How to choose a credit card for groceries

If you’re like most Canadians, you’ve spent a lot of time lately thinking about ways to save more money on groceries. The country spent much of 2022 enduring bank-account draining food prices that seemed to just keep rising, and thus far there’s not much light at the end of the tunnel. In fact, experts predict that we’re in for much of the same in 2023, with food prices continuing to rise by as much as 5% to 7%.

Despite the bleak outlook, there is some good news. Using a credit card that rewards you for your grocery purchases is one of the best ways to fight back against inflation. With the right card, you could maximize the rewards you earn from spending money on food (and by food we mean not just groceries but even on takeout and meal kit subscriptions). Here’s what you need to know about choosing the best credit card for groceries.

How Can I Save More on Groceries?

Aside from the standard advice of saving on food by using coupons, buying in bulk when items are on sale, and shopping at discount grocery stores, one of the best ways to save on groceries is by earning cash back rewards as your shop.

While we’re pretty much powerless as to how inflation will impact food prices, we can have some control over the amount we spend on groceries — or, at the very least we can have some power over how much we get rewarded for our food-related purchases.

Groceries are a popular accelerated earn category for credit card and prepaid card companies. Many credit cards offer rewards or cash back for purchases made at grocery stores, so using a credit card that rewards food purchases (which can even include takeout, restaurant and meal kit subscriptions) can add up to significant savings over time.

Is it best to use a credit card for groceries?

Using a credit card for groceries can be a good idea but only — and this is a big “but” — you pay off the card on time and in full each month. If you’re confident that you can manage your card responsibly, unlike using cash or a debit card, you could reap big rewards by using a credit card for grocery purchases.

How do you decide which credit card to use?

When it comes to choosing the best credit card for food purchases, look for a card that offers some type of reward like loyalty points or cash back for the specific kind of food purchases you make most often. So, if the bulk of your food bill comes from groceries, get a card that gives you cash back or rewards for purchases you make at grocery stores. On the other hand, if most of your food spending tends to come from takeout or eating out at restaurants, or if you subscribe to meal kit services, you’ll want to ensure that your card gives you rewards for those types of food purchases.

Other important considerations include:

1. Annual fee: Some credit cards charge an annual fee, sometimes it can be worth paying the fee if the benefits you’ll get throughout the year clearly exceed the cost of the fee. On the other hand, if you don’t use the card enough, or the benefits are negligible, then look for a no-fee card.

2. Interest rate: If you plan to carry a balance on your credit card, be sure to get a card with a standard low-interest rate to avoid accumulating high-interest debt.

3. Welcome bonuses: Some credit cards offer new applicant bonuses that may include a temporary boosted accelerated earn rate, a lump-sum of points or a balance transfer promo. Pick a card with an offer that can benefit you based on your food buying habits and overall financial goals.

4. Extra non-food related perks: Some credit cards offer additional perks like travel insurance, purchase protection, or concierge services.

If you want to enjoy the rewards of a credit card but are wary of using credit, check out KOHO’s selection of prepaid credit cards. KOHO gives you the purchasing power of a credit card without the need to worry about interest charges or accumulating debt. KOHO’s prepaid Mastercard can be used anywhere that accepts Mastercard. The funds on the card are drawn from the money you've deposited into a KOHO account so you can only spend money you already have.

KOHO has three different account tiers — Easy, Essential, and Extra — each with unique benefits and cash back options.

1. The KOHO Easy tier is the no cost basic account. It rewards you with 1% cash back on groceries and transportation and you can even get extra cash back at selected merchants.

2. The KOHO Essential tier has a monthly fee of $4 per month or $48 per year and even comes with a 30-day free trial. As with KOHO Easy, you’ll earn 1% cash back on groceries and transportation, however, you also earn an additional .25% cash back on all other purchases, and you’ll also enjoy extra cash back at participating merchants.

3. The KOHO Extra tier is the premium account and will cost you $84 annually or $9 per month. At this tier you earn an impressive 2% cash back on groceries and transportation, as well as on eating and drinking (which means almost all your food spending is covered!). You also get 0.5% cash back on all other purchases, with some bonus cash back at select merchants.

The type of account tier you choose will depend on your spending habits and the features you value the most.

Does buying groceries with a credit card build credit?

If you use a traditional credit card (i.e., one from which you borrow money and must pay back each month) than you will build up your credit score. Of course, if you don’t pay off your balance then you’ll negatively impact your credit score when your non-payments are reported to Canada’s credit bureaus.

Using a KOHO prepaid card, however, does not impact your credit score because it’s not a traditional credit card but rather a prepaid reloadable Mastercard so you can only spend money you have. That being said, KOHO does have a Credit Building feature that you can add to your account for as little as $7 monthly.