House brand and issued by the bankcan offer consumers solid benefits and savings on everything from gas to groceries to travel. But when it comes to groceries — a staple of every household budget — when is a special credit card worth it, and how do you choose the card that will save you the most money?
The basic premise of grocery rewards credit cards is that when you purchase food from a qualifying retailer, you earn additional points or cash back on those expenses, which translates into significant savings over the course of a year.
According to a new report from LendingTree, a family that spends about $100 a week on groceries can earn more than $300 in cash in a year, depending on where they shop and what type of card they use.
But where you shop and what you buy both factor into how much you can save. For example, grocery purchases at some of the largest retailers in the United States will not count toward rewards with certain card types.
Private label card or card issued by a bank?
If you focus your grocery shopping at one retailer, such as Target or Walmart, a store-brand credit card probably makes sense. If you split your grocery purchases across multiple retailers, a bank-issued card is likely the way to go.
“You can have cards from favorite brands that you’re loyal to, or you can have cards that earn you points anywhere,” said Matt Schulz, chief credit analyst at LendingTree. “For some people, because people tend to be very loyal to their grocery stores, it may be worth getting a store card rather than a broader grocery rewards credit card. It also depends on the details of the card and your spending habits.”
Choose the right card
Consumers can choose from more than 90 credit cards that offer rewards for groceries, according to LendingTree’s analysis of more than 200 credit cards.
First, most cards will limit the types of groceries that earn rewards, as well as the types of retailers consumers can shop at.
For example, if you shop with an American Express Blue Cash Preferred Card, groceries purchased at “supermarkets, convenience stores, warehouse clubs, and meal kit delivery services” are not eligible for rewards. Shoppers have to frequent real “supermarkets” to make money, leaving out popular outlet stores like Costco or Walmart.
A number of credit providers exclude these types of retailers from rewards programs due to the breadth of products they sell. For example, at Costco you can buy both perishable groceries and personal electronics.
Store brand cards
If you exclusively shop for groceries at one store, such as Kroger or Target, opting for a store card is likely to maximize savings.
For example, someone who does most of their shopping at Target can get 5% off a variety of products — including groceries — with the Target REDcard credit card.
If you’re not loyal to a particular retailer, the cards with the biggest payouts – 6% cash back – according to LendingTree’s analysis, are:
- American Express Blue Cash Preferred card. Shoppers can earn 6% on up to $6,000 in US supermarket purchases, followed by 1% on additional spend. After the first year, there is an annual fee of $95.
- American Express Surpass Hilton Honors Card. This card earns shoppers 6 X bonus points on every dollar spent on qualifying purchases at grocery stores. It has an annual fee of $95.
What you buy and how you pay for it matters
Even when shopping at an eligible retailer, card issuers may deem certain purchases ineligible for rewards.
“Even with specific stores, there are still nuances and small details that you need to be aware of, as some of them may give you more rewards if you buy your groceries online or buy branded products,” Schulz said.
For example, the Chase Sapphire Preferred Card gives shoppers 3X points on online grocery purchases only. If you craft them in the store, they are not eligible for rewards.
Products such as alcohol and tobacco, even purchased from the supermarket, also do not earn rewards.
And in some cases, shoppers can’t use digital payment systems, like Apple Pay, to accumulate savings.
“It’s important to know yourself before applying for one of these cards because the best card for you depends on your spending habits,” Schulz said. “Do your homework, read the card details, or you may find yourself disappointed and not getting the rewards for your money that you were hoping for.”
USA News Gb1