I Love Food
As much as I enjoy eating out at new trendy restaurants, it can be a very expensive endeavor. We still go out once a month, but In order to save money my wife and I tend to cook and eat at home. Actually, sorry, I misspoke. I do all the cooking, and we both eat at home.
We also pack a majority of our meals for lunch at work. This means we spend a fair amount of money on groceries; in our current Goodbudget, for example, we set aside $700 for groceries every month. That is a fair chunk of change, and I know most people get by spending a lot less. Admittedly, I do try to buy fresh produce and humanely raised meat as often as I can, which definitely increases our bill.
Sometimes grocery shopping can be a chore, but there are times when I genuinely enjoy the process. What I enjoy even more, however, is saving money while grocery shopping. Currently, I get 8.1% back on most of my spending, which I think is a pretty good return.
You can save close to the same amount too! Let me show you how.
First, The Card
At the end of last year, American Express launched a new version of the Amex Gold card. With this card, you earn 4x Membership Reward points at all US restaurants and grocery stores. Given how much my wife and I spend on groceries, I knew this would be a great card for us. Just from our regular grocery expenses, I could earn 2,800 Membership Rewards points every month, or 33,600 points every year!
I previously wrote about how much credit card points are worth to me. While this is subjective, I personally value Membership Rewards points at 1.7 cents each. Your valuation may differ, but since JetBlue is a transfer partner, your points should be worth a minimum of 1.4 cents each.
If you the math based on my personal valuation, 2,800 points are worth $47.60. I earned this by spending $700, so effectively I received 6.8% of my money back. Hopefully that makes sense.
You can also do the math this way. My Membership Reward points are worth 1.7 cents each. For every dollar I spend on groceries with my Amex Gold card I earn 4 points, which is worth 6.8 cents. This is the same as saying I get 6.8% of my dollar back.
By the way the calculation is exactly the same for restaurants, so if I use my Amex Gold card at restaurants I am shaving 6.8% off my final bill.
Second, The App
At the same time, I use the Drop app. Drop is a free application that allows me to earn points on everyday purchases. When you sign up, you choose five merchants to earn points from. You will not be able to change merchants at later date, so choose wisely. These merchants are termed your “Power Offers”. As you can see below, I picked Uber, Whole Foods, Target, Trader Joes and Lyft.
After you pick your five merchants, you then can securely link your credit cards to the app. From that point on, whenever you spend money at Power Offer locations, you earn points.
Different merchants have different rates at which you earn points. I signed up early as a beta tester, so my earn rate is higher than what is currently available. At Trader Joe’s, for example, my earn rate is 15 points per $1. If you were to sign up now, your earn rate will be 12 points per $1.
There are also a variety of rotating mobile offers that you can also earn points from. I do not use these rotating offers that frequently, but sometimes there are great deals. Recently there was 300 points per $1 offer at Warby Parker, which was perfect timing since I needed to get new glasses anyway!
You can redeem your points for gift cards at a variety of different brands. You can pick from AMC, iTunes, Best Buy, American Airlines, Target… the list goes on. There are currently 43 brands to choose from, but the list does keep growing.
The exchange rate on Drop is $1 = 1,000 points, so a $10 gift card will cost you 10,000 points. I normally just redeem my points for Amazon gift cards since that is the easiest way for me to use a gift card.
Third, Adding It All Up
Let’s put this all together. As I mentioned before, I earn 15 points per $1 at Trader Joe’s. This amounts to 1.5% back on my spending. The beauty of the Drop app is that it is completely independent from any credit card points earning.
So when I grocery shop at Trader Joe’s, I earn 6.8% back with my Amex Gold card. I then earn an additional 1.5% because I have my Amex Gold card linked to the Drop app.
In total, I save 8.3% every time I shop for groceries at Trader Joe’s!
I highly encourage everyone to sign up for Drop. If you sign up with my referral link, you can even get $5 right off the bat for free!
A Few Caveats
Before you dive into this money saving strategy, there are a few things to be aware of. Most importantly, American Express does not consider warehouse retailers like Costco and Sam’s Club as grocery stores. So if you do most of your grocery shopping at warehouse locations, this strategy will not work for you. The other thing is that American Express caps grocery spending at $25,000 a year. Personally, I am nowhere close to that limit, but just keep this in mind if you have a large family.
Finally, when I say I get 8.3% of my money back, I am not speaking in terms of cold hard cash. What I am really getting is Drop points and American Express points. I basically consider Drop points as cash since I redeem my points for Amazon gift cards, so that is really 1.5% cash back.
For the remaining 6.8% back on American Express, however, this is based on the value I feel I can get by redeeming points on travel partners. You can read my post about average valuations and point redemptions here. Sometimes it is easy to get a 1.7 cent value (or higher) from my Membership Rewards points, while other times it can be a little trickier.
But for the most part, I am confident in my 1.7 cent Membership Point valuation. In my mind, I am sure I am getting 8.3% back on my grocery bill.
I hope this helps you think about how to strategize your grocery spending. As always, I will be happy to answer any questions you may have. Leave a comment, or send me an email!