7 Ways You Lose Out On Credit Card Rewards

[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

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