Credit card issuers classify purchases into different categories to determine eligibility for bonus rewards, cash back, or points. These categories can influence how much you earn for various types of spending. Understanding how these classifications work can help you maximize your rewards and get the most value from your credit card.

How Purchases Are Classified:

1. Merchant Category Codes (MCCs): Credit card networks (like Visa, Mastercard, or American Express) assign Merchant Category Codes (MCCs) to businesses based on the type of goods or services they offer. Each business is placed into a specific category, such as dining, travel, gas, or groceries. These MCCs are critical because they determine how purchases are categorized for bonus rewards.
2. Bonus Categories: Many credit cards offer extra rewards on specific categories of purchases, such as:
   • Dining: Restaurants, fast food, and sometimes cafes or coffee shops.
   • Travel: Airlines, hotels, rental cars, and sometimes ride-sharing services.
   • Groceries: Purchases made at grocery stores or supermarkets.
   • Gas Stations: Purchases at fueling stations.
   • Entertainment: Tickets for movies, concerts, or theme parks.

   Credit cards with rotating or fixed bonus categories allow cardholders to earn higher rewards (e.g., 2x, 3x, or 5x points) on purchases made in these categories.

3. Specific Retailers vs. Broad Categories: Some cards offer higher rewards for purchases made at specific retailers (like Amazon or Target), while others classify broader categories (like all grocery stores or dining establishments). For example, if you have a card that offers 3x points on travel, it will apply to all merchants classified under the “travel” category, not just one specific airline or hotel chain.
4. Rotating Bonus Categories: Some credit cards, like the Chase Freedom Flex or Discover it, have rotating bonus categories that change every quarter. These cards require cardholders to activate the categories each quarter to earn the bonus rewards. Rotating categories can include spending on groceries one quarter and gas stations the next, with bonus points or cash back (usually 5%) offered for purchases in the designated categories.
5. Merchant Discretion: While MCCs are largely standardized, how merchants choose to classify themselves can impact your rewards. For example, if a restaurant processes payments through a hotel, the purchase may not qualify for dining rewards but instead be classified as a hotel transaction. Similarly, some supermarkets may be coded as “warehouse clubs” or “superstores” if they sell a variety of goods beyond groceries, which may affect your ability to earn grocery-specific rewards.
6. Online Purchases: Online shopping can also complicate how purchases are classified. A store like Walmart, which sells both groceries and general merchandise, may not always qualify as a grocery store, depending on how the purchase is processed. It’s important to check the MCC for online purchases, especially if you’re counting on bonus rewards.

Common Bonus Categories and Examples:

• Dining: Includes restaurants, cafes, bars, and food delivery services.
• Travel: Includes airlines, hotels, vacation rentals, and transportation services (such as taxis, trains, and rideshare).
• Gas Stations: Only gas stations (not convenience stores attached to gas stations) qualify.
• Groceries: Supermarkets and grocery stores qualify, but wholesale clubs (like Costco) and big-box retailers (like Walmart) often do not.
• Entertainment: Concerts, sporting events, and movie theaters are often included in entertainment categories.
• Streaming Services: Some cards offer bonuses for services like Netflix, Spotify, and Hulu.

How to Maximize Rewards:

1. Know Your Categories: Review your credit card’s terms and conditions to understand which purchases qualify for bonus rewards. Some cards may require enrollment or activation for rotating categories or special promotions, so keep track of when these bonuses apply.
2. Use the Right Card: If you have multiple credit cards, use the one that offers the highest rewards in each category. For example, use a card that offers 3x points on dining when eating out, and another card with bonus rewards for groceries when shopping at the supermarket.
3. Check MCC Codes: When in doubt, you can check the MCC codes on your credit card statement or ask the merchant how they are classified. This is especially helpful for maximizing rewards at merchants that may not fit neatly into one category.
4. Monitor Online Purchases: Pay attention to how online purchases are categorized, especially with large retailers that sell multiple types of products. If a transaction isn’t categorized as expected, you might miss out on bonus rewards.
5. Take Advantage of Temporary Offers: Some credit card issuers offer temporary or promotional bonus categories. For example, during the holidays, certain cards may offer extra rewards for shopping at department stores or using specific online platforms. Take advantage of these promotions when they arise.

Potential Pitfalls:

• Misclassified Purchases: Merchants may not always be classified as expected. For example, a coffee shop inside a grocery store may not trigger dining rewards because it’s coded as part of the supermarket.
• Non-Qualifying Stores: Not all stores that sell food qualify as grocery stores. For example, big-box retailers and warehouse clubs like Costco may not earn grocery rewards, even if you’re purchasing groceries.
• Exclusions: Some cards have exclusions for certain purchases, such as gift cards or purchases made through third-party payment services like PayPal, so review your card’s terms.

Credit card issuers classify purchases into categories using MCC codes, and understanding how these codes work can help you maximize your rewards. By using the right card for the right type of spending and staying aware of how purchases are classified, you can earn more points, miles, or cash back.