Not all 'digital wallets' give you bonus reward points

Merchant codes are key to award earning


Cashing In
Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for

Ask a question.

'Cashing In' archive

Question Dear Cashing In,
I'm considering applying for the American Express SimplyCash business card. One of the things I like about it is it gives you bonus points if you spend money in certain categories. But in some of the fine print about the card, it said that purchases made with digital wallets are ineligible for the bonus points. Why is that? Also, I have Apple Pay on my iPhone. Would it apply to that? -- Yvonne

Answer Dear Yvonne,
The key to answering your question is understanding how banks process different kinds of charges. When it comes to rewards, this question is important -- not just for your case, but for anybody with a card that awards bonuses for spending in certain categories. A lot of cards do that.

Every merchant who accepts credit cards has what's known as a merchant category code, a number that card networks assign to help identify transactions. Your corner grocery store has a code that identifies it as a grocery store. Your nearby gas station has a code that identifies it as a gas station. And so on. 

The codes have a number of uses. They can let banks or card networks restrict certain transactions, such as gambling. And they can help banks identify fraud -- if your card is used at a merchant you don't normally frequent, for instance, the MCC can help raise a red flag.

Banks can also use the codes for reward purposes -- to identify transactions that might earn extra miles or points. If you read the fine print on this type of card, you'll see that the bonus points are tied to the merchant category codes. For instance, the Barclaycard Rewards MasterCard (no annual fee) gives double rewards on gas, groceries and utilities, and its fine print says that purchases in those categories "must be submitted by eligible merchants using the merchant category codes for purchases in this category ... Purchases made at merchants that do not process transactions under these terms or that use incorrect merchant category codes will not qualify." 

This background is necessary to understand how to answer your question on digital wallets, Yvonne. The key issue is what is the merchant category code on the transaction? If the card says you receive bonus points for charges at supermarkets, and the code indicates you have a transaction at a supermarket, you receive the bonus points.

However, with some digital wallets, the category code is the company that runs the digital wallet. For instance, if you buy something through PayPal, the transaction shows up on your credit card statement as a transaction with PayPal -- not with the merchant that PayPal sends the money to. 

In a Q&A on the American Express site, it explicitly says that you cannot earn additional rewards if the purchase uses "a third-party payment account or digital wallet (e.g. PayPal, Google Wallet)."

I asked American Express spokeswoman Melanie Backs why this is, and she confirmed: "It has to do with how the merchant code is communicated. American Express needs to have that transaction data in order to know which transactions are eligible for bonuses." 

However, Apple Pay operates differently, and charges using it should be eligible for bonus points. When you use Apple Pay at a merchant, your iPhone transmits your credit card information to the merchant, and the transaction is directly with the merchant, not with Apple. American Express' website explicitly says: "You receive all of the same rewards, security and benefits of your American Express Card when you use it with Apple Pay."

So if the only digital wallet you'll be using is Apple Pay, you should have no worries about bonus rewards points with American Express.

See related: Apple Pay vs. Google Wallet vs. Softcard -- a mobile wallet review, Strategies to maximize cash-back rewardsBest way to track all those reward points?

Meet's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday,'s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Published: February 10, 2015

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Follow Us

Updated: 10-24-2016

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.