Don’t Get Shortchanged On Credit Card Rewards

Rewards credit cards deliver value to cardholders whether they earn cash back, miles, or points. But a word of caution may be in order: You may not actually be getting your full amount of rewards for purchases made at certain retailers or through third parties. Don’t get shortchanged!

Many cards offer bonus rewards on purchases made at grocery stores and gas stations. But often the “fine print” discloses that transactions made at superstores and discount warehouse retailers are not eligible for the bonus category rewards. So instead of earning 3% or 5% back on your purchases, you only earn the basic 1% reward. This can add up to a significant amount of lost rewards if you routinely do your shopping at these types of retailers.

In addition, payment services such as PayPal, sites such as Groupon and Expedia, and mobile card readers aren’t always eligible for the extra bonus points or cash back on purchases. So once again, you may be earning only 1% in rewards rather than the higher amount you originally planned on.

The main reason for the discrepancy in rewards is Merchant Codes. Every transaction you make on your credit card is processed with a specific merchant code when it is sent to your card issuer (bank). For example, if you purchase gas at Costco or groceries at WalMart, the merchant code is not going to be an eligible merchant code for the bonus gas and grocery rewards. The same would hold true for purchases made at Target or Sam’s Club. These purchases would earn you the base rate of (generally) 1% but you would not earn 3% or 5% on these purchases.

This highlights why it is important to read and understand your credit card’s terms and conditions (preferably before you sign up). If you frequently shop at retailers which are excluded from the bonus rewards rate, a better option might be a rewards card that offers 2% back across the board rather than different levels of rewards.

Note: Apple Pay currently has a direct relationship with banks and card issuers so transactions made with Apple Pay should earn full bonus rewards.