Using Merchant Category Codes to Maximize Bonuses

Sep 16, 2014

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Today TPG Contributor Nick Ewen explains merchant category codes, and how understanding them can help you get the most out of category bonuses offered by your credit cards.

TPG often preaches the importance of maximizing the points and miles you earn not only in your travels, but also from your day to day spending. If, for example, you spend $25,000 annually on credit cards, the difference between earning 1 point per dollar or 2 could be the difference between traveling for free by yourself or bringing a friend along for the trip. Fortunately, credit card issuers make earning bonus points very easy with category spending bonuses, which may offer double points on dining (like the Chase Sapphire Preferred), triple points on airfare (like the American Express® Gold Card), or 5x points at office supply stores (like the Chase Ink Plus and Ink Bold).

The key to maximizing those category bonuses is identifying how merchants are categorized in the first place. Many cases are clear (e.g., Staples is an office supply store), but others are not. Today I want to explore the world of Merchant Category Codes (or MCCs) to give you a better sense of how the different card issuers (MasterCard, Visa, and American Express) classify their merchants, and how you can use that information to improve your earnings wherever you shop.

If you want to earn full bonus points on purchases, you'll have to check (or hope) that the businesses MCC is coded properly!
If you want to earn full bonus points on purchases, you’ll have to check (or hope) that the businesses MCC is coded properly! (Image courtesy of Shutterstock)

Let’s begin with a quick overview of these codes. Unsurprisingly, one of the main purposes of these codes relates to taxes. Many non-profits are tax-exempt, so they are classified with a corresponding MCC to reflect this. Merchant coding can also keep businesses honest when it comes to tax deductions. If a company claims a $3000 tax deduction on office equipment and an audit reveals that their purchase actually came from a “Veterinary Services” merchant (MCC 0742 according to Visa, by the way), that would be an indication of tax fraud. There are many sites with more information on the ins and outs of MCCs and taxation, so if you’re struggling with insomnia, feel free to check out IRS Revenue Procedure 2004-43 here.

However, beyond the fascinating implications of tax law, MCCs play a large role in determining what bonuses we earn on purchases with various cards. In order to earn bonus points on a specific transaction, the merchant must be classified in an eligible category. It doesn’t matter if you purchased a meal; if your card classifies that business as a department store, you’ll earn points based on that MCC.

Chances are pretty good that you’ve seen some version of merchant codes before, as many credit cards provide this information within your online account summary. However, they’ll do this in a variety of different ways. Here’s a screen shot of account activity on my Chase Sapphire Preferred:

Chase Sapphire Preferred activity

Here’s a similar screen shot from my Hilton HHonors American Express:

Hilton Amex

Finally, here’s one from my Citi Hilton Reserve Visa:

Citi Hilton Reserve

As you can see, each card formats the information in a slightly different fashion. Fortunately, all of them provide enough information for you to double-check how the issuer codes a specific purchase.

This can also be a good way for you to make sure that your card has awarded you the proper points. The Chase summary above makes it easy, since you can see exactly how many points are awarded for each transaction. However, the Citi Hilton doesn’t specify bonus points for my Hilton purchases, and my Amex doesn’t indicate a bonus for grocery stores. Remember that card issuers aren’t perfect; last year I actually caught the Citi Hilton Reserve failing to award me extra points despite a MCC that should have triggered a bonus.

My wife and I spend 6 nights at the incredible Hilton Seychelles Labriz. While we were on an award stay, we had some significant spend on-property, and I paid for it using my Citi Hilton Reserve to avoid foreign transaction fees and earn 10 points/$. However, here is what posted to my statement:

Hilton Reserve activity

Notice that despite charging over $2500, I only earned 160 points as a category bonus. Fortunately, a quick call to Hilton was enough to get my points credited properly, and I learned to check my statements in the future to make sure bonus points are awarded.

So how do you begin identifying how your specific card issuer classifies a merchant? There are a few strategies. A good starting point is this fairly user-friendly merchant coding search tool. This site allows you to enter an address or zip code and search for specific businesses by name, industry, or category. While the site is operated by Visa and pertains only to their merchants, credit card issuers tend to categorize businesses similarly, so the results here are fairly reliable.

There are certainly exceptions though. For example, when I search for grocery stores on the Visa Supplier website, it claims that the WalMart Supercenter near my wife’s office is one. However, I know from experience using my Hilton HHonors Amex that it is not coded as a grocery store according to American Express:

Screen Shot 2014-09-11 at 6.35.21 PM

Another option is to simply make a purchase and see how that transaction shows up in your online account. For example, from my Chase statement above, you can see that ExpertFlyer is NOT classified in any “Travel” category, which I honestly didn’t realize until I started working on this post. As a result, it isn’t eligible for double points, though my Uber ride to LaGuardia last Monday was classified as travel and did earn me that same bonus. If you’re planning to make a large purchase and want to make sure it will be coded in a bonus category, you could first try making a small, refundable purchase as a test.

So how can you utilize this information to help with your points & miles accrual? Here are some suggestions to either maximize your earnings or avoid pitfalls:

Check hotel restaurants and other on-property merchants. When you’re a guest at a hotel, it makes sense to charge all purchases to your room in order to earn the maximum number of points with that stay. However, if you’re just dining or visiting a spa, check to see if that vendor is coded as part of the hotel or as a different type of establishment. For example, here’s how the spa at the JW Marriott in Miami is classified by Visa:

Visa MCC lookupIf you charged an expensive spa treatment to your Marriott Rewards Premier card, it would be disappointing to have it post as a “Barber/Beauty Shop/Supplies” purchase and only earn one point per dollar, instead of the five points per dollar you’d earn if it posted as a Marriott purchase.

Check gas stations. While it may not seem intuitive, some gas stations actually have different coding for their pumps and the convenience stores attached to them. An example of this is a Chevron right off the Turnpike near my hometown. When you search on the Visa Supplier site, the gas station comes up as “Fuel” while the store is categorized as “Grocery.” This can be especially helpful for the rest of this month, as the Chase Freedom is offering 5x points on fuel purchases. To maximize points, you would want to use the Freedom at the pump, but another card (like the Amex EveryDay Preferred) inside.

Check restaurants within gas stations. Last month, I played golf with a buddy of mine, and we stopped at Dunkin’ Donuts on our way to the course. This particular location was inside a gas station, and in addition to buying breakfast and coffee, I also purchased a bottle of water and some snacks for the round. I paid for the snacks with my Chase Freedom and my Dunkin’ Donuts purchase with my Chase Sapphire Preferred. Lo and behold, when I saw my online statement, I had received 5x points on the gas station purchase and double points on the Dunkin’ Donuts purchase. However, some fast food joints attached to gas stations may ring up as “Fuel.” Again, the Visa Supplier tool referenced above is a good place to start, but paying for a small purchase is really the only way to know for sure how a merchant is classified.

Check stores like Target and WalMart. These stores (and others like them) offer a huge variety of items and generally low prices, yet they aren’t discussed much when it comes to category bonuses. Here’s how Visa classifies three different Target stores within an hour of my house:
Visa MCC
Remember that just because they’re classified this way on Visa’s site doesn’t mean that they’ll fall within the same MCC when you use an American Express or MasterCard. Still, a card that offers a bonus on grocery purchases could be a good option.

At the end of the day, these classifications may not make a huge difference, but if you have a merchant with whom you regularly do business, it’s probably a good idea to verify their MCC to make sure that you’re using the best card possible to maximize your points earning.

What other tips do you have to make use of category bonuses? Please share your thoughts and ideas in the comments section below!

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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