Watch out for limits on rewards card category bonuses

Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

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Question Dear Cashing In,
I spend about $3,000 a month on groceries at Whole Foods for work. I pay my card off every month. What is the best credit card to use? – Tommy

Answer Dear Tommy,
First, a few tips of the hat to you. Congratulations on paying off your card every month. That’s essential to getting the most out of your rewards, because penalties and interest payments quickly add up. 

Second, it is smart of you to use your card for work purchases. Assuming your employer pays you back and you continue to pay off your card balance each month, you’re essentially receiving rewards for free. 

Now let’s get to the type of reward card that would be best for this situation. Keep in mind you are also going to want to consider whether you prefer rewards in cash, bank reward points or some other type of reward. 

Ordinarily, since you mention grocery spending, we would think of looking for a card that gives big bonuses for shopping at supermarkets. That’s true, but it is only a part of what we must consider. 

There are a number of cards, especially from American Express, that reward grocery spending. American Express offers the EveryDay card (no fee, 2 rewards points per $1 on groceries), the Blue Cash Everyday card (no fee, 3 percent cash back on groceries), the EveryDay Preferred card ($95/year, 3 rewards points per $1 on groceries) and the Blue Cash Preferred card ($95/year, 6 percent cash back on groceries). Some of these also have minor sign-up bonuses that make them more attractive as well as category bonuses in other areas.

Those would be fine for most people, but since you are talking about a high level of spending – $3,000 a month, or $36,000 a year – they might not be right for you, because each of them caps the bonus points for groceries after spending $6,000 in a year. After that, you’d earn just 1 percent back or 1 point per $1, which dramatically reduces the appeal of these cards. Even with the card with the largest cash back rewards on groceries, the Blue Cash Preferred, you would take in just $565 on $36,000 in annual spending (after subtracting the annual fee). 

Instead, you’ll want to look for a card that has no limits on the amount of purchases eligible for category spending or that has a high regular rewards rate with no limits. For example, the Citi Double Cash card (no annual fee) gives 2 percent back on all purchases, so that would be $720 on $36,000 in annual spending. 

If you are a fan of Hilton hotels, you might also consider the American Express Hilton Surpass card (annual fee: $75, rises to $95 on Jan. 18, 2018). It gives 6 Hilton points per $1 spent at supermarkets, with no limits, as well as bonuses on spending at Hiltons, restaurants and gas stations. It comes with Hilton Gold status, which gives you perks such as late checkout. It also gives you a free weekend night annually if you spend at least $15,000 on the card. With the sign-up bonus (currently 75,000 points) and $36,000 in annual spending on groceries, you would have nearly 300,000 Hilton points, which you could use to stay nearly a week at a midrange property, or a few nights at a top-tier resort.

You might examine the details of that one, and if it is too complicated or does not appeal to you, a simple cash back card with a good rate might do the trick.

See related: What’s the best reward card for a single big purchase?, Credit cards, rewards programs add up to savings at the grocery store

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Updated: 06-22-2018