Getting Creative to Maximize Return on Grocery Spending

Personal finance is one big optimization problem that I’m constantly running through my head in order to think up new tricks that can save or earn me more money.  This is what I refer to as the “Money Metagame” which inspired the name of this blog.  How much I spend is one of the components I have the most control over and there’s two ways I see to improve that part at any given time.  First, I can cut out unnecessary expenses to eliminate some spending completely.  This can be done by identifying wasteful spending or looking at alternatives, but those kinds of decisions are extremely personal and will vary pretty heavily from person to person.  Secondly, I can just find ways to reduce the amount I spend on the exact same products and services I already use.  If you can find these opportunities, it’s a no-brainer to take advantage of them most of the time because you don’t have to change your lifestyle in any way.  Groceries is one spending category where there is a lot of room for optimization (via both ways mentioned above) and that’s how I’m tying all this together.  We recently picked up an Amex Blue Cash Preferred to take advantage of the 6% back on grocery purchases, but have to use a small trick to make it actually work with our regular grocery spending.  Read on to find out why the regular method of getting 6% back doesn’t work for us and what trick we use to actually get MORE than 6% back.

Our Grocery Spending Pattern

The best way to optimize your finances in my opinion is to work backwards.  First, figure out where all of your money is currently going and then come up with ways to improve it, NOT the other way around.  Trying to create a budget for yourself without taking a look at where you’re currently spending money is a sure-fire way to make a impossible budget to follow.

For most people, groceries is one of those line items you certainly can’t get rid of completely and it probably makes up a good percentage of your monthly spending.  For us, we determined that we spend hundreds of dollars on groceries per month and more specifically split that spending pretty evenly between Fred Meyer (a Kroger brand) and Target.

Once we determined where our grocery spending was going, it was easy to come up with a few ways to improve it.  First, we now do all of our Target spending through Target gift cards that I obtained for 10-20% off of face value online.  That’s an easy $30+ we save each and every month without changing any of the products we buy or where we buy them.

For our Fred Meyer spending though, it’s not quite as easy.

Optimizing Grocery Spending with Credit Cards

For optimizing Fred Meyer spending, it’s not as easy as simply going online to buy discount gift cards because they simply aren’t available for the same kind of discount that Target is.  At any given time, you might be able to save 2-3% on the gift cards, but that’s not as good as the ~5% you can get from grocery categories with various credit cards.  We took advantage of the 5% back on groceries in the first quarter of the year via the Chase Freedom, but then decided to get another credit card to extend that kind of bonus year round.

Our strategy when applying for credit cards involves two different goals, earn huge travel rewards and help us save money on everyday expenses.  This application fit into the second category and our choice was between the Sallie Mae Mastercard which gives 5% cash back on up to $250 in grocery spending per month with a $25 signup bonus and the Amex Blue Cash Preferred (BCP) which gives 6% cash back on up to $6,000 in grocery spending per year with a signup bonus of $150.  (I did a write-up of Sallie Mae card here: The Sallie Mae Mastercard: The Best Everyday Spending Card You’ve Never Heard Of)

The BCP does have an annual fee of $75 (the Sallie Mae has no annual fee), but we decided to take advantage of the larger signup bonus plus higher spending cap and apply for it anyway.  The annual fee is cancelled out by the signup bonus in the first year (+$75 profit), but if we decide to keep it for an additional year, the effective return on groceries drops to 4.75% if we’re using the card only for grocery spending.

Anyway, should be simple right?  We just use the BCP for all of our Fred Meyer purchases and we’re now saving 6% on everything.  Unfortunately, it turned out not to be that simple…

Why We Had to Get Creative

While Fred Meyer was categorized as a grocery store in the VISA card system and worked for our Chase Freedom in the first quarter, it is NOT categorized as a grocery store on the Amex network.  Much like Target and Walmart, our specific store falls into the “Merchandise & Supplies – Wholesale Stores” category which does NOT work for the 6% back on grocery stores bonus.  At first, I thought we had reached a dead end and I would have to simply maximize the 6% bonus for other activities (gift card reselling, MS, etc.) and probably just cancel it at the end of the year.

Luckily, an idea popped in my head a few weeks later that would allow me to still get the 6% back at the exact same Fred Meyer store if I just added one more step to the process.  As Fred Meyer is a Kroger brand along with several other stores such as QFC, their gift cards work interchangeably across any of the stores.  Assuming the local QFC stores (much smaller than the Fred Meyer if that has anything to do with it) count at a grocery store in Amex’s network, I can simply buy Kroger gift cards there at face value, get the 6% back, and then use the Kroger gift cards at the Fred Meyer we prefer to shop at.

I decided to try it out by making a small gift card purchase at QFC with the Blue Cash Preferred card to see what it would code as and used the gift card at Fred Meyer to make sure there wasn’t anything I was missing.  Sure enough, the QFC purchase coded as a grocery store and rewarded the full 6% back and I had no problem using the purchased gift card at Fred Meyer.  Success!

It Gets Even Better

Not only does the QFC purchased gift card work at Fred Meyer, it also earns the regular Fred Meyer rewards just like paying any other way would!  That means in addition to the 6% rewards I get from the BCP credit card, I also get 1% back from Fred Meyer directly, AND earn fuel points towards gas at the same time.  I actually wasn’t sure if the 1% back would still be valid when using gift cards, but was pleasantly surprised when the receipt showed that it worked.  Now we’re saving a minimum of 7% on ALL of our grocery purchases and it doesn’t require much extra work on our part.

We constantly have a supply of Target gift cards that I purchase online and we now stop at QFC once every couple months to get a $500 gift card that we slowly drain with regular purchases at Fred Meyer.

Gift cards aren’t just for reselling, they can often be leveraged to significantly reduce the cost of your everyday spending.

How have your optimized your return on everyday grocery spending?

13 thoughts to “Getting Creative to Maximize Return on Grocery Spending”

  1. Nice article.

    Of course you’re now driving to another store, spending time there, committing some of your money to gift cards for indeterminate amounts of time or earning less than you might if you spend more than expected, spending time budgeting, etc. Worth it?

    Also, I don’t think you can count the 1% from Fred Meyer or the gas rewards, as presumably you were already earning those before you started “optimizing”. Its fair to count additional gas rewards due to say gift card purchases you make that you otherwise would not have (say gas rewards are doubled by buying the gift cards AND using them). But otherwise you can’t count them as an additional savings here.

    1. All great points, there’s a lot of variables that go into it all. Let me go through the ones you brought up:
      1. There’s actually a QFC right next to the Target we use, so that part is just an extra 5ish minutes every couple of months on top of a trip we’d take anyway.
      2. At any given time we have at MOST ~$1k tied up in gift cards, so we’d be foregoing a max of 1% interest if we had that in a savings account instead ($10/year). More realistically, this is money that would be in our standard checking account for regular spending and we’re only losing ~$1/year or less.
      3. We’re good about not spending more than what we need to whether it’s with credit cards, gift cards, or simply cash. It’s all the same to us and we stick to only buying things we need. Some people may have an issue with this part if they’re more impulsive with their spending than us.
      4. We don’t really spend any time budgeting per say, we just reflect on what we spent over the past months and look for ways to improve going forward. This would happen regardless, so I don’t think it’s relevant in regards to this article at least.
      5. Worth it? Conservatively, we spend a couple hours per year getting gift cards and lose out on $10 in interest, BUT we save upwards of $600 per year because of it. Definitely worth it my opinion.

      Also, I agree the 1% back and gas rewards aren’t additional savings. Rather I was looking at the total savings versus someone using cash or debit and not joining the loyalty programs.

  2. “The best way to optimize your finances in my opinion is to work backwards”

    this is so true, nice write up

    where are you finding target GC 10-20% off?

    1. Thanks 🙂

      For the target gcs, there’s a couple different ways. First, at any time you can use a 2% card to buy Amex gift cards from a cash back portal and then use the amex gift cards to buy Target gift cards at 6-8% discounts from the various exchanges ( Not all exchanges allow AGCs, but total savings comes to 10%+ depending on the portal payout and exchange price.

      Second, you can hold out for a 8-10% ebay bucks deal that happen every so often and just buy Target cards at face value from GiftCardMall. Add in a portal and 2% card and the total savings is 10%+. Using AGCs on ebay can also add a couple percent on top.

      Both of these methods work for a lot of other gift cards as well 😉

      1. Ok, use all those methods, just hoping for an unknown site that sells for that kind of discount.

        I think it is more a way of thinking that maters, for years I was happy with 1% + 2% back at costco with a standard AE and executive membership at costco. now I get 4% + 2% simply by buying AE gift cards with my discover card thru a portal first.

  3. Nice post, Noah. I agree with mos of what you wrote. We had the Amex BCP until just the other day, when I downgraded it to a no-fee BCE to avoid my first AF. One thing worth noting is that IF you (or others) decide to downgrade (or cancel) the card before your AF comes due, be sure to max out your 6% for that CALENDAR year – as the $6k cap per year is based on calendar year (not cardholder year). Since I did that, the BCE is going into the drawer, only to be pulled out for Amex Offers. 🙂

    I generally subscribe to your notion that our spending is not impacted by cash versus debit versus CC, which is why nearly all of our spend is on CC. But I’m a bit hesitant on the GC front. While I agree with your math, I find GCs to be problematic on a number of fronts (prepayment, keeping track of them, an extra step, etc.). GC can be great for reselling or taking advantage of Amex Offers (like the awesome Smart & Final offer!).

    I ran into the same issue as you at Fred Meyer, but we don’t do a lot of spending there. Your Target ideas are right-on, but we tend to just use our PrePaid RedCard for most small purchases (to show a more-than-MS activity, for whatever it’s worth!) and call 5% “good enough.” But we definitely go the discounted gift card route for any large purchases. And there’s even more fun to be had at … 🙂

    1. Good call on the calendar year thing. I think downgrading to the BCE even resets the grocery spend if the 3% would benefit you.

      Gift cards certainly carry extra risk with the possibility of losing them and a lack of purchase protection which is why I try to utilize them for smaller consistent purchases rather than big ones. Benefits of certain credit cards like doubling the manufacture’s warranty on appliances is worth foregoing the gift card savings in certain cases.

  4. You know what always eludes me: when people use the words “Target” and “saving money” in the same sentence. The groceries are so overpriced there that you’d most likely save more than $50 a month if you wouldn’t shop there at all but get the stuff somewhere else. We usually shop at Food 4 Less – also a Kroger store- or the Walmart Neighborhood market around the corner. Before I got a Redbird for MS reasons I never set foot into a Target because their prices are so insanely high. These days I sometimes grab some ice cream when I’ve loaded my Redbird but that’s about it. Even with the 5% savings it’s still more expensive than comparable products from Walmart or Kroger.

    1. It probably depends on what city you’re in and the location of each. For example, the Target downtown in our city is WAY more expensive than the one more north that we live closer to.

      Our Target and Fred Meyer have fairly competitive prices compared to each other with different items consistently being cheaper than others at one store. Once you factor in the 10%+ savings by using gift cards though, Target usually ends up winning out on most items. Target’s produce isn’t very good though, so we tend to buy fruit, vegetables, and meat at Fred Meyer. Overall, grocery prices with sales, coupons, and everything else make it near impossible to optimize perfectly. We just focus on the big savings we can get across the board rather than scrutinizing every single item’s price.

    2. Agree with all of the above, but currently one can get 1.4%, 1.26%, 1.25% and 1.10% APY on bank accounts …go to (The 1.4% is there, but kind of hidden until you investigate further). Thanks Shawn for referring this site as well, thoroughly enjoying him. Like you said in one of your highly appreciated blogs as well!! 🙂

  5. I have a neater trick. Shop at Grocery Outlet where everything is half off. Done.

    *drops mic*

  6. How do you like sm mc? Did you sign up for upromise, sm HY acct & mm acct for the 10%?

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