Best Rewards Card for Grocery and Gas: American Express Blue Cash Preferred vs PenFed Platinum Rewards

I hate credit cards with bonus rewards in rotating categories. Banks must have done studies and found it works effectively (for them). Citi, Chase, and Discover all do it. I just want a card that gives me a good rebate on known categories every day.

Fortunately there are two good choices in the market: American Express Blue Preferred and PenFed Platinum Rewards.

Which one is better?

AmEx Blue Cash Preferred

American Express Blue Cash Preferred card (“Blue Preferred”) pays 6% rewards on purchases at supermarkets, 3% on gas and department stores, and 1% on everything else. Whenever you accumulate $25 worth of rebates, you can request a statement credit.

It has a $75 annual fee. There’s also a no-annual-fee version that pays only 3% rebate on purchases at supermarkets, 2% on gas and department stores, and 1% on everything else. If you spend more than $210 a month at supermarkets, you are better off with the Blue Preferred after the annual fee than the no-annual-fee version.

You get 6% only for purchases at grocery stores. If you buy groceries at Costco, Walmart Supercenter, or Super Target, they usually don’t count as 6%. It has been reported that American Express will limit the 6% cash back on grocery store purchases to $6,000 a year starting in 2013.

This chart shows the reward percentage after the annual fee if you use this card only at grocery stores for the first $6,000 before switching to a 2% card after $6,000.

American Express Blue Cash Preferred Rewards on Grocery Store Purchases

“Old” AmEx Blue Cash

Before Blue Cash Preferred, American Express had a Blue Cash card. It paid 0.25% cash back on the first $6,500 and 5% cash back on both gas and grocery store purchases. Existing cardholders still have this card but it’s no longer available to new applications.

Because of the lower cash back on the first $6,500, compared to the alternative of using a 2% cash back for that $6,500, this old Blue card effectively has an annual fee of $6,500 * (2% – 0.25%) = $114. Of course the upside is that the cash back on gas is 5% versus 3% in Blue Cash Preferred but it’s 5% versus 6% on grocery store purchases.

PenFed Platinum Rewards

PenFed Platinum Rewards card pays 5% rewards on gas, 3% on supermarkets, and 1% on everything else. You redeem rewards in prepaid debit cards or gift cards.

The easiest way to use up the value on a prepaid debit card would be to make a one-time payment on a utility bill. My Internet service provider accepts one-off payments by credit card.

Get Both

If you don’t mind applying for and carrying an extra card, get both. You would get the highest rewards for both gas and groceries. Use the Blue Preferred card only at grocery stores and use the PenFed card only for gas.

Pick One

If you only want to use one card at both supermarkets and gas stations, which one you should get? It depends on whether you spend more on gas or at grocery stores.

I made this simple calculator. It also shows whether you should consider upgrading the old AmEx Blue card to the new Blue Cash Preferred card.

 

Because I spend more at supermarkets than at gas stations, I’m using AmEx Blue Cash Preferred.

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Comments

  1. Tom says

    I have the regular blue cash card but didn’t think my spending was high enough to justify the preferred version with the $75 annual fee. Thanks to your calculator I will upgrade. Not sure if you can get a referral bonus if I do, but happy to try if you want to send me the code. Regular reader, love your stuff.

  2. KD says

    I too have AmEx Blue Cash Preferred. You will be minting some great cash, TFB! $150 per referral! If you run out of them (actually, there is no limit) , please let me know. I can give you a link to forward too. ;-)

  3. Geoff says

    For me it’s still much better to use the regular blue cash with 5% on gas, groceries, and drug stores after the $6500 initial spending threshold (no annual fee). Fatwallet has a pretty good calculator to use to decide which is best as well.

  4. Harry Sit says

    @Tom, @Gabriel, @Adam – Thank you so much! I sent the referral.

    @Geoff – The “regular” aka “old” Blue Cash with a $6,500 floor is no longer offered. If someone wants a card for groceries and gas now, these two are the best candidates. Also, because of the $6,500 floor and other cards paying 2% for everything else, pairing up either Blue Preferred or the new PenFed card with a 2% Fidelity AmEx or Sallie Mae Visa will give higher rewards than the old Blue Cash.

    @KD – I hope many readers will give me the privilege to refer them. The money comes from American Express anyway.

    • jj says

      actually the old blue cash card is available but most likely you need to do it in incognito mode to get to it and apply for it.

      it’s hidden.

      for bigger families and spenders the old card is actually superior. If you spend more than $12k on groceries per year the old card is actually better than the preferred card and plus it has no annual fee.

  5. Stu says

    Geoff…I use the Blue Cash (old school) 5% for each two. Almost fell for the upgrade (downgrade to me) to the preferred card. I was saved by the annual fee.

  6. Geoff says

    @TFB – I guess that means I’m grandfathered into the old terms then, because the website still shows the $6500 floor and the escalating rewards when I look at my cash back summary. Although, I could have sworn the everything else purchases above $6500 used to be 1.25% (and before then, perhaps even 1.5%?) and now it is showing up as 1%, which definitely changes my evaluation. Kinda sucks too, because it’s been a trusty card for a number of years now, and I’d rather miss out on a few bucks then have to deal with multiple cards.

  7. ogd says

    @TFB — this has got to be hands down the simplest most ingenious way to monetize a financial blog :)

    I love my Preferred. I’m still unsure what qualifies for the awesome and unique “department store” category. So far, experimentally, Bloomingdale’s and Nordstrom Rack are yay. REI and other smaller clothing stores are nay. I think Bed Bath & Beyond is nay too, but I’m not sure about it.

  8. Harry Sit says

    @ogd – The definition comes down to how the stores identify themselves with a Merchant Category Code. 5311 is department store. Visa has this search tool to find out which code the merchant is under. REI is 5945 – sporting goods. Bed Bath & Beyond is 5719 – furnishings.

  9. Aaron L says

    After reading this, I calculatd that it would be worth it to convert my unused Amex card to Blue Cash Preferred, so I had Amex do this. Now that I think about it more clearly, the benefit is very marginal. I have rotating 5% cards that cover groceries at least one quarter of the year. The 4% spread between my 2% Fidelity 529 card and Blue Cash Preferred will barely cover the annual fee over the remaining 3 quarters. I think I’ll still come out ahead, but it’s probably not worth it – especially because the grocery spending would otherwise be useful to meet spending requirements for signup bonuses.

  10. JoeTaxpayer says

    I hate the rotating cards as well. I had a fiend send an invite for the blue card, and I’ll submit an application soon. The 6% at the grocery store can be pushed a bit as gift cards are available for a number of stores. Combine the Home Depot card with a 10% Home Depot coupon and 16% is nothing to pass up on large purchases.

  11. J R says

    I have the standard Blue card now but with what I spend on groceries I definitely should upgrade to the preferred. Can you send me a refer a friend link?

  12. slug | sunkcostsareirrelevant.com says

    I have the AMEX and love it. I won’t switch to the new PenFed on principle since they’ve decimated the rewards on the Cash Rewards card. I love the ease of reward redemption with the old one and the 5% gas reward is untouched, for the time being.

  13. Harry Sit says

    paul lolicata – I only have the AmEx Blue Cash Preferred. It took about a week when I applied. Would you like a referral?

  14. paul lolicata says

    tfb, I have 3 credit cards. I got the chase southwest about 4 months ago and reaped the rewards. then about 1 month ago i applied and denied a chase sapphire. so, i am new at this. do i need to wait a few monthe before i apply for another card. my redit is excellent .

  15. MG says

    I would love a referral! and thanks for the information. I have received offers from AMEX for the gold card but I have been waiting to decide.

  16. SS says

    I have the “old” amex ($6500 tiered) and I noticed it doesn’t give credit for all the gas stations. For instance, ASTRO doesn’t count for the 5%. I called and apparantly neither do any of the big box store gas stations. Has anyone had that problem with the newer promotions from Amex?
    Thanks

  17. Tired of Delta Skymiles says

    TFB,
    Thanks for this. Not sure if it’s still good but please send me the referral link. The Skymiles $150 annual fee (Platinum) for what amounts to less than half the value of the published miles has made me decide to cancel the card.

  18. Dan says

    I just received a notification from American Express that as of January 15, 2012, the Blue Cash Preferred card will earn 6% up to $6,000 of spending at grocery stores. After the $6,000, it will drop to 1%.

  19. JoeTaxpayer says

    The $6k limit is a deal killer for me. I get 2% on all purchases on my current card. So 4% higher on only $6k of purchases is $240 less the fee, $165 is the benefit. Not worth it to me to carry an extra card and have to track purchases till I hit the limit, as anything above that $6k would cost me. Too bad.
    I didn’t already sign up as I had a card with an introductory 10% back, and I was busy killing that deal.

  20. Harry says

    Dan – The new limit of $6k per year is already noted in the post, the chart, and the calculator. The new limit kicks in when your card renews (pays the annual fee) next year. So you still have some time. At the amount I spend, the calculator shows the PenFed card isn’t any better. So I’m sticking with it.

    Joe – AmEx had to put in the limit because others have done the same to this card as you did to your other card.

  21. JoeTaxpayer says

    Dan – no – I took extreme advantage of that deal, and believe they pulled it because of me. 10% was drug store, supermarket, gas. I bought $50,000 of Visa gift cards at CVS. Just as I passed $20K, the deal was dropped to 5%, but they honored my 90 days and I kept going. I wrote about it at Budgets Are Sexy about a month back.

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