BLUF: Food is always a big spending category. Strategic use of the best credit cards can get you the most money back on groceries.
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I love food. I mean, who doesn’t it? It is a great part of life that you get to enjoy on a daily basis. What’s a little depressing though is that food, and largely groceries, are my second largest expense behind housing! I spent just short of $8,000 at grocery stores in 2020 between groceries, toiletries, cleaning supplies, prepared foods and alcohol. That’s for two people and spending about half of it at a local discount grocer called Aldi’s.
I’m always looking for ways to save money or get money back which is why I was blown away when I found this cash back option. I also found myself feeling bad for the people around me paying in cash, check and other credit cards that are just giving free money away. It seems weird to approach strangers at the store about saving money so I’ll do it via blog instead.
Show me the money
The American Express Blue Cash Preferred gives you 6% (!!!) cash back on the first $6,000 you buy in groceries at grocery stores. Every. Single. Year. That’s 6%, everyday, at normal grocery stories. It’s not some special rate that only works for 3 months and then rotates to another category. 6% cash back x $6,000 in a year is $360 back in your pocket. Score.
There is a catch though. And before I tell you please promise to hear me out. It has a $95 annual fee. The horror! Many people see an annual fee and it’s a non-starter for them. They see that they have to pay $95 every year to have a credit card and they’re out. It’s important, though, to keep an open mind in life and not dismiss any idea before you do the math and see if it actually makes sense.
To the math, smart consumer!
In calculating the true value of a credit card I think you must include any fees into the equation to be fair. In this case, the $95 annual fee. In other words, the true value in this card is $6,000 * 6% = $360 – $95 = $265 a year for groceries. You could keep spending more but it drops to 1% so you should be putting that on another card.
But how does that compare to a 2%, no annual fee card like the Citi Double Cash which I also love and carry in my wallet? Let’s dust off our high school algebra. The equation 0.06x – 95 = 0.02x, solving for x, will tell me the exact amount I need to spend in grocery stores in a year (x) for these two cards to give the same total cash back.
- Solving for X:
- 0.06x-95 = 0.02x
- 0.06x = 0.02x + 95 – Add 95 to both sides
- 0.06x-0.02x = 95 – Substract both sides by 0.02x
- 0.04x = 95
- x = 95/0.04
- x = $2,375 at grocery stores
We can check our work easily.
- $2,375 * 0.02 (2%) = $47.50 for the Double Cash card.
- ($2,375 * 0.06) – $95 = $142.50 – $95 = $47.50 for the Blue Cash Preferred
$2,375 a year at a grocery story is only $198/mo. Pretty easy to hit in just groceries, let alone buying toiletries, alcohol and prepared foods there. Anything spent more than that and the Blue Cash Preferred is the easy winner. Spending $500/mo on average for even my family of two is no problem to hit the $6,000 max value. Worst case I could always buy gift cards there which is conveniently at the end of the year at Christmas time.
But wait, there’s more
The card would be worth it for me if I just stopped there at groceries. You also get 6% on streaming services and 3% on gas, tolls and ride share? Here’s a little snip from my account showing those sweet sweet cash back numbers.
The usually have some kind of sign up bonus but right now it’s an even sweeter deal. A nice sign up bonus AND the first year annual fee waived.
Action Steps:
- Review your budget and spending history. How much do you spend in grocery store purchases in a year?
- Take a look at your current credit cards and how much cash or other rewards you’re getting from them. Are you maximizing your rewards?
- If not, consider opening the American Express Blue Cash Preferred. The the sign up bonus it’s a no risk option to try.
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Join the conversation. Comment below if you have this card! Comment below if you have another card that you think is better!
