The best cash back credit cards for parents
Families with children can benefit the most from supermarket, gas rewards
Ted Rossman has seven years of experience in the credit card and personal finance industries as a member of the award-winning communications department at CreditCards.com and its sister sites The Points Guy and Bankrate.
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I love cash back credit cards because they give me free money on everything I buy.
In fact, I earned $1,602 worth of rewards last year.
Cash back cards particularly appeal to people like me. I’m married with a four-year-old daughter, and while I travel occasionally, it’s not a passion of mine. I prefer using cash back to offset everyday spending. And I always pay my bills in full to avoid interest (that’s key to any credit card rewards strategy).
In this post, I’ll take a deeper look at how fellow parents of young children can maximize their cash back earnings. Step one is identifying your top credit card spending category, and for most families that is (drumroll please) …
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My family and I spend nearly $900 a month on groceries, making it our second-largest expense behind our mortgage (which we can’t pay via credit card). We earn 3 percent cash back on up to $6,000 of annual grocery spending at U.S. supermarkets with the Blue Cash Everyday® Card from American Express. That’s $180 in savings per year. There’s also the Blue Cash Preferred® Card from American Express, which gives 6 percent back, also on up to $6,000 on purchases at U.S. supermarkets every year, and charges a $95 annual fee for a net savings of $265 yearly.
If you buy your groceries at a big-box store such as Target, Costco or Walmart, you need to know that those purchases are not typically eligible for American Express’ grocery bonuses. People who buy a lot of items from those retailers should consider the stores’ co-branded cards.
- The Target REDcard is my favorite out of those three. It gives 5 percent off every dollar you spend at Target stores and Target.com (you even get free two-day shipping online). This is a great deal, especially considering how many other kid-oriented things Target sells (clothes, toys, medicine, etc.).
- The Costco Anywhere Visa Card by Citi is a great choice for gas purchases (4 percent back on up to $7,000 each year), and you can rack up 3 percent off eligible restaurant and travel spending. It’s not as generous at Costco itself, though (2 percent cash back).
- The Walmart Mastercard isn’t nearly as appealing – it offers 3 percent back at Walmart.com, but just 1 percent in-store. If you buy your groceries at a Walmart brick-and-mortar location, your best bet is to use a flat-rate cash back card such as the Citi Double Cash Card, which essentially gives 2 percent back on everything – 1 percent when you charge and another 1 percent when you pay your bill on time.
Another card worth mentioning here is the Amazon Prime Rewards Visa Signature Card. Cardholders get 5 percent cash back at Whole Foods and Amazon.com.
Finally, you can earn 4 points per dollar on groceries with the American Express® Gold Card, but it charges a much higher annual fee than any of the other cards I’ve mentioned ($250). And while points can be redeemed for cash back, this one is a better fit for people who want to exchange their points for free travel.
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Don’t forget about gas
The good news for parents who play the credit card rewards game is that many of the best gas credit cards also offer solid value in other key categories. The PenFed Platinum Rewards Visa Signature Card, for example, gives 5 percent cash back on gas and 3 percent on groceries.
The aforementioned American Express Blue Cash Preferred supplements its industry-leading 6 percent back at U.S. supermarkets with 3 percent back at U.S. gas stations. The Chase Freedom has given 5 percent back on gas in three of the past five quarters (and groceries in another). And the Costco Anywhere Visa (also mentioned above) is another solid choice at the pump.
The Bureau of Labor Statistics reported the average American household spent $1,968 on gas in 2017, the most recent year for which data is available. You’d get about $100 in free money if you earned 5 percent cash back on that amount. And that’s the real point of cash back credit cards: getting something extra for money you would have spent anyway.
Paying with credit at the pump can cut into your rewards savings
Keep in mind that many gas stations charge a higher price for credit card transactions, as opposed to cash. Last night, I filled up for $2.69 per gallon with my Chase Freedom card (I would have paid $2.63 per gallon with cash). I still came out ahead – the effective price was about $2.50 per gallon after subtracting my 5 percent cash back – but the higher credit card price cut into my savings.
Here’s a workaround: you pay the cash price when you buy gas with a gas station gift card. So it’s a good idea to stock up on these cards when you can get them at a discount using an eligible credit card.
For example, a Chase Freedom cardholder might buy gas gift cards at the gas station itself this quarter, since they qualify for 5 percent cash back. But if the 5 percent category switches to groceries next quarter (as it did last year), then you should buy your gas gift cards at the supermarket. Always be maximizing!