It’s always a conversation starter when I share that my credit card gets me 6% cash back on groceries. I get asked, “wait 6%, wow what card is this?” The American Express Blue Cash Preferred credit card is out here changing the game on credit card perks for sure. With travel and entertainment at a halt, you have to be realistic on how you’re getting rewarded for your credit card points. The best way to stay out of debt, and still enjoy some credit card perks is to get cash back to choose what you want to do with the money. But to do that you have to read the warning of the blog first and follow my credit card guidelines.
Warning:
When talking about credit cards, my beliefs have been very consistent. If you use credit cards, make sure you use your credit card like a debit card. This small tip will most likely help you understand how to use your credit card appropriately. Meaning that every purchase you make is planned for and you only swipe your card if you have the money to pay it off in full. Caring a balance and chasing points isn’t a way to build positive credit habits and will usually lead you to debt. Having good credit card guidelines that promote you to only spend what you have is the foundation for building good credit.
Points vs Cash Back
Credit card point vs cashback is a hot topic in the credit card community. It’s important to weigh the difference and review your budget and lifestyle before choosing. For my family, we noticed that a large portion of credit cards promote you to charge all your expenses to their credit card to maximize your points. This strategy is the opposite of how we manage our finances with the High-5 Banking Method. This strategy focuses on spending and saving with purpose by using separate accounts to organize and manage your finances.
How Not to Use your Credit Card
How we use credit cards has to be purposeful and not tempt us into combining our needs and lifestyle wants back together. This habit tends to lead a lot of people to overspend and go into debt. The reason is that as bills are usually consistent and have a budget, lifestyle wants aren’t. It is very easy to budget $100 for going out to eat and end up paying $125 plus tip. All lifestyle expenses can easily tempt you to spend more and under budget. That is why we didn’t want to use the strategy of one card for everything to maximize points.
A few lifestyle expenses to be aware of when swiping your credit card are travel, restaurants, entertainment, clothes, online shopping, and fast-food. The budget line items need to be planned and even over-budgeted for just incase of hidden costs.
How to Use your Credit Card Effectively
Just like the High-5 Banking Method, we focused our attention on using our credit card with purpose. The goal is to get a credit card that flows with your everyday life and budget. You want to feel less pressure to spend more, stay on budget, and get rewarded. Plus also keeping your checking account safe from fraud and cyber hackers.
The best way we did this was to look for a credit card that gave us perks for making purchases we were already going to make. Every month you can choose different lifestyle experiences, but your bills are the same every month. So looking for a credit card that benefits you for paying your bills and mandatory needs is a plus. Since most of our bills are on autopay, we needed a credit card that benefited us on groceries and gas. In California gas is pretty pricy and can add up when you have two family cars.
American Express Blue Cash Preferred
While doing some research for our “bills” credit card, we stumbled across the American Express (Amex) Blue Cash Preferred. They had two credit cards that offered cash back for groceries, streaming, gas, and transit. These cards seem like a millennial’s dream since it hit everything on our list. Amex has one card with no annual fee with a 3% cash back vs a $95 annual fee card with a 6% cash back option. Check out this cash back calculator to see which cash back credit card best suits your finances.
Here is a clear breakdown of the two cards:
American Express Blue Cash Preferred
- $300 Bonus for $3k/6m
- Annual Fee $95, waived for the first year
- 6% Grocery up to $6K
- 6% Streaming
- 3% Transit and Gas
- 1% on other purchases
Blue Cash Everyday
- $200 Bonus for $1K/3m
- No Annual Fee
- 3% Grocery up to $6K
- 2% on Gas Stations
- 2% Select Department Stores
- 1% on other purchases
Does this Credit Card Work for Us?
To figure out which card best suited us we had to run through the numbers and our budget first. This way we can see if our natural spending patterns will provide enough cash back to pay the $95 fee and leftover cash. When reviewing our budget we realized that our grocery budget was about $6,000 a year. Which is the max you can spend on groceries to get the 6% cash back, when you spend more than that the cash back percentage goes to 1%. I liked this because it promoted us to stay within the budget for our groceries to maximize our cashback perks. These little mindset shifts are the money moves that promote us to spend less and stick to our budget, like a win-win.
Now I do want to note that you only get the cash back at local grocery stores like Sprouts, Trader Joes, Ralphs, Vons, etc. You can not get the 6% cash back at Target, Walmart, Costco, Bj’s, nor Sam’s Club. If you do all of your grocery shopping at these types of places then this card won’t benefit you. For my family, we do most of our grocery shopping at our local farmers market grocery stores like Sprouts and Trader Joes. We do go to Costco, but we know that those purchases are more for specialty items like diapers and bulk buy items. So when we reviewed our budget and how we purchase from those stores we realized that this card would work for us.
Saving without Saving
Since we budget and keep a record of how much we spend on groceries, streaming, and gas. We were able to easily calculate how much cash back we would have at the end of the year if we didn’t touch it. This added up to having more than enough to cover the annual $95 fee and a good amount of cash. We decided to save the cash back and use the money to accomplish one of our short-term goals. The first goal that came to mind was Christmas. So, we decided to use the remainder cashback as our holiday budget to buy presents for Christmas. This allowed us to not have to save for the holidays and just use the cash available instead. Now we have a little Holiday Hack that we are excited to continue using in the future as a way to not save for the holidays.
Other High Cash Back Credit Cards
Since Amex broke out of the traditional credit card benefits with much success. We’re now seeing some competitors offer similar card benefits to hit our target audience. Chase Bank offers two credit cards, the Chase Freedom Flex and Chase Unlimited. These cards both offer great cash back options with no annual fees. This might be of interest to you if you want to get cashback for buying groceries but first review your finances.
Cash Freedom Flex
- No Annual Fee
- 200 Bonus
- 5% Grocery up to $6K
- 5% Travel through Chase Unlimited Rewards
- 3% Restaurants, delivery, drug stores
- 1% of other purchases
Chase Unlimited
- No Annual Fee
- $200 Bonus
- 5% Grocery up to $12K
- 5% travel through Chase Unlimited Rewards
- 3% Restaurants, drug store
- 1.5% other purchases
Closing Thoughts
The saying of personal finances are personal is a true statement. If you review your budget and see that you don’t shop for groceries at your local grocery store then this card might not be for you. During the pandemic, our family ate less out, cooked more at home, and streamed everything. This card became super valuable to us and our spending habits that we created. We also love how we can choose what to spend our cash back on and not feel forced to use it. Hopefully, you continue to practice positive credit card habits to build your credit with purpose and get cash back while staying debt-free.