Finally, after months of rotating our grocery store purchases on various cards, and in my search for new cards to replace the 6 months of 5% cash back on the AARP card, I finally found a great cash back card: the new Blue Cash Preferred® Card from American Express [1] that gives 6% cash back on groceries up to $6,000 in spending, (and other purchases with some creative planning).
I’ve always held onto my American Express Blue Cash card as my emergency cash back card [2], but it hasn’t made it into circulation recently with the rotating 5% quarterly cash rewards credit cards [3] since you had to spend $6500 before earning 5% cash back on groceries.
You can now dig out your old American Express Blue Cash card and upgrade it to the Blue Cash Preferred® [1] card.
In addition to the sign up bonus, American Express is adding a new benefit for holiday shopping, one year of Amazon Prime [4] for unlimited Free Two-Day Shipping. As a fan of Amazon Prime, this is a nice added bonus!
How to Get Cash Back on Groceries & 100 Reward Dollars
If you already have an American Express Blue Cash card you can upgrade (but you won’t get the reward dollars). If not, you’ll need to apply for a new card, which qualifies for the 100 reward dollars:
- To Upgrade:
- Login to your American Express account and click on your Blue Cash card, below it is a box that says “upgrade now.” Follow the directions and accept the terms to upgrade.
- You’ll get a new upgraded American Express preferred card in the mail in a week, but the number won’t change, so you can keep using your old card while you wait.
- To Get a New Card with 100 Reward Dollars:
- If you don’t have a Blue Cash card to upgrade, you can open a new Blue Cash Preferred® Card from American Express [1].
- Spend $1000 within your first 3 months.
- Get your 100 Reward Dollars in 6-8 weeks.
How to Get Your Amazon Prime
- Sign up for a new membership with your card.
- Meet the spending requirements above in the same time period.
- Get one year of Amazon Prime [4].
American Express Preferred® Card
- Annual Fee: $75
- Cash Back Rewards – No Tiers:
- 6% cash back: US supermarkets up to $6,000 per year in purchases
- 3% cash back: US gas stations & select US dept stores
- 1% cash back: all other eligible purchases
Grocery Store Upgrade Calculations
If you use your Blue Cash card, you have to measure the upgrade benefit against the opportunity cost of giving up the 5% at drug stores and stand-alone gas stations once you clear the $6500 tier. Since we don’t buy much, if anything at drugstores, that’s easy for us. And since the Penfed card [5] has 5% cash back on gas, I think we’re better off to upgrade this one (even with the annual fee) and delegate our grocery purchases to this card.
If I spend $5200 in groceries ($100 per week), my rewards are:
- Current Blue Cash card: $52 (1%)
- Blue Cash Everyday®: $156 (3%, up to $6,000 in spending)
- Upgraded Blue Cash Preferred® card: $237 (6% = $312- $75 annual fee)
No Annual Fee Card. If your purchases aren’t dominated by groceries (like ours are), it could be better off to go with the Blue Cash Everyday® Card from American Express [6] with no annual fee, which earns 3% cash back at stand-alone supermarkets (up to $6,000 in spending), 2% cash back at stand-alone gas stations and department stores, and 1% cash back on all other eligible purchases.
Break Even Point. I’m not a big fan of annual fees, but in this case, new card members will cover the annual fee with the reward dollars. For those of us who are upgrading the break even point is spending $208.33 per month on groceries. If you spend more than that, your cash back from the Preferred card will beat the Everyday card after factoring in the annual fee. We spend at least $209 each month on groceries, so it’s an easy comparison for us.
Cash Back at Other Stores
Here’s where we get into some of the creative planning that I mentioned to extend our cash back past just grocery stores:
Cash Back on Gift Cards. You can stretch the cash back beyond just the grocery store by purchasing gift cards at the grocery store. Our grocery store sells gift cards to Amazon.com, restaurants, and many departments stores. Now you can extend the 6% cash back (up to $6,000 in spending) beyond grocery stores and to everywhere that you can buy a gift card for. I don’t know about you, but we buy so much at Amazon.com, that cash back at Amazon will really add up!
6% Cash Back for Everything Else (Less the costs of prepaid card activation fees) To extend it even further, you can buy Visa Prepaid Credit Cards at the grocery store. I haven’t made a lot of these purchases in a few years, but I’m hoping it will be a way to continue to pay our taxes with credit cards [7] to earn cash back.
If you can buy Visa prepaid cards in $500 increments and get cash back, you can then turn the purchased VISA card into 6% off for all your other purchases (up to $6,000 in spending). Fees to activate the cards usually are $5-$6 each. If you assume $6 on each $500, you get the equivalent of 4.8% cash back on all other purchases.
Have you upgraded your American Express Blue Cash card for the cash back?