For many of us, groceries account for a significant portion of the household budget. It’s estimated that the average family in the U.S spends around $400 a month on grocery shopping, or $5000 a year. If you’re heading to the store a credit card for grocery shopping could help you save money through cash back rewards and earning bonuses on your everyday supermarket purchases.
Use this guide to help you choose the best credit card for groceries that could make your household spending a smart move for your wallet.
What is a credit card for groceries?
Credit cards for groceriesgive you rewards and cash back that help you save money on your shopping habits. There are typically two types of rewards for grocery credit cards, these are unlimited rewards and capped rewards.
Unlimited rewards for your grocery credit card have no limitation on how much you can earn in rewards and cash back. Capped rewards will typically allow you to earn rewards up to a spending limit.
To earn rewards on your purchases, you can simply pay for your shopping using your grocery credit card.
How does paying for groceries with a credit card earn rewards?
When you make a purchase with your credit card, your credit card provider will give you a cash back reward. The percentage can vary between card issuers but typically range between 1% – 6% of the total transaction.
For instance, if you spend $1000 on a purchase, and receive a 1% cash back, you’ll earn $10. If the cash back reward is 5%, you’ll earn $50. While typically you won’t physically receive the cash as a direct deposit in your bank account, your credit card statement will be credited by the amount earned. This can then be redeemed against other rewards and purchases.
Can a grocery rewards credit card help build credit?
If you are paying for your everyday shopping using cash or a debit card, this does not help you build your credit score. When used responsibly, using a credit card to pay for your groceries can help improve your creditworthiness and have a positive impact on your credit profile.
Be mindful to make consistent on-time payments and it’s a good idea to keep your credit utilization ratio low, where you use less than 30% of your credit limit each month.
What are the benefits and disadvantages of a credit card for groceries?
When it comes to your everyday spending, a credit card for grocery shopping can be a useful addition to your wallet while you build your credit score. Here are some pros and cons of using a credit card for grocery rewards.
- Low fees: Many card providers have a low annual fee that is easy to offset with rewards and some do not charge an annual fee.
- Maximize rewards: Many credit cards offer attractive rewards where cash back can be as high as 6% on some cards. The more you use your credit card, the faster the points will add up.
- Build your credit score: In addition to receiving rewards, you can simultaneously strengthen your credit score through frequent purchases and making on-time payments.
- Convenience: You don’t need to worry about carrying cash when you go to the supermarket. You can use your credit card to pay for your purchases and track your spending.
- Caps and limits: There may be limits on the rewards you can receive on your grocery spending. For instance, some credit cards give a 5% cash back reward on the first $5000 of grocery shopping and 1% thereafter.
- Interest charges: Many credit cards can have high-interest rates which can compound over time if you’re not paying off your full balance each month.
- Redeemed against other rewards: While you can earn cash back on your credit card, for the most part, credit card providers will not credit your bank account with the amount earned. Typically, you can spend the cash back against other rewards such as travel. When taking out a credit card, it’s important to consider how you can redeem your cash back and if this is beneficial for you.
What are the best credit cards for grocery shopping?
When shopping around for your grocery credit card, keep in mind where you shop the majority of the time and whether the annual fees are likely to be offset by your spending. Here are some credit cards that offer rewards for grocery shopping for you to consider:
- Credit One Bank® Platinum Rewards Visa: You can earn 5% cash back rewards on the first $5000 of eligible gas, grocery, internet, cable, satellite TV, and mobile phone service transactions each year. Once you have reached the limit, the cash back reward is reduced to 1% on purchases. There is a $95 annual fee and an interest rate of 23.99% variable.
- Credit One Bank® Platinum Rewards Visa with No Annual Fee: You can earn up to 2% cash back on eligible gas and grocery shopping as well as other purchases with no limit. There’s no annual fee for the credit card.
- Aspire® Cash Back Reward Card: Offering 3% cash back rewards on gas, groceries, and utility payments, there is a low annual fee of $85.
- Credit One Bank® Platinum Visa®: You could be eligible for 1% cash back rewards on gas, grocery purchases and mobile phone service, internet, cable, and satellite TV purchases.
Tips for picking the best grocery credit card
With many credit card providers offering promotions and various types of rewards, finding the best credit card for grocery shopping can be a time-consuming task. Here are a few factors to keep in mind that can help you find the right credit card for your finances and household spending.
- Consider where you shop frequently: Choose a credit card that best suits your everyday spending. If certain stores are excluded, you don’t want to be forced to shop somewhere different because of your credit card.
- Calculate how much you’re likely to spend: Some credit cards have attractive offers where you can earn 5% in cash back for the first $5000. However, if you’re likely to spend more than this, you may earn more in rewards if you choose a credit card with a lower cash back percentage and unlimited purchases.
- Annual fees: It can be advantageous to take out a credit card with a higher annual fee if you’re likely to offset the cost in rewards due to higher spending. These cards can also offer better earning opportunities.
- Check your credit score: The best rewards come with a credit rating of at least good for approval. Since applying for a credit card can temporarily ding your credit score, you’ll want to know where you stand beforehand.
- The options to redeem the cash back: Depending on how you can redeem your cash back, the rewards may or may not be worth it for you in the long run. Some credit card providers allow you to redeem your rewards against travel perks, however, if you do not travel frequently, then it would be best to find another card.
- Additional rewards offered: Certain credit cards offer added benefits for their customers such as rewards for spending on gas, restaurants, and utilities.
How can I apply and qualify for a credit card for groceries?
Many credit card providers give rewards for everyday purchases and grocery shopping. Applications can generally be completed online and a hard credit check is required.
Before you send your application, it’s a good idea to check your credit report and correct any errors as this could hurt your chances of approval. Be mindful to read the terms and conditions and consider any fees you might have to pay to use the credit card.
Some card issuers allow you to check for preapproval with a soft credit inquiry before applying, however, this does not guarantee approval. A soft credit inquiry does not impact your credit score.
Can you get a credit card with grocery rewards when you have poor or limited credit?
Rewards-based credit cards often require a minimum credit rating of good (670) or above. There are some exceptions to this, however, these cards typically come with high-interest rates.
You may find it beneficial to go for a secured credit card while you build your credit rating, and then switch to a credit card with better benefits once you have a strong credit history.
Is a credit card for groceries the best option for me?
If you make purchases and frequently shop at the supermarket, then you could benefit from a credit card with rewards for grocery shopping. Without changing your spending habits, you could gain an extra few hundred dollars each year with little to no effort.
To maximize your rewards, you should take into account how much you spend each month and whether it’s best to go for a credit card with an annual fee that can be offset with purchases or one with no annual fee. Plus, there may be additional benefits such as air miles and travel rewards.
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