How Credit Card Issuers Classify Purchases for Bonus Rewards

How Credit Card Issuers Classify Purchases for Bonus Rewards loading="lazy"

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Many rewards credit cards earn points, miles or cash back on everyday purchases—but some offer the opportunity to rack up bonus rewards in specific spending categories, such as dining or travel. Credit card issuers use what are known as merchant category codes to classify purchases and determine which transactions should earn these bonus rewards.

By understanding how your specific credit cards characterize merchants—and then using the cards that will accrue the most points or miles where you spend the most money—you can maximize your rewards. Here's how credit card issuers classify purchases for bonus rewards in common spending categories like gas and groceries.

What Are Merchant Category Codes?

Merchant category codes can include groupings like restaurants, airlines, telecommunications services and more. The IRS even publishes a full listing of merchant category codes to help consumers understand which businesses tend to fall into which categories.

Aside from simple classification purposes, credit card issuers use merchant category codes for a variety of reasons, including tracking customer behavior, tax reporting and determining if certain purchases are eligible to earn bonus points.

In general, merchants are responsible for reporting their own category code to issuers, but ultimately it's up to the card company to determine which category a merchant falls under. If you find that you did not earn bonus points at a merchant where you think you should have, you might be able to call your credit card and ask for a correction.

But you don't necessarily need to drill down to the specific merchant category code of every business you patronize. In fact, it might be better not to do so. For example, Citi publishes its merchant category codes, and if you look for restaurants, they're actually under "miscellaneous stores," which won't tell you much about how your purchase will code rewards-wise. Instead, review the rewards FAQ page for your bank and follow the categories listed there.

How Credit Card Issuers Classify Purchases for Bonus Rewards

The major credit card issuers—American Express, Bank of America, Capital One, Chase, Citi and Discover—each have their own system of classifying purchases. They mostly line up from issuer to issuer, but there might be some discrepancies. It's always best to look at the terms and benefits of your specific credit card.

Here are some of the biggest bonus categories, and what types of businesses are typically included in each.

Dining

Dining might comprise anything from sit-down restaurants to cocktail bars, and even food delivery services, depending on the issuer.

For instance, if you have Capital One SavorOne Cash Rewards Credit Card, you can earn 3% cash back on dining, which includes:

  • Restaurants
  • Cafes
  • Bars
  • Lounges
  • Fast-food chains
  • Bakeries

On the other hand, if you have the Chase Sapphire Preferred® Card, you can earn 2 points per dollar on dining, which encompasses:

  • Sit-down or eat-in dining
  • Fast-food restaurants
  • Fine-dining establishments
  • Delivery services that classify themselves as a restaurant

There are two major differences to note for these issuers: Capital One makes no reference to delivery services (though many, like DoorDash and Grubhub, do in fact code as dining), and Chase won't count bakeries for bonus earning on dining. So if you have both of these cards, it's better to use the Capital One SavorOne Cash Rewards Credit Card for any bakery purchases, and the Chase Sapphire Preferred® Card for takeout and delivery, just to be safe.

Travel

If you have a card that earns bonus rewards for travel in general, or for specific types of travel transactions (like hotel bookings or airfare), just check with your issuer before making any large purchases.

For example, if you have the Citi Premier® Card from our partner, you can earn 3 ThankYou Points per dollar spent on travel including:

  • Airlines
  • Hotels
  • Car rental agencies
  • Travel agencies/aggregators
  • Tour operators
  • Gas stations
  • Commuter transportation
  • Ferries
  • Commuter railways
  • Subways
  • Taxis, limousines and car services
  • Passenger railways
  • Cruise lines
  • Bridge and toll roads
  • Parking lots and garages
  • Campgrounds and trailer parks
  • Timeshares
  • Bus lines
  • Motorhome/recreational vehicle rentals
  • Boat leases and rentals

That's quite a range of possibilities. With Citi, gas stations count toward travel purchases, whereas this is not usually the case with other issuers, including Chase and American Express.

Groceries

Most issuers tend to count your average grocery store or supermarket, and even some smaller markets in this category. The only major exclusions to be on the lookout for are large chain stores that aren't primarily for groceries, such as Walmart and Target, which are deemed ineligible by Capital One and Chase, for example.

American Express sometimes stipulates that only U.S. grocery store purchases are eligible for bonus rewards, so don't expect extra earnings if you're stocking up on supplies beyond the U.S. borders.

Gas

More than simply what you purchase at the pump, a gas category can also encompass things you buy in a station's store, such as snacks and drinks. Most standalone gas chains should count.

Streaming

This category has become more popular for bonus rewards since the pandemic months when folks were locked down at home and craving entertainment. Given the preponderance of streaming services, you'll need to check your specific card's reward terms and conditions to see which ones are included and which aren't.

For example, with the Capital One SavorOne Cash Rewards Credit Card, purchases earn 3% back on streaming services including Hulu, Netflix and Disney+ among others. But there are some major exclusions, like Amazon Prime Video and Verizon Fios On Demand, as well as some audiobook and fitness programming subscriptions.

How to Maximize Bonus Rewards

Tracking the categories where your credit cards may earn bonus rewards is important for earning the most points, miles or cash back possible on every purchase. Here's how to maximize your credit cards' bonus rewards categories.

Focus on Cards With Good Bonus Categories

The first thing to do is make sure you have cards that offer bonus earning on the types of things you spend the most money on, whether that's groceries and gas or travel and dining. At least one of your credit cards should earn extra rewards in one or two of your major expense areas.

Use Multiple Credit Cards

If you have more than one main credit card, pair your products so you earn bonus rewards at even more types of merchants.

For instance, the Citi Rewards+® Card earns 2 ThankYou Points at supermarkets and gas stations on the first $6,000 spent per year, then 1 point per dollar thereafter and on everything else. Plus, each transaction is rounded up to the nearest 10 points.

You could pair that card with the Chase Freedom Unlimited®, which earns 5% cash back on travel purchased through Chase, 3% back on dining and drugstores, and 1.5% back on all other purchases. That way, you can earn bonus rewards with a vast array of merchants, and can be sure of at least 1.5% back on non-bonus purchases with the Chase Freedom Unlimited®.

Leverage Limited-Time Opportunities

During the pandemic, we saw certain credit cards begin to offer limited-time opportunities to earn bonus points on new or changing categories. For example, the Chase Sapphire Preferred® Card usually earns 2 points per dollar on only travel and dining, and 1 point on everything else. For a few months, though, it also earned 2 points per dollar on up to $1,000 per month in purchases at grocery stores.

Other cards, like the Chase Freedom Flex℠, regularly earn bonuses on quarterly rotating categories. From July to September 2021, for instance, its bonus categories—which earn 5% back—include:

  • Grocery stores (excluding Walmart and Target)
  • Select streaming services, including Disney+, Hulu, ESPN+, Netflix, Sling, Vudu, FuboTV, Apple Music, SiriusXM, Pandora, Spotify and YouTube TV

That's in addition to the card's regular rates of 5% cash back on travel purchased through Chase and 3% at drugstores and dining at restaurants. You'll also earn 5% cash back on grocery store purchases (not including Target or Walmart) on up to $12,000 spent the first year. You'll earn 1% on all other purchases. By paying attention to the card's temporary categories and hitting that spending threshold, you can earn as many as five times the rewards as on other everyday purchases.

The Bottom Line

Understanding how credit card issuers classify purchases for bonus rewards is imperative if you hope to maximize your earning. By using the right cards for the right purchases, you can rack up rewards even faster, all with little or no effort. Paying off your bill every month will ensure you get the full value out of your rewards (by not paying interest on a balance).

Go over the terms and conditions of earning with any rewards credit cards you carry, and review your statement each month to make sure you're earning the bonus rewards you deserve. Also check out Experian CreditMatch™ to find personalized credit card suggestions to meet your needs and habits.