as mentioned, despite having the card, I cannot find again the points/cash ratio. Note, discover DOES distinctly avoid calling this card a “cashback” card in any of their promotions, instead calling it a “double miles” card. :)

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