2012 concluded my first full year using the Blue Cash Preferred® Card from American Express as my primary card of choice for groceries (by far, the biggest expense category I charge by credit card).
So I wanted to share the results on whether my quest for 6% cash back on groceries paid off (or didn’t).
Prior to using this card, I was using the TrueEarnings® Card from Costco & American Express. Nice card, but it only offers 1% cash back on supermarket purchases.
Realizing that around 60% of my typical credit card purchases were at supermarkets, I went on the hunt for a card that could offer more cash back in that category. What’s sweeter for a frugal rewards card hacker than extra cash back on common grocery purchases that you were going to make anyways? (a man’s gotta eat!)
At the conclusion of my search, two cards jumped out as being far superior to any others on the market in this category (and they just so happen to be closely related):
- The aforementioned Blue Cash Preferred.
- The Blue Cash Preferred’s sister card, Blue Cash Everyday® Card from American Express.
Amex Blue Preferred vs. Everyday Benefits
What’s the difference between the two cards? (highlighted in bold below)Blue Preferred offers:
- The first $6,000 of purchases at U.S. stand-alone supermarkets in a calendar year qualifies for 6% cash back; 1% thereafter
- 3% cash back on gasoline at U.S. stand-alone gas stations and select major department stores
- 1% cash back on other purchases
- Earn $150 reward dollars after you make $1,000 in purchases in the first three months of card-membership
- $75 annual fee
Blue Everyday offers:
- The first $6,000 of purchases at U.S. stand-alone supermarkets in a calendar year qualifies for 3% cash back; 1% thereafter
- 2% cash back on gasoline at U.S. stand-alone gas stations and select major department stores
- 1% cash back on other purchases
- Earn $100 reward dollars after you make $1,000 in purchases in the first three months of card-membership
- No annual fee
The 1% difference on gas stations and department stores was not a big differentiator, nor was the $150 vs. $100 sign-on bonus. The 6% vs. 3% on supermarkets was. As was the $75 annual fee.
I have never paid for a credit card with an annual fee and always held a negative view towards those with an annual fee (who likes certain credit card fees?). However, after crunching the numbers, I determined the Blue Preferred would deliver a better overall return, even with the $75 annual fee. Would these #’s play out in reality?
Blue Preferred Cash Back After 1-Year
Crunching numbers is one thing. But how would the cards play out in real life?Here’s a screenshot of my rewards earnings over the year:
You can see my earnings had a huge jump from Jan to Feb., as I received my $150 reward bonus (and redeemed it as a statement credit). Then, they steadily increased between $35-$45 per month each month, as I purchased groceries each week.
For more granularity, I live in a 2-person home (my wife and I) and we buy our groceries at Trader Joes, Whole Foods, Meijer (includes all toiletries, over-the-counter medicine, pet supplies), Kroger (for a rare unscheduled run), and Costco. We also eat at home 99% of the time. Dining out expenses probably average $25/month.
My total “groceries” (supermarket) category expenses in my year end review, according to AmEx, was $6,446.87. How common is this? According to the U.S. Bureau of Labor Statistics, the average American spent $3,624 on groceries over the course of a year. A couple would average approximately twice that, or $7,248.
This means that I just passed the $6,000, 6% cap and received the full $360 cash back for the “stand-alone supermarket” category (and 1%, or $4.46 on the remaining $446.87 in spend for that category).
Note that each retailer you purchase from has a classification code that determines what category it falls in to. What retailer purchases fell in to Amex’s “groceries” category for me? Trader Joes, Whole Foods, Meijer, and Kroger.
The lone exception was Costco, which fell in to the “wholesale stores” category, and I only received 1% cash back on (btw, yes, you can use this card at Costco and are not limited to only using the Costco AmEx, which also delivers 1% cash back on Costco purchases).
Blue Preferred vs. Everyday Results
What happens when comparing the two cards (and a typical no-annual-fee 1% cash back card like Discover It) when looking at the first $6,000 in grocery expenses?Blue Preferred:
- year 1: $360 cash back + $150 bonus – $75 annual fee = $435
- subsequent years: $360 cash back – $75 annual fee = $285
If you have similar grocery expenses or more
Blue Everyday:
- year 1: $180 cash back + $100 bonus = $280
- subsequent years: $180 cash back = $180
- year 1: $60 cash back = $60
- subsequent years: $60 cash back = $60
This calculation doesn’t include the additional 3% cash back benefits in the gas and department store categories that you get with Blue Preferred, which make the card even more beneficial.
If you haven’t already, you may want to re-think that anti-annual fee sentiment!
Final Thoughts:
The Blue Cash Preferred Card comfortably surpasses the Blue Cash Everyday card and 1% cards on supermarket purchases in net cash back for most users, despite the $75 annual fee. For me, it brought an additional $375 cash back in year 1 and will bring $225 each subsequent year. Just for buying the groceries I was already buying! Your mileage may vary, of course, depending on where you shop and how much you spend annually.If you have a large family, it might actually pay off to use both, hitting the Blue Preferred 6% cap, then moving on to the Blue Everyday.
As always, pay off your monthly statements in full and don’t use your card just for rewards benefits, that’s just silly.
source: 20somethingfinance.com
