One of the best features of credit cards is that they often offer rewards for using them.
Whether it be cash back, rewards points, or airline miles, these rewards can be worth a lot.
Earning them from your everyday purchases is like saving money on every purchase you make.
Different credit cards offer different rewards at various rates. Many credit cards offer bonus rates for using them at certain types of stores.
Smart card users who have multiple cards will aim to maximize the rewards they earn by using different cards at different stores to maximize their earnings.
The problem is that carrying all those cards can be annoying. Mobile payment options like Apple Pay and Google Pay help you avoid having an overstuffed wallet, but will you still earn rewards when using mobile payment solutions?
Card Issuers Assure Rewards are Still Earned
The good news is that you will earn rewards on credit card purchases, even if you use a mobile payment solution.
Many card issuers guarantee this in their fine print.
- Bank of America promises “you'll still get all the same great benefits and rewards you may already enjoy with your cards including our $0 Liability Guarantee.”
- Capital One's Google Pay FAQ states: "If you normally earn rewards like miles or cash back on purchases, with your Capital One card, you will continue to earn those rewards with Google Play purchases."
- In its FAQ page, American Express states “Yes, you receive all of the same rewards, security, and benefits of your American Express Card when you use it with Apple Pay.”
- Discover pledges that “you’ll earn with every purchase (and) as always, your rewards never expire.”
If you look at the fine print of any credit card, you’ll find similar assurances.
You can feel free to add credit cards to a mobile wallet and make payments through your phone. You’ll be able to earn rewards just the same.
How Merchant Codes Work
Many credit cards offer different rewards rates based on where you are making your purchase.
A credit card may offer 6% cash back on purchases made at grocery stores.
However, you only get 1% back on purchases made at other stores.
How does a credit card issuer know which rewards rate to apply for each transaction?
The answer is merchant categorization codes (MCCs).
Every merchant that accepts credit card payments has its own merchant category code.
This code is used by credit card processing networks to determine what type of business is run by the merchant.
On the merchant’s side, this code determines the fees that they will pay for accepting card payments.
On the consumer side, this code determines what rewards category that your purchase falls under.
Card networks may categorize the same stores differently
This seems relatively simple, but it can get complicated quickly. Visa, MasterCard, American Express, and Discover all operate their own payment networks. Each network assigns merchant category codes (MCCs) to merchants.
That means that different networks might categorize the same store differently.
Discover could treat a merchant as a school supply store while Visa and MasterCard code it as a bookstore. American Express might then categorize it as a home supply store.
Usually, however, the card networks use the same MCCs for the same merchant.
What’s worse is different locations for the same chain of stores might be categorized differently. One example is Walmart.
Visa categorizes different Walmarts differently. Some will show up as grocery stores while others will be coded as discount stores.
Assuming a card uses the same MCCs for those stores, one Walmart might give you 6% cash back on your card while another gives you 1%.
This means that knowing the MCC for a store you’re shopping at is important if you want to maximize your earnings.
If you make a payment expecting the higher rewards rate but get a lower rate, it’s easy to feel cheated.
It's in the fine print
Credit card companies know this and include wording in their fine print to avoid this.
For example, Chase states:
“Please note we make every effort to include all relevant merchant codes in our rewards categories.
However, even though a merchant or some of the items that it sells may appear to fit within a rewards category, the merchant may not have a merchant code in that category.
When this occurs, purchases with that merchant won’t qualify for rewards offers on purchases in that category.”
How to Avoid Missing Out on Rewards
Use Visa’s Supplier Locator tool
Visa is the only of the major payment networks to offer a public directory of merchants that accept its cards, along with their MCCs.
In most cases, the other card issuers will have similar MCCs. Before you make a purchase, look up the MCC for the store in Visa’s Supplier Locator Tool.
You can then use that information to choose the correct credit card.
You can search the database by merchant to find the MCC of the store you’re at, or just do a search for stores with a specific MCC if you want to use a certain card.
Remember, where you buy the product is what matters, not the product that you buy.
If you go to a grocery store to stock up on greeting cards and cleaning supplies, it will count as grocery spending to the card issuer.
Make a test purchase
If you want to be completely certain of the MCC of a store you’re at, try making a small purchase on the card you plan to use to test things out.
Once you make the purchase, you can use your phone to log into your account and check the pending charge.
The pending charge will include the exact category that is assigned to the merchant, so you can know what rewards rate you’ll get.
If you don’t have the luxury of trying either of the above tips, don’t be afraid to ask someone.
A cashier or store manager might know the MCC for their store, letting you choose the right card for your purchase.
You probably aren’t the first person to ask, and the worst case is that they don’t know the answer, so asking cannot hurt.
Best Credit Cards for Rewards on Mobile Payments
You can use mobile payments almost anywhere. They’re very popular at drug stores, supermarkets, restaurants, and department stores, and adoption is increasing all the time.
You should add all of your cards to your mobile payment wallet if you can. If you can’t focus on adding the cards you don’t use regularly.
You should also add cards that have rotating bonus categories.
Many cards will offer significantly higher rewards for certain categories, with the categories changing every three months.
Using these cards for everyday purchases doesn’t make much sense, but you can earn a lot when you use them in the bonus category.
Adding them to a mobile wallet so you don’t have to carry them around can make using them a lot easier.
What to Look for in a Good Rewards Card
There are a few features to look for in a rewards card.
Of course, the most important thing to look at is the earning rate offered by the card.
If one card offers 1.5% back on purchases and another offers 2% back on the same purchases, why would you use the 1.5% back card?
Many cards offer a flat 1% on all purchases, but it’s easy to earn much more.
To earn a lot of rewards, you’ll have to take advantage of cards that offering bonus rewards for category spending. These cards can give you 5% or more in rewards when you use them at certain merchants.
Look for rewards cards with bonus categories that you do a lot of spending in.
If you go out to eat a lot, a card that offers bonus rewards at restaurants could offer you a lot of rewards.
If you never go out to eat, that same card could be lackluster.
Type of rewards
Some cards offer cash back. Others offer rewards points. Still, others give you miles on certain airlines.
Find a card that gives you the type of rewards that you want. If you don’t travel a lot, you probably want to avoid cards that give miles as rewards.
If you want to keep things simple and avoid figuring out the best redemptions for rewards points, focus on cash back cards.
While it isn’t the most important thing to look at, the sign-up bonus can help you decide between two relatively equal cards.
Many rewards cards, especially premium ones, offer huge sign-up bonuses. If you spend the requisite amount within the first few months of having the card, you can get hundreds of dollars in rewards.
If you find two cards that offer similar rewards on an ongoing basis, the sign-up bonus can help you choose between them.
Having a lot of different credit cards means you can earn the most rewards by taking advantage of bonus spending categories.
Use a mobile payment solution like Apply Pay or Google Pay to avoid carrying around all the cards while still being able to use them.