What a Grocery Credit Card Does
A grocery credit card is a rewards card that gives you cash back or points when you buy food at supermarkets and grocery stores. Most of these cards return between 1% and 5% of what you spend on groceries, depending on the card and sometimes on how much you spend that month. The rest of your purchases—gas, restaurants, utilities—usually earn a lower rate, often 1% or nothing.
You use a grocery card like any other credit card: swipe it at checkout, pay the bill each month, and the rewards show up as a credit to your account or points you can redeem. The card issuer—usually a bank or the grocery store itself—funds the rewards by taking a small cut from the store's payment processing fees. You do not pay extra at checkout.
Grocery cards come in two main types: co-branded cards issued by a specific store (like a Kroger card or Whole Foods card) and general rewards cards from banks that happen to reward groceries well. Co-branded cards often have higher grocery rewards but lower rewards everywhere else. General cards spread rewards across more categories but may not reward groceries as much.
Key Takeaways
- Grocery cards return 1% to 5% cash back or points on supermarket purchases, with rewards rates varying by card and sometimes by spending tier.
- Co-branded cards tied to a specific store usually offer higher grocery rewards but work only at that chain, while bank-issued cards work everywhere but may reward groceries less.
- Most grocery cards charge no annual fee, but some premium versions do; check whether the rewards you earn cover any yearly cost.
- You must pay your full balance each month to come out ahead, because interest charges on unpaid balances quickly erase rewards.
- Rewards are taxable income in the eyes of the IRS, though most people receive a 1099 form only if they earn over $600 per year in rewards.
How Rewards Rates Work on Grocery Cards
Most grocery cards offer a flat rate: you earn the same percentage back on every grocery purchase, no matter how much you spend. A card might offer 2% cash back on all groceries, period. You do not have to set up categories or hit spending thresholds.
Some cards use tiered rewards, where your rate climbs as you spend more in a calendar month or year. For example, a card might pay 1% cash back on groceries up to $1,500 spent per month, then 2% on anything above that. Once the calendar resets, the tier resets too. Read the terms carefully, because the threshold and the bonus rate vary widely.
A few cards limit the total grocery rewards you can earn per year. A card might say "earn 5% cash back on groceries up to $25,000 spent per year, then 1% after that." If your household spends $30,000 on groceries annually, you hit that cap and earn a lower rate on the overage. Check the card's terms page to see whether a cap exists.
Rewards on grocery cards almost never include gas stations, restaurants, or prepared food from the deli counter—even though you buy them at the store. The card issuer defines "groceries" narrowly as packaged food, produce, and dairy. Pharmacy purchases at grocery stores also usually earn the base rate, not the grocery rate.
Annual Fees and Whether They Make Sense
Most grocery cards charge no annual fee. You open the account, use it, and pay nothing to keep it open. If you close the card, there is no penalty.
A small number of premium grocery cards do charge an annual fee—usually $95 to $150 per year. These cards typically offer higher rewards rates (4% or 5% on groceries instead of 2%) or extra perks like bonus points on your birthday or discounts at partner merchants. The math is straightforward: if the card charges $95 per year and you earn 5% cash back on $2,000 in monthly groceries ($24,000 per year), you earn $1,200 in rewards. Subtract the $95 fee and you keep $1,105. That works. But if you spend $500 per month on groceries ($6,000 per year), you earn $300 in rewards, and the $95 fee cuts that to $205. The fee may not be worth it.
Before you open a card with an annual fee, calculate your own household's annual grocery spending and multiply it by the card's rewards rate. Subtract the fee. If the result is positive and meaningful to you, the card makes sense. If the result is under $50 or negative, a no-fee card is the better choice.
Co-Branded Cards Versus General Rewards Cards
A co-branded grocery card is issued by a specific store—Kroger, Safeway, Whole Foods, or another chain—and offers the highest rewards when you shop at that store. These cards often pay 4% or 5% cash back on groceries at their store, but only 1% or nothing at other stores. Some co-branded cards also give you discounts at the pump if the store has a gas station.
The advantage is straightforward: if you do most of your grocery shopping at one chain, a co-branded card maximizes your rewards. The disadvantage is that you are locked into that store. If you move, change stores, or want to shop around for sales, the card becomes less useful. Co-branded cards also tend to have lower credit limits and stricter approval requirements than general bank cards.
A general rewards card from a bank—like the Chase Freedom Unlimited or a card from American Express—rewards groceries at 1% to 3% cash back but also rewards other categories like gas, restaurants, or travel. These cards work at any store, any time. The downside is that the grocery rate is usually lower than a co-branded card's rate. If groceries are your main spending category, you earn less than you would with a co-branded card. But if you spend across many categories, a general card may earn more overall.
The choice depends on your shopping habits. If 80% of your spending is groceries at one store, a co-branded card wins. If your spending is split across groceries, gas, restaurants, and travel, a general rewards card probably earns more.
How to Use a Grocery Card Without Paying Interest
A grocery card only makes financial sense if you pay your full balance every month. If you carry a balance and pay interest, the interest charges will quickly exceed any rewards you earn. For example, if you earn $50 in cash back but pay $80 in interest, you have lost $30.
Set up automatic payments from your bank account to the card's issuer for the full balance, due on the card's statement date each month. This removes the risk of forgetting and accidentally carrying a balance. Most card issuers let you set this up in their mobile app or website in under five minutes.
If you sometimes carry a balance because of unexpected expenses, a grocery card is not the right tool for you. A card with a 0% introductory APR period might be better, or you might focus on building an emergency fund before opening a rewards card. Rewards only work if you are already paying in full.
Comparing Grocery Cards Side by Side
| Card Type | Grocery Rewards Rate | Annual Fee | Works Where | Best For |
|---|---|---|---|---|
| Co-branded (Kroger, Safeway, etc.) | 4% to 5% | Usually $0 | That store only | Shoppers who buy most groceries at one chain |
| General bank card (1% to 3% groceries) | 1% to 3% | Usually $0 | Any store | Shoppers who split spending across categories |
| Premium bank card (4% to 5% groceries) | 4% to 5% | $95 to $150 | Any store | High-spending households that want rewards everywhere |
Tax Reporting and Rewards Income
Cash back and rewards points are considered taxable income by the IRS. In theory, you owe tax on the full value of rewards you earn each year. In practice, most people do not report small amounts of rewards because the IRS does not require it unless you earn over $600 in rewards in a calendar year.
If you earn more than $600 in rewards from a single card issuer, that issuer will send you a Form 1099-INT or Form 1099-MISC (the form varies by issuer) in January of the following year. You must report this on your tax return. If you earn less than $600 from a single issuer, you will not receive a form, but you are still technically required to report the income. Most households with modest rewards do not report small amounts, and the IRS does not pursue it.
If you earn rewards from multiple cards in the same year, add them up. If the total across all cards exceeds $600, at least one issuer will send you a form. Keep records of all rewards you earn, just in case.
Frequently Asked Questions
Can I use a grocery card at warehouse clubs like Costco or Sam's Club?
Most grocery cards do not work at warehouse clubs because warehouse clubs are not classified as supermarkets. Some general rewards cards earn their base rate (1%) at warehouse clubs, but not the higher grocery rate. Check the card's terms to see whether warehouse clubs are included. If you shop primarily at a warehouse club, look for a card specifically designed for that club, like the Costco Anywhere Visa.
What happens to my rewards if I close the card?
Rewards you have already earned and posted to your account are yours to keep. If you close the card, you can still redeem those points or cash back. However, any rewards that have not yet posted may be forfeited. Check your card's terms for the exact policy, but most issuers honor rewards that have already been credited to your account.
Do I earn rewards on gift cards I buy at the grocery store?
Yes, most grocery cards treat gift card purchases as groceries and reward them at the full rate. This is a way to earn rewards on purchases you plan to make anyway—buy a gift card at the grocery store with your rewards card, earn cash back, then use the gift card later. However, some card issuers have closed this loophole, so check your card's terms or call the issuer to confirm.
Can I get a grocery card if I have fair or poor credit?
Most grocery cards require good to excellent credit (a credit score of 670 or higher). Co-branded cards sometimes have slightly lower requirements than general bank cards. If your credit is fair or poor, you may not be approved. Before you explore, check your credit score through a free service like Credit Karma or AnnualCreditReport.com. If your score is below 670, focus on building credit first—pay bills on time, pay down existing balances, and wait a few months before explore for a rewards card.
Do I earn rewards on alcohol or tobacco purchases at the grocery store?
Most grocery cards do not reward alcohol or tobacco at the grocery rate, even though you buy them at the store. These items usually earn the card's base rate (often 1% or nothing). The card issuer's terms page will specify which items are excluded from the higher grocery rate. If you buy a lot of alcohol or tobacco, factor that into your rewards calculation.