Is the Amazon Prime credit card still worth the cost?

Apr 8, 2020

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The coronavirus pandemic has re-prioritized everyone’s spending habits, so it’s important to evaluate which card to use for your purchases. Yes, the Amazon Prime Rewards Visa Signature Card is technically free to own, but one of the caveats is that you have to be an Amazon Prime subscriber to qualify.

In 2018, Amazon increased the price of a Prime membership from $99 a year to $119.

It’s hard (and actually kind of foolhardy) to assess the value of the Prime membership based solely on the return you might get using the online retailer’s credit card — because membership includes so many other tangible benefits — but for argument’s sake, I’m going to try.

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First, let’s look at what the Prime Rewards card pays:

  • 5% cash back at Amazon.com and Whole Foods Market
  • 2% back at restaurants, gas stations and drugstores
  • 1% back on all other purchases

There’s no cap on the cash back value you can earn, and you can redeem your rewards to pay for all or part of your Amazon purchases. In addition to cash back, you can also redeem for gift cards or travel. Currently, new cardmembers receive a $70 Amazon.com gift card instantly upon approval. With Amazon’s acquisition of Whole Foods Market and the millions of readily accessible items ready to be delivered to your home, let’s see if this card is still worth the cost.

Related Reading: Best cash-back credit cards

How should you use the card?

(Photo by The Points Guy)
(Photo by The Points Guy)

In a normal situation without a global pandemic, the Prime Rewards card should be a secondary option in your wallet. This should not be your card for everyday spending, as you’ll find that many other travel credit cards offer better returns on both bonus and non-bonus category spending.

For example, the Chase Sapphire Reserve gets you 3 points per dollar spent on travel and dining at restaurants, while the Costco Anywhere Visa® Card by Citi earns 4% cash back on eligible gas for the first $7,000 per year and 1% thereafter. You even can beat the 5% cash back at Whole Foods by using the Blue Cash Preferred® Card from American Express, which offers 6% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%). Terms apply.

With grocery and household spending levels much higher than usual because of restaurant and store closures, no card can top the Prime Rewards bonus on spending at Amazon.com and Prime Now for fast deliveries.

So let’s look at how much you’d have to spend annually with Amazon to justify the higher subscription price.

Earning Your Membership Fee Back

Dania Maxwell/Bloomberg via Getty Images
(Photo by Dania Maxwell/Bloomberg via Getty Images)

For a moment, take coronavirus out of the equation and figure out your break-even cost for signing up for Prime and using the Prime Rewards card. The $70 gift card you receive for signing up goes a long way toward paying off the first-year cost of the Prime membership. You’d have to spend about $1,000 at Amazon during your first year to earn enough cash back to pay off the remainder of your Prime subscription cost. Here’s the breakdown:

$119 (Prime membership) minus $70 (welcome offer gift card) divided by $0.05 (5% back with card) = $980.

During subsequent years, you’d have to spend about $2,400 on Amazon merchandise to earn enough cash back to pay for your Prime subscription. Here’s the breakdown:

$119 divided by $0.05 = $2,380

A 2017 Consumer Intelligence Research Partners analysis found that the typical Amazon Prime member spends about $1,300 a year with the retailer. That’s not enough spending to justify getting a Prime membership for the express purpose of getting the credit card.

I spend even less than average, it turns out. In 2017, I spent $615.62 on Amazon, buying both merchandise and digital content. Had I used the Prime Rewards card, I would have earned $30.78 in cash back or Amazon credit, well short of either the new or old Prime membership fee.

Another Amazon card option

I might be better off with the Amazon Rewards Visa Signature Card. You can get this card without subscribing to Prime. The Amazon Rewards card pays:

  • 3% back at Amazon.com and Whole Foods Market
  • 2% back at restaurants, gas stations and drugstores
  • 1% back on all other purchases

New cardmembers receive a $50 Amazon.com gift card instantly upon approval.

I could get a slightly better return, but I’d have to use the Chase Freedom Unlimited, which earns 1.5% cash back on purchases, and transfer those points to my Chase Sapphire Reserve account, where each point is worth 2.1 cents on average when you redeem them with travel partners, according to TPG’s latest valuations. That would put the total return on Amazon spending at 3.15%.

The information for the Chase Freedom Unlimited has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Bottom Line

This exercise to determine whether it’s worth paying the Prime membership fee to get the Prime Rewards card is extremely subjective. Some of us may find incredible value from 5% back on Whole Foods deliveries — especially during this period when we are stuck at home.

I’m an Amazon Prime member — and I don’t even buy that much from Amazon. But for people who enjoy perks like free two-day shipping, Prime streaming services and Prime Now two-hour delivery, this benefit alone could justify the cost of a membership. Essentially, membership is already a sunk cost and with no annual fee, adding on the Prime Rewards card is just icing on the cake.

I find value in the membership because of the Prime Video and Amazon Music streaming services. This alone is worth the $119 a year to me. Throwing in a rewards credit card on top of that doesn’t hurt, either.

Additional reporting by Chris Dong.

The information for the Amazon Prime Rewards card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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