Understand rewards exclusions, merchant category codes to earn top rewards

Written by
Curtis Arnold
Terms apply; see the online credit card application for full terms and conditions of offers and rewards.

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Rebate credit cards have grown significantly in popularity since Discover Card helped pioneer the concept of cash back cards in the 1980s. A GigaPoints/Ipsos poll published early last year found that six in 10 Americans (60%) agree that credit card rewards are very important to them.

Similarly, according to a CardRatings 2016 online survey of 2,008 U.S. adults conducted by the Harris Poll, 83% of Americans who have a personal credit card claimed they have at least one rewards credit card.

I’m also personally a big fan of leveraging reward cards. I have earned literally thousands of dollars in cash rebates over the years using a no-annual-fee 2% cash back card that doesn’t have redemption tiers (I earn a flat 2% on almost all purchases). I especially love double-dipping to maximize my rebates!

Despite their popularity, many consumers have frustrations

Despite their popularity, though, card reward programs have downsides and not all consumers love them all the time.

A couple of stats that are troubling from my perspective as a consumer advocate are that according to the same survey referenced above by GigaPoints/Ipsos, only 57% of consumers believe they get the maximum possible rewards from their current credit card(s). Furthermore, 30% of respondents find it difficult to understand which credit card rewards and points programs would be best for them.

Jamie Smith (name changed to protect her identity) shares such frustrations, particularly when she tries to redeem her rewards:

“I have a U.S. Bank card with an $800 reward balance and also a Citi cash rebate card,” Smith says. “Redemption never seems to pan out easily. The rewards sites are hard to navigate and there are way too many steps to redeem. One of them, I think Citibank, requires a separate website setup for redemption. It’s just such a pain that I have to ask myself, ‘Is it worth it?'”

Personally, I’ve found card rebate programs fairly easy to manage over the many years I’ve used reward cards. More importantly, they have given me a welcomed financial boost (and are definitely not gimmicky as some naysayers think) that has proven particularly helpful during leaner years.

Given this dichotomy between my experience and what other rewards card users experience, I wanted to address one potential pitfall of many rebate programs: How card companies categorize certain types of purchases and what that means for earning rewards.

Certain types of purchases “Don’t earn squat”

This process gets a bit complicated as it involves something called “merchant category codes,” aka MCC codes (if you’re feeling nerdy, here’s a more detailed explanation).

In layman’s terms, certain purchases may seem like they’d be considered “restaurants” or “grocery stores,” or “gas,” but don’t code that way and are subsequently excluded from earning the rewards you expect.

If you aren’t aware of these exclusions, which are common among reward cards, you could lose out on hundreds of dollars in rebates every year. For example, let’s say you have a card that offers you 5% cash back at grocery stores and you normally shop for groceries at Walmart. You could go all year spending at Walmart and thinking your racking up big rewards only to learn that Walmart purchases don’t code as grocery stores, but rather as “merchandise” and are excluded from the 5% category. Furthermore, card issuers often exclude “superstores” like Walmart and Target from rewards earning tiers.


You can avoid a lot of these exclusions if you use a card that offers the same reward percentage on all purchases, that is a flat-rate rewards card They’re also less complicated, and simple is always better in my opinion.

Andrea Norris-McKnight, the editor of The Dollar Stretcher and After 50 Finances, shares my sentiment:

“If you don’t have the time to stay on top of a complicated rewards program for your card, you might be better off getting a card with a simplified rewards program,” Norris-McKnight says. “For instance, some Capital One cards reward a straight 1.5% cash back on all purchases and you can use points for online shopping.”

Norris-McKnight’s frustration with cards that allow you to earn higher rebates in certain categories is a direct result of her personal experiences.

“My spouse and I are vacation club owners and we have the company’s branded credit card that allows us to use rewards points to pay club maintenance fees,” she explains. “Over the past decade, the amount 10,000 points will pay on our fees has decreased three times. They also changed their points structure, which meant we were earning fewer points on everyday purchases even though they significantly increased points earned on a category we seldom used. It finally made sense for us to switch to a different type of rewards card that would save us more money.”

Gas purchases aren’t all created equal

I love to earn rebates at gas stations and recently wrote an article with tips on how to maximize your rebates on gas purchases. However, I didn’t address a related exclusion in the article that I’ve been aware of for many years, but which many consumers could miss.

The exclusion typically limits or caps the amount of rebates you can earn at gas stations that are affiliated with warehouse clubs, such as Sam’s, Costco and BJ’s; discount stores, such as Walmart; and certain convenience stores.

This exclusion is particularly problematic for consumers, like me, that enjoy the cheaper gas often found as such locations. Sam’s gas, for instance, is my go-to place to fill up as it;s normally the cheapest in my area.

I recently reviewed the terms of the CardNamediscontinued and found this specific exclusion under the section labeled “Gas Stations.” (Citi is a CardRatings advertiser) The fine print says you can only earn 1 (one) ThankYou® Point per $1 spent for the following types of gas purchases:

… gasoline purchases at warehouse clubs, discount stores, convenience stores or other merchants that do not use the gas station merchant category code.

The only type of gas purchases that generally earn the top rewards are those made at what card issuers call “stand-alone” gas stations. Examples include Exxon-Mobil, Shell, etc. – basically gas stations that only or primarily places to get gas. In the Citi example, you could earn five ThankYou® Points for purchases at stand-alone stations, but only one point per $1 if you buy gas at one of the excluded locations.


If you mainly buy gas at wholesale clubs, consider applying for the Sam’s Club® Mastercard®, which features a 5% rebate on gas on the first $6,000 in gas purchases each year. Similarly, the CardNamediscontinued gives 4% cash back on eligible gas purchases, including gas at Costco, for the first $7,000 spent per year.

Information about the Sam’s Club® Mastercard® has been collected by CardRatings and has not been reviewed or provider by the issuer.

Grocery, dining and entertainment purchases aren’t always entertaining

Similar exclusions exist for other types of purchases such as grocery, dining, entertainment, etc. Case in point, the CardNamediscontinued boasts an impressive 3% rewards on entertainment purchases.

However, there are notable exclusions. I ran across the following fine print regarding what qualifies as an entertainment purchase while recently reviewing the terms of this offer under the section titled “What are non-qualifying entertainment purchases?”

You won’t earn 3% cash back for purchases made at golf courses, country clubs (including membership fees), collegiate sporting events categorized as “universities,” charitable organizations that provide live entertainment, amusement park tickets purchased on third-party sites or on entertainment and resort packages categorized as “travel” or “hotel”

“Some amusement parks may code their online tickets as merchandise instead of entertainment,” Norris-McKnight notes. “Similarly, some food trucks or food carts may use a merchandise code instead of a dining code. Finally, restaurants in department stores or hotels may use a merchandise or hotel code instead of a dining code.”

Such exclusions can also apply to cards that offer rotating categories where you earn enhanced rebates on certain types of purchases that change throughout the year. A popular example is the CardName‘s discontinued cash-back program, which offers 5% back on purchases in different categories each quarter you activate, BUT you only earn that 5% back on the first $1,500 you spend in the bonus categories each quarter.


If you’re aware of exclusions and have a card that has rotating categories, you can really rack up some nice rewards since most cards try to feature categories that have seasonal appeal.

An educated consumer is an empowered consumer

In closing, I believe consumer awareness of these types of exclusions and rules is particularly important. According to a J.D. Power 2021 U.S. Credit Card Satisfaction Study released last summer, misaligned card terms and rewards contribute to declining customer satisfaction with card issuers.

The bottom line is to be sure to review terms of an offer before you apply. Also do the math to figure out how to maximize your rebates.

“Never apply for a card before first reading through the pricing and terms and card offer details and making sure you understand how the card works,” Norris-McKnight says. “Card issuers put this information right on their websites in a format that is long, but clearly stated and pretty easy to read. It will explain any fees, how the rewards program works, when payments are due and what rights you are granting the card issuer in terms of how they can change rewards, etc.”

I think we all would agree that reward cards should be fun and profitable at the same time. Most of all, they should not be a source of stress or frustration.

I hope these tips help you alleviate stress as you seek to profit by simply using a credit card to make everyday purchases. I would love your feedback on how you’ve been able to leverage reward cards to your financial advantage. Who knows, I may include a tip from you in a future article!

Curtis Arnold
CardRatings Founder

Curtis founded Cardratings.com in 1998 and, in so doing, helped pioneer the concept of rating credit cards. He has been a nationally recognized expert in consumer credit for well over 20 years. He is the author of “How You Can Profit from Credit Cards: Using...Read more

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