Grocery Store Credit Cards:
In our last three articles we spoke about which groceries to buy to save you money. In today’s article we have one more way to save you money at the grocery store, by using a credit card that gives you a high percentage cash back on purchases made at grocery stores. In order to make this list, here is what a credit card has to be able to do for you:
1. No annual fees- Credit cards are supposed to pay you, the idea that you should pay for a credit card in either interest or annual fees is ridiculous. I always pay my balance in full so there is no interest charge, and I would never get a credit card that had an annual fee on principal. (the first card on this list breaks this rule)
2. Cashback at grocery stores must be better than 1.5%- The Quicksilver card from Capital One pays 1.5% cashback on all purchases, so I wouldn’t mess with any cards that can’t beat that.
3. I want to be paid in cash, not in points- Did you know that 80% of credit card rewards are never redeemed? That is because credit card companies make it confusing and complicated to redeem your rewards. That is why I never mess around with airline miles which can’t be redeemed anyway, and I only consider credit cards that award me points if those points can be turned into cold hard cash. Don’t waste your time with any cards that want you to save up points to buy overpriced merchandise.
Best Credit Cards to use at Grocery Stores:
Red Card from Target– If you get your groceries from Target then there is no question you should use the Target Red Card. It is 5% off almost all purchases at Target, or 10% with the pharmacy bonus.
American Express Blue Cash Preferred– This card breaks the rule about annual fees, but makes up for it with a huge 6% cash back on purchases made at grocery stores. Besides the annual fee, the other downside is the 6% cashback only counts on $6,000 worth of purchases per year, or $500/ month. If you get 6% back on the full $6,000 in purchases in a year you will earn $360 cash back. If you take away the $75/ year in annual fees then that leaves you with $285/ year in savings.
Besides the 6% at grocery stores, you also earn 3% cash back at gas stations, 3% at some department stores, and 1% at all other locations.
Sallie Mae Rewards Card– The Sallie Mae credit card gives you 5% cash back at grocery stores on up to $250 in purchases per month or a total of $3,000/ year. If you get the full 5% cash back on all $3,000/ year that adds up to savings of $150/ year. In addition you also get 5% back at gas stations on up to $250 in purchases per month and 5% back at book stores in purchases up to $750/ month. Keep in mind that most purchases made on Amazon.com are classified as coming from a book store so if you make a lot of purchases at Amazon this would be a good card for you. Another thing to keep in mind about Amazon is they sometimes have some good deals when buying groceries in bulk.
Although Sallie Mae’s website says the card is to pay down your student loan, it doesn’t have to be used that way. You can either take your cash back and use it to pay off your student loan, or you can just get it back in the form of a statement credit.
Another advantage this card has over the other cards on this list is that it is a Mastercard which is accepted at many more locations than either an American Express card or the Target card. The Sallie Mae Rewards card pays 1% cashback at stores that don’t qualify for larger rewards.
American Express Blue Cash Everyday– This card is the little brother of the 6% preferred card. It only pays 3% at grocery stores on purchases up to $6,000 per year, but this card has no annual fee. The annual savings on $6,000 in purchases would add up to $180/ year. In addition to 3% at grocery stores this card also gives you 2% cash back at gas stations and certain department stores as well as 1% on other purchases.
What is a grocery store?
So how do these cards define a grocery store? Well, that question can be trickier than you might think. For example Walmart stores sell food, are they grocery stores? The answer is sometimes. It depends on what code the store fills out when they set up their payment equipment. Most often Super Walmart stores define themselves as grocery stores and other Walmarts define themselves as discount stores or department stores. Target stores are the same way.
As often as I suggest paying with stuff with discount gift cards, frequent readers might be surprised I didn’t recommend paying with gift cards at grocery stores. The reason I didn’t recommend gift cards is because grocery store gift cards are in such high demand that they normally sell for a discount of around 1%, or the same amount you could get by having a plain old everyday 1% cash back credit card.
Instead I think you are better off getting one of these credit cards with a larger cash back percentage. Although a couple of percentage points don’t sound like much you should keep in mind that groceries are one of your biggest purchases so small discounts can add up to a couple hundred bucks a year. If you stack this few hundred dollars a year with the discounts we discussed in the other articles, the savings could add up to a significant amount of money.
Is cutting your grocery budget a good idea (groceries part 1)
Saving money by buying in bulk (groceries part 2)
Coupons vs Store brands (groceries part 3)