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Are there any restrictions on the types of purchases that earn rewards on a credit card?

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Restrictions On Earning Credit Card Rewards
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Many credit cards offer rewards to their users. These rewards include cash back, miles or points for cardholders to redeem on travel, gifts, or everyday perks. But are there any restrictions on what you earn reward points for? It depends. This article will review the most common restrictions on earning reward points, and explore how you can continue to make the most of your rewards card despite the restrictions.

What Are Credit Card Rewards Programs And How Do They Work?

Most credit card users are aware that their cards come with rewards that offer a certain number of points back per dollar spent or a percentage of cash back on purchases. The points earned can typically be used on travel perks, merchandise, groceries, or statement credits (money your bank credits to your account, bringing down your card balance). 

To pay for these rewards, your card issuer allocates a percentage of the transaction fees they earn from merchants and uses it in their rewards program. This is how they can afford to offer incentives to cardholders.

The rewards and cashback you earn will vary widely depending on the Credit Card, with percentage cashback ranging from 1-5% per purchase, and points ranging from X1 to X10 points per dollar spent. With this level of variety, it’s important to double-check the exact rewards program offered by your credit card. Rewards programs also change over time, so ensure you review your terms and conditions to stay up to date.

Types Of Purchases That Generate Rewards

When it comes to earning rewards on your credit card, most purchases are eligible. However, certain spending categories tend to earn higher rewards. The most common categories for rewards include:

Groceries. Sometimes linked to specific grocery stores.
Gas and Gas Station purchases.
Dining.
Travel and travel-related purchases.
Special categories such as specific streaming services or certain stores.

In many cases, credit cards offer sign-up perks that allocate a high number of reward points to your account if you spend a certain amount within the first few months. This offers a good introduction to the benefits of reward points.

Now that you know which purchases most commonly earn reward points, let’s look at some common restrictions on your reward earnings.

Common Restrictions On Earning Rewards

  • Not all credit card purchases come with rewards. Certain restrictions apply, so be sure to keep the limitations in mind so you can plan your spending accordingly. A few limitations are listed below:
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Balance transfers and cash advances. Balance transfers involve moving existing debt from one credit card to another, often with a low or zero-interest introductory period. Cash advances, on the other hand, refer to withdrawing cash from your credit card at an ATM or through checks provided by the card issuer. Since these transactions are not typical purchases, they are often excluded from earning rewards.

Utility bills. Paying electricity, water and internet bills usually doesn’t earn reward points. This is because utility bill payments are often facilitated through third-party payment processors (e.g. not paying the merchants directly), making it difficult for the credit card issuer to track and reward these transactions.

Fees. Fees such as annual fees, late payment fees and foreign transaction fees on your credit card do not earn rewards as they are not considered to be purchases.

Now that we’ve covered some common restrictions, let’s take a closer look at the types of purchases that are specifically excluded from earning rewards.

Excluded Purchases That Do Not Earn Rewards

Beyond the general exclusion categories, there are a few specific purchase types that don’t earn rewards. This will vary based on the card, but in general, the following purchases are excluded:

Gift Cards. Credit card issuers consider gift cards to be a variation of a cash equivalent, or “cash advance” as covered above. Another reason gift cards don’t earn rewards is to prevent cardholders from purchasing gift cards just to earn rewards and then spending their gift cards on top of this.

Specific merchants or business purchases. Certain purchases are deemed potentially risky or inappropriate spending, such as transactions made at casinos or adult entertainment establishments. Therefore credit cards do not offer rewards on these types of purchases.
 
Digital wallet or mobile payment transactions. This includes Apple Pay, Google Pay and Samsung Pay among others. Review your credit card terms to see if this restriction applies to your card.

Special Categories With Limited Rewards

While most credit cards offer rewards on a wide range of purchases, some categories may have limitations or caps on the amount of rewards you can earn. These limitations are often in place to prevent abuse or to align with the card issuer’s business strategy.

For example, a credit card might offer excellent bonus rewards, such as X4 points on dining and entertainment, but only up to $300, after which the rewards rate may drop or revert to the standard earning rate (e.g. X2 points). This is important to keep in mind if you frequently spend in these categories and want to maximize your reward potential.

Similarly, some credit cards may offer rotating categories that change every quarter. For example, in one quarter, the bonus category may be groceries, while in another quarter, it may be gas stations. To get the most out of your credit card rewards, keep an eye on these rotations.

How To Find Out If A Specific Purchase Qualifies For Rewards

Now that you’re aware of the most common reward restrictions, you may be unsure as to whether you’ll earn points or cash back for things you’d like to buy. Luckily, there are a few ways to find out about what purchases will earn you consistent rewards:

  • Check your terms and conditions. While your card’s terms and conditions might be tedious to get through, it’s your most reliable source of information regarding eligible purchases. This document will outline your rewards programs in detail and include any restrictions or exclusions that apply.
  • Contact customer service. If you still can’t find the information you need in the Ts&Cs, call or text your credit card’s customer service. They will likely be able to fill you in on any missing details or particulars and whether a purchase qualifies for rewards.
  • Look online. There are several online forums, blogs and websites dedicated to researching and sharing information on credit cards and their specific reward programs. You are also more likely to learn about other cardholder experiences around a particular rewards program and determine if it’s worth your time and money.

Once you know which purchases will earn you rewards, you can enjoy your shopping without a second thought.

Conclusion

Credit card rewards can be a valuable tool to earn perks and benefits for everyday purchases. While you will typically earn rewards on everyday things such as groceries, dining, and travel purchases, not all purchases come with reward points. Credit cards restrict rewards on certain purchases such as utility bills, bank fees, gift cards and anything they deem risky or unnecessary.

Knowing which restrictions apply to your rewards can help you strategically spend and maximize the bonuses your card offers, and with careful planning, you can unlock the full potential of your credit card and its perks.

Author Bio

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Mohamed Konate

Mohamed Konate is a personal finance expert, blogger, and marketing consultant based out of Toronto. He is a former financial services professional who worked for many years at major Canadian financial institutions where he managed the marketing strategy around various financial products ranging from credit cards to lines of credit. Mohamed is passionate about personal finance and holds a Bachelor in Business Administration from the University of Quebec (Montreal) and a Master in International Business from the University of Sherbrooke (Quebec).He is also the author of the Canadian Credit Card Guidebook. Read his full author bio

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