Home > Credit Cards > 7 Ways You Lose Out On Credit Card Rewards

Comments 1 Comment

[UPDATE: Some offers mentioned below have expired and/or are no longer available on our site. You can view the current offers from our partners in our credit card marketplace. DISCLOSURE: Cards from our partners are mentioned below.]

The easiest way to rack up the most credit card rewards from spending is to take advantage of cards that offer bonuses for purchases from certain categories of merchants. These cards can offer anywhere from double rewards to 6x the points, miles, and cash back. For example, the Chase Ink Bold and Ink Plus cards offer five Ultimate Rewards points per dollar spent on office supplies and telecommunications services.

Yet, as exciting as it is to imagine your rewards multiplying, there is often a catch. Here are 7 ways that cardholders will fail to earn their bonus rewards:

1. Foreign purchases

Rent a car on your next trip to Europe, and it may cost you over $100 to fill it up. Worse, you can’t count on earning extra rewards for purchases at gas stations. The problem is that most reward cards exclude foreign purchases from bonus categories of spending. For example, the American Express Premier Rewards Gold offers double Membership Rewards points at gas stations and supermarkets, but only within the United States.

2. Merchants may not be properly categorized

Transactions are coded by merchants to indicate which type of retailer they are, which is how bonus rewards are determined. But this process is not perfect. For instance, Chase warns cardholders that it “makes every effort to include all relevant merchant codes in its listed categories. However, even though a merchant or the items that it sells may appear to fit within a listed category, the merchant may not have a merchant code that falls within that category. Therefore, purchases with that merchant will not qualify for the stated rewards offer on category purchases.”

But the real issue is that cardholders are rarely shown which merchants fall into which categories, and which of their purchases qualified for a bonus. Thankfully, Visa offers its Supplier Locator Search tool that allows anyone to look up the merchant category of a particular retailer, just to be sure.

3. Cardholders waste money chasing bonuses

As great as it is to earn 5% cash back on a purchase, some cardholders may be tempted to spend more in order to earn more rewards. Always remember that 5% cash back on an unnecessary purchase is not a reward, but a loss of 95% of the purchase price.

4. Bonus caps

When credit card issuers offer bonuses of above 3%, the costs of the rewards given will invariably exceed the merchant fees they earned. As a result, most banks will place a cap on the total awards received. For example, the American Express Blue Cash Preferred card offers an amazing 6% cash back for purchases from grocery stores (in the United States). Nevertheless, it limits bonuses to the first $6,000 spent each year (then 1% back), or only $360 in bonuses. After that cap is reached, the standard 1% cash back applies.

5. Confusing rotating bonus categories

Several of the leading cash back reward credit cards offer 5% cash back at certain merchants, but these offers change each quarter. Cards with these programs include Chase Freedom, Discover it Cash Back, and Citi Dividend Platinum Select. Cardholders must remember to log on to their accounts online and ‘activate’ their bonus categories, or they will not be eligible to receive the bonus for eligible purchases. Also, the Chase Freedom and Discover it Cash Back card limits the amount of cash back received to the first $1,500 of eligible purchases each quarter, or $75 in rewards. Citi’s Dividend Platinum Select has a similar, $6,000 annual limit on purchases that qualify for 5% cash back. Unfortunately, these limits may prompt cardholders to rush to make unnecessary purchases before they they lose their bonus.

6. Bonus categories may exclude less expensive options

Even when a purchase is necessary, cardholders may choose a more expensive retailer in order to qualify for a bonus. For instance, American Express offers several cards that feature bonus levels of cash back for gasoline purchases, but only at “stand alone” gas stations. This excludes gas purchased from fuel centers at warehouse stores and supermarkets, which may offer discounts that are greater than any additional credit card rewards offered.

7. Annual fees

The reward cards with the best bonus offers will typically have the highest annual fees. These fees can be worth it for those who spend heavily in bonus categories, but they always reduce the value of the rewards received.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team