How card rewards can cut the cost of your coffee habit

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Caffeinate cash back with strategic purchases, card use

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How card rewards can cut the cost of your coffee habit

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Routine
coffee purchases may not efficiently rack up credit card miles for a free
vacation flight, but if caffeine is your kryptonite, these expenses can boost
you toward a larger reward goal.  

The
average American spends roughly $1,100 each year on coffee, which is about $3 a
day, according to a 2017 Acorns Money
Matters report.
For those who love lattes or brewing high-priced, single-origin coffee beans at
home, annual coffee expenses may be even higher. All purchases add up over
time, so why not earn card rewards to offset your coffee spending??

“There’s a way to save no matter your
preferred way of acquiring your beloved coffee,” said Lisa Rowan, personal
finance expert at The Penny Hoarder.

Here’s
how to maximize credit card reward earnings on your coffee expenses, big or
small:

Which cards to use
where?

“The best thing
you can do when buying coffee or any product is use the highest cash back
credit card
possible,” said Jason Wuerch, founder and author behind Frugal For
Less, a personal finance blog focused on saving money and maximizing
income. 

Review
the rewards and benefits of your cards to determine which offer the sweetest
deals, then make a couple of purchases to ensure the rewards pan out as expected,
Rowan suggests. If all goes well, default to that card for future coffee
purchases.

A little extra research can go a long way. Not all credit card reward programs
are created equal and depending on where and how you buy coffee, understanding
how cards reward your expenses will maximize your earnings.

“Make
a list of what you normally like to purchase and where you like to make those
purchases, then find a card that best fits your needs,” Wuerch added. “It might
help to map out your expenses for a few weeks to see where you’re spending the
most money.”

Based
on where you spend the most money on coffee, here’s what types of cards you
should use on each purchase:

“Don’t
forget to pair the right card with whatever loyalty program your favorite
coffee shop offers, whether it’s a punch card, app or barcode.”

Grocery stores

If you buy most of
your coffee-related goods at grocery stores or wholesale clubs, the most
lucrative rewards cards to use will likely be a cash back card that offers at
least 3 percent back on such transactions, such as the Blue Cash Everyday® Card from American Express. If you have
a points card that doubles or triples earnings on grocery purchases, such as
the PenFed Platinum Rewards Visa Signature card (3 points per dollar spent on
groceries), that may be a good option, too.

However,
this is when card comparisons and a little math pays off, as some cards offer
even heftier grocery store rewards. The Blue Cash Preferred® Card from
American Express

offers 6 percent cash back on supermarket purchases. New cardholders also
benefit from a 0 percent purchase APR for 12 months and get a $200 statement
credit after spending $1,000 in the first year.

Your potential savings: If you buy $20 a week on coffee-related items at the grocery store using the
Blue Cash Preferred card, your annual coffee expense total of $1,040 will earn
you $62.40, plus the $200 statement credit bonus if you’re a new cardholder.

Cafés

If you get your
caffeine fix on-the-go from cafés, pay with a card that offers a high rate of
rewards on restaurant purchases. “A coffee shop most likely counts as a
restaurant.” Rowan said.  

However,
before assuming your card will read a local hipster coffee hangout purchase as
a restaurant expense and reward you accordingly, double-check the card terms or
call your issuer to find out how the establishment is coded.

See related: How
to find a business’s merchant category code

Once
you know your café purchases are coded as a restaurant expense, select the best card
to use or apply for a new one. Cash back cards with rotating bonus categories, such as
the Discover it® Cash Back card or the Chase Freedom cards, can maximize
your café cash back earnings, even if temporarily. For example, the Discover it Cash Back card offers 5 percent back on all
restaurant purchases July-September.

With the Discover card, if
you spent $5 a day on coffee from your favorite café each day during that bonus
period, you’d get $23 back on those coffee purchase alone, which would be
matched at the end of your first year as a cardholder, bringing those 92 days
of coffee reward earnings to $46.

To
reap rewards on café coffee throughout the year, use a rewards credit
card that favors food purchases above all else, such as the Uber Visa card from Barclays. This card offers 4 points per
dollar on restaurants, takeout and bars, including UberEATS. New cardholders
also get a $100 bonus after spending $500 in the first 90 days.

Your potential savings: With the Uber Visa card, if you spend $5 on a
Starbucks latte five days a week – you’d earn 5,220 points on these purchases,
a $52.20 value that could be redeemed for UberEATS credits, cash back or gift
cards.

Tip: If you buy
coffee beans from grocery stores each week but are also a loyal café customer,
Capital
One’s Savor
card
may be a good go-to option to
maximize coffee reward earnings. It offers 3 percent cash back on dining
purchases (cafes included) and also 2 percent back on groceries.

Online retailers

If  you shop for coffee online, there are more
rewards cards to choose from.

If
you’re an Amazon Prime member, the Amazon Prime Rewards Visa Signature card from Chase offers 5 percent back
on all Amazon.com purchases. Other retail loyalty programs may indicate which
branded cards could offer larger rewards on coffee-based purchases, so long as
you pay balances off in full each month, as store-branded credit cards
typically have high interest rates.

For example, Target’s in-store coupon and discount program, Cartwheel, used in
conjunction with the Target REDcard, which offers 5 percent back on in-store
purchases and free online shipping from Target.com, is another such pairing.

To
reap rewards on coffee purchases from online retailers, you also could use a general cash back card that earns money back on each transaction.
Citi’s Double Cash card offers 2 percent back on all purchases, 1 percent back upfront
and another 1 percent when you pay the bill.

When
shopping for coffee online, check your card issuer’s shopping portals to see if you
can earn reward bonuses in addition to standard cash or points back by shopping
coffee-carrying retailers there.

For example, if you buy coffee beans from
Walmart.com via Chase’s Ultimate Rewards portal with a Chase Sapphire Preferred
card
, you’ll earn 3 points per dollar. If you were to pick up your coffee from
a brick-and-mortar Walmart store, however, you’d only get 1 point per dollar.

What about the
Starbucks Rewards Visa card?

In early 2018,
Chase and Starbucks released the Starbucks Rewards Visa card, which may sound
like a no-brainer for those seeking coffee and
credit card rewards.

Starbucks
Rewards Visa cardholders earn 1 Star for every $4 spent outside Starbucks
stores and up to 3 Stars for every $1 spent in stores. Stars can only be
redeemed at Starbucks and the card touts a $49 annual fee, which diminishes its
value, said Wuerch.

“You’d
need to spend $925 at Starbucks per year to cover the annual fee,” he said. “Since
25 stars is roughly related to $1 and I’d get 1 star for every $4 spent on
non-Starbucks purchases, I’d have to spend $100 to get 25 stars. This means I’m
basically getting 1 percent cash back. If I only use the card at Starbucks, I’m
getting 33.3 stars per $100 spent, which is about 1.32 percent cash back.

“Why
use this card when there are plenty of 1.5 to 2 percent cash back credit cards
on the market, or credit cards that give you more in airline miles?”

The Starbucks credit card does offer 2,500 Bonus Stars to new cardholders who spend $500 in the
first three months from account opening and another 250 stars when the credit
card is used to load money onto your Starbucks app, but both reward
opportunities are designed for Starbucks lovers who are just seeking more
product, not flexible rewards or cash back.

While
the new cardholder bonus reward offering is worth 20 Starbucks food and drink
freebies, “You do have to pay a $49 annual fee, and all the benefits you accrue
can only be used at Starbucks,” The Penny Hoarder’s Rowan explained. “It’s up
to you to decide whether you want to double-down on your super-fan status, or
have rewards that can be used more flexibly at a variety of retailers.”

Combine rewards,
savings options when you can

Once you’ve dubbed
a credit card your “coffee card,” there are even more ways to save:

  • Free loyalty reward programs
    If
    you aren’t using the Starbucks Visa card, you should still have the Starbucks
    Barista app to scan your free rewards card when make a purchase.

    “Don’t
    forget to pair the right card with whatever loyalty program your favorite
    coffee shop offers, whether it’s a punch card, app or barcode,” Rowan said.

    Starbucks,
    Dunkin Donuts and Panera Bread are all major coffee retailers with free
    customer loyalty programs.

  • Subscription and auto-ship service
    Some
    online retailers offer discounts to those who subscribe to routine shipments of
    products. Sign up for such a service with a strategically chosen rewards card
    as payment to keep coffee resources stocked and rewards slowly rolling in.

    “If
    you’re ordering coffee beans or grounds online (Amazon Subscribe & Save,
    Target Restock, Jet), check a retailer’s subscription or auto-ship services,”
    Rowan added. “Along with your rewards payment card, these services can slice a
    bit off your tab.”

  • Online savings tools
    Use
    apps such as Ebates and Ibotta in partnership with your credit card to earn
    even more money back on top of standard card rewards.

    Both tools allow users to
    register purchases and shop in-app through major retailers to earn cash back on
    everyday items, including coffee. You can then use your earnings to help pay
    down your rewards card balance.

“The most important thing to keep in mind is
that there are a lot of little things you can do to save on coffee that all add
up – and they never take as long as you think once you get used to the
process,” Wuerch said.  

 




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