Credit Card Rewards – Which Program Is Best For Buying Food?
This post was written by guest blogger Michael D. from Credit Card Forum, which is a message board and blog for talking about credit cards.
Have you noticed the barrage of credit card commercials on TV this fall? During the recession there were none, but now that the economy is improving the banks are back at it… all trying to convince us their credit card is the best.
However the truth of the matter is that most of these commercials are for credit cards that give sub-par rewards (and that’s why they can afford to spend so much marketing them). Well in this post I’m going to rank the best reward programs for buying food – at both grocery stores and restaurants – and rather than going on hype, I’m going to simply go by the numbers. Some of these you may have heard of, but others probably not…
American Express Blue Cash
This is an oldie but a goodie… if you’re a big spender. Here’s how it works:
For the first $6,500 you spend in a calendar year, you earn 1% on gas/grocery stores/drugstores and then 0.5% (half a percent) on everything else… obviously nothing exciting! However, after you’ve spent that amount, you start earning an unlimited 5% cash back on gas/grocery stores/drugstores and 1.5% on all other purchases… now that is exciting!
I generally only recommend this card for those that plan on spending at least $20,000 per year (so the rebate averages out in your favor). Not easy to do, but if that describes your spending then this is by far the best credit card for grocery store shopping since it is the only one on the market that gives an unlimited 5% on that category.
Citi Forward Card
Now this is a credit card you never see advertised, but it has the most generous rewards program for eating out, you must look at these credit card applications and apply now!
The Citi Forward card gives 5 points per dollar on restaurants, fast food, and several other categories. There is a cap on the number of points you can earn per year – a max of 75,000 – but when you do the math you realize that is sufficient to cover most peoples’ spending. There’s no other card on the market that comes close to giving 5x points on restaurants and fast food all year long (but some do for a few months out of the year, which I will discuss in a moment).
Now there is a potential drawback with the Citi Forward card and that comes when you cash out your points. If you don’t redeem your points carefully, the value of your points will be watered down. However if you choose your reward carefully (like a $100 partner gift card) you can get a full $0.01 in value per 1 point. I talk about this strategy in detail in my Citi Forward card review.
Citi Diamond Preferred Card
This Citi credit card has an interesting rewards program, but it really only makes sense for the first year. Let me explain…
For the first 12 months, the Citi Diamond Preferred card gives 5 points per dollar on grocery stores, drugstores, and gas stations. What happens after the year is up? Well, they unfortunately chop that down to only 1 point per dollar on those categories.
So for those who don’t spend enough for the AmEx Blue to make sense, then this Citi card is one way to go. It offers great grocery rewards for the first year, but of course the drawback comes after that. I wrote a review of the Citi Diamond Preferred card where I discuss the pros and cons in detail.
Chase Freedom Card
Rounding out the list is the Chase Freedom card. Yes, it’s one of those which you’ve probably seen non-stop commercials for lately.
The rewards program on the Chase Freedom was changed in 2009 to more closely mimic the Discover More, both of which give 5% cash back in rotating categories (but only up to a certain amount of spending). From October through December of 2010, the Chase Freedom is giving 5% on up to $1,500 in spending at grocery stores, department stores, and movies.
That may sound nice, but the drawback is they only give 5% at grocery stores for one quarter out of the year. So it is a good credit card for grocery stores, but only for 3 months per year. Obviously this makes it the least attractive credit card in the grocery category. For full details here is my review of the Chase Freedom.
Credit cards are often highway robbery if you carry a balance. However, if you’re the type of person that always (and I do mean always) pays your balance in full every month, then credit card reward programs can save you a decent chunk of money on groceries, restaurants, and fast food. But once again, I would like to stress the importance of not carrying a balance – reward cards have very high APRs so they make absolutely no sense to use if you aren’t going to pay them off every month!