Optimize Grocery Shopping With a Credit Card

Introduction

We can’t survive for very long without eating. And unless you’re growing all your own food or dining out for every meal, that makes grocery shopping a necessity.

Of course, most of us don’t want to spend more money than we have to. Luckily, you can optimize your spending and maximize your returns by strategically using the right credit card for your weekly grocery run.

Why Use a Credit Card for Grocery Purchases?

You can find plenty of reasons to use a credit card for grocery shopping, and they go beyond the obvious advantage of being able to defer the payment. If you don’t get your paycheck until next Friday but you need to shop for the family this weekend, a credit card gives you that financial buffer. You know, “I’ll gladly pay you Friday for some meat and bread today,” to misquote Wimpy from Popeye.

But that’s just the tip of the iceberg when it comes to perks.

Earn rewards on essentials                       

One great benefit of paying with credit is the potential to earn credit card rewards, like points or cash back. You might get a flat reward rate, like 1% cash back rewards on all purchases. Or you might have a categorized or tiered rewards structure. That could look like 2% cash back on gas and groceries only, or 5X points on groceries and 1X points on everything else.

Either way, if groceries are eligible for rewards, this benefit can help you fight inflation at the grocery store. We’re not talking a ton of money here, but every little bit counts.

Simplify monthly budgeting                       

Budgeting isn’t the most exciting thing you can do with your time, but it’s important for your financial life. And a great way to streamline the process is using a credit card for targeted shopping.

Credit cards come with a designated credit limit, so you can’t spend more than that (unless you agree to paying overlimit fees when you do). If you use one card for your grocery shopping every time, you know exactly how much you can and can’t spend. And all your budgeting records for groceries stay on one card’s statements.

This not only helps simplify the budgeting process, but it can help you save money on groceries by encouraging (or forcing) you to stick within some strict parameters.

Build credit with everyday spending                       

Finally, purchasing things with a credit card and then paying it off on time is one of the best and fastest ways to build credit. That’s because payment history is the factor with the biggest impact on your credit score. Paying on time is good (even if it’s just the minimum due) and paying late or missing payments is not.

Features To Look for in a Grocery Credit Card

This probably isn’t news to you, but not all credit cards are created equal. And the right card to pull out of your wallet at grocery checkout time is going to be whichever one is best suited for grocery shopping from the options you have.

High cash back or bonus points for grocery categories

If your only credit card offers the same level of cash back rewards or points on all purchases, just use that one. But if you have one with tiered levels or targeted categories, it might be a better choice — depending on the card’s focus.

Every retailer uses merchant category codes (MCCs) assigned to their business by the credit card networks. Dedicated grocery stores have MCCs that designate purchases as groceries, and other stores selling groceries (think Walmart and Target) might as well. This allows credit cards to offer rewards specifically for grocery purchases.

For example, it’s not uncommon to find a credit card that gives rewards on everyday purchases like gas, groceries, and utility bills. Or you might get rewards on all purchases at a lower level, like 1% cash back, while groceries earn a higher level — maybe 5% cash back. If you use that card for all your grocery purchases, you have the opportunity to maximize your credit card rewards without changing your shopping habits in any other way.

Keep in mind that groceries purchased at a warehouse club, like Costco or Sam’s Club, may or may not count for grocery rewards because they have a separate MCC. Your credit card’s terms and conditions should spell out what’s included or not.

Low or no annual fees

Everybody likes free stuff, and credit card annual fees are no exception. If you can qualify for a $0 annual fee on a credit card, go for it. But they’re harder to get if you don’t have excellent credit, or if the card comes with valuable benefits and rewards — like a high-end travel card that offers free upgrades and airport lounge access.

And let’s be honest — if the perks are something you’ll use, annual fees aren’t always a bad thing. Generally speaking, credit cards with annual fees can be worth it if the value outweighs the cost. So if you have to pay $95 a year but you’re getting $300 in cash back based on your average spending patterns, that’s a pretty good ROI.

Introductory offers and sign-up bonuses

If you happen to be in the market for a new credit card, look for one with an introductory offer like a promotional APR, welcome bonus, or sign-up bonus.

An introductory APR is commonly 0% for the first six months or so, but it could also be just for balance transfers. Welcome bonuses and sign-up bonuses are often considered interchangeable terms, and sometimes they are. But it’s not unusual to earn a sign-up bonus just for opening the account. On the other hand, welcome bonuses almost always require meeting certain criteria — like spending a minimum amount on the card within a designated time frame.

So a typical welcome bonus could look something like $200 in cash back rewards after spending $1,000 in the first three months, or 10,000 bonus points after spending $300 in the first month. The details will vary by the card, but the concept remains the same. And if you have an offer like that, it definitely could be worth putting all your groceries on that card until you hit the threshold.

Redemption options for rewards

Just like rewards are earned in different ways for different things, the redemption process can also change. Some points expire if you don’t use them within a certain period. Some cash back rewards collect in your account until you redeem them, while others are automatically issued as statement credits every month. Some rewards give you the option of choosing merchandise or gift cards, while others are only for cash or credits. And the credits might be applied to your statement, or used to offset the price of something else, like hotel stays or airline tickets.

There’s really no right or wrong rewards programs, but certain structures will make more sense for you and your purchase habits. Some people like getting tangible gift cards, reducing their travel costs, or trading in rewards for merchandise. But if optimizing your grocery shopping returns is the goal, statement credits are great because they directly reduce what you owe.

How To Use a Grocery Credit Card Effectively

Once you’ve found the right credit card with the right rewards program and redemption structure, the next step is using it effectively. That includes not overlooking the nickels and dimes, because everything adds up.

Combine with store loyalty programs

You can stack your rewards by combining what you earn on credit card purchases with what you can get from the store itself. So if the store has a loyalty program that offers exclusive coupons or discounted prices, use those perks to lower your overall grocery bill. Then pay with your rewards credit card so you’re earning points or cash back on the remainder.

Pay your balance in full to avoid interest 

Not everyone knows this, but if your credit card has a grace period, you can get away with never owing interest. The secret is always paying your full balance before the due date, and you have at least 21 days after your statement is generated to do that before interest is calculated.

To figure out whether or not you have a grace period, and how long it is, check your credit card’s Schumer box. If there’s a grace period, one section will be labeled “How to Avoid Paying Interest on Charges.” And the details will tell you how many days you have to pay the full balance without being charged interest.

Track spending and adjust your budget monthly                       

If you’re using the same credit card for all your grocery purchases, this part should be pretty easy. But you’ll want to periodically take a look at how much you’re spending on groceries, and make any necessary adjustments. If you’re finding it hard to pay off your balance each month and your debt is starting to grow out of control, it’s time to cut back on the expenses.

One of the drawbacks of using a credit card is that the money isn’t coming from your bank account, so it’s easy to forget that you spent it. Sure, you’ve got a limit to your available credit, but that doesn’t make it relevant to each individual shopping trip.

Let’s say your credit card has a $1,500 limit. You would only notice an immediate issue if you maxed it out, and that’s not likely to happen on a typical weekly grocery run. If you normally spend $100 a week on groceries, but you get overconfident with a few splurges, you could easily let it creep up to double. Suddenly your budget is blown without even realizing it, and that’s when rolling balances and interest charges start burying you in debt.

Checking your spending every month and comparing it to your budget is the best way to keep it under control. If you’ve gone over, you can reel it back in — or adjust the budget if you’ve set it unrealistically low.

Bottom Line

The prices of groceries will typically keep going up over time. And since food is an essential purchase, it’s not something you can totally avoid. However, you can optimize your spending and maximize the rewards you get as a result.

All it takes is some strategic thinking and the right credit card — one that lets you earn rewards on the things you buy most.