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Review Purchase Categories for Credit Card Rewards

One of the reasons why we put 99.9% of our spending on credit cards are for the rewards. A few percent back in cash or reward points [3] isn’t going to make anyone rich, but it’s a little better than getting nothing back if you are responsible. At the moment we only use two credit cards so keeping the bonus rewards categories in order is fairly simple, but there was a time when I used as many as four cards.

One important lesson I learned early on was that not all purchases are categorized as you would intuitively expect. It’s important to check your statement to find out whether it’s being coded how you expect and change which card you use accordingly. Let me explain with a few examples.
With your purchases, don’t assume that your favorite restaurant is categorized as a restaurant. Review your statement and each purchases’ “Merchant Category” to confirm it’s marked the way you think it is. (Citi calls it a Merchant Category, American Express and Discover call it a Category, you get the idea)

For example, on any Citi Card statement, each transaction breakdown will include the Merchant Category. You may be surprised at how certain purchases are coded (the merchant elects this). For example, Amazon.com is considered a bookstore by Citi.

A prime example of ambiguity is if you dine in a hotel restaurant. Depending on the hotel, your purchase may be considered a “lodging” purchase or a “restaurant” purchase. We recently attended a wedding at the Renaissance Hotel and I bought some drinks at the bar. If it were a standalone bar, I’m almost certain the purchase would be considered a “restaurant/eating place” purchase. It, however, was considered a “lodging” purchase on my Citi card because the Renaissance Hotel charged my card. Now that I’m aware of this, I’ll use a card that gives me higher rewards on lodging, even though I’m using it in a restaurant.

In these one-off situations, it’s not important to know how the purchase will be coded. If you often find yourself in a hotel bar, find out how the purchase will be coded (by reviewing your statements after the fact) and you can earn a little extra cash back.

Take a look at your statement, surprised by any of the categories?