How Merchant Category Codes Work

Jordann Brown
by Jordann Brown February 21, 2018 / No Comments

The best travel credit cards in Canada and the best cash back credit cards have been gaining popularity because they allow you to earn benefits for spending money, either in the form of a percentage of your purchases back, or rewards points for each dollar spent – and who doesn’t like free money?

In fact, there are so many rewards and cash back credit cards available in Canada that it’s easy to find one to suit your unique spending habits. For example, some rewards credit cards let you earn the highest rewards when you spend on travel, while others reward you for spending in categories like groceries or transportation.

But how does your credit card provider differentiate travel purchases from purchases made at the grocery store? Thanks to a classification system called merchant category codes, your purchases are easily sorted into various categories, and your rewards are allocated automatically. Keep reading to find out how merchant category codes work and what to watch out for on your credit card statement.

What is a merchant category code?

Put simply: a merchant category code is a four-digit number used to classify vendors by what they sell or what service they provide. Almost every major business in Canada has a merchant category code assigned to them. Merchant category codes are used primarily by credit card companies to determine which of your purchases qualify for cash back rewards or travel rewards points.

While there are dozens of merchant category codes (here is a full list), most credit cards reward are based on categories, not specific codes. Merchant codes are lumped into each category, and these categories determine how much cash back or credit card rewards you’ll earn.

Some common categories are:

  • Gas
  • Groceries
  • Bills
  • Entertainment
  • Travel
  • Pharmacy
  • Restaurants

Cash back credit cards will offer certain cash back multipliers that vary depending on your spending categories. For example, the Scotia Momentum Visa Infinite credit card offers the following multipliers:

  • 4% cash back on gas and groceries
  • 2% cash back at the pharmacy and on bills
  • 1% cash back on everything else

Whenever you shop at a store with a merchant code categorized as groceries, you’ll earn 4% cash back, no matter what you purchase. If you’re smart about your spending and which credit cards you use when at certain merchants, you can really maximize your rewards.

Scotia Momentum VISA Infinite


  • Annual fee: $99 (waived for first year for new accounts opened until October 31, 2018)
  • Welcome bonus: earn 5% cash back on your first $3,000 in purchases for the first three months (up to $150 cash back)
  • Earn 4% cash back on gas and groceries, 2% cash back on drug store purchases and recurring bill payments, and 1% cash back on all other purchases
  • Receive VISA Infinite benefits

The same goes for rewards credit cards, but in this case, you’ll earn points, not percentages. For example, the BMO World Elite Mastercard rewards your spending using the following multipliers:

  • Three points per dollar spent on travel, restaurants, and entertainment
  • Two points per dollar spent on bills, gas, groceries, pharmacy, and all other purchases

Keep in mind that you also need to consider the points you’re earning. If you don’t like to travel, there’s no point in having one of the best travel credit cards in Canada. That being said, the BMO World Elite Mastercard is a popular choice.

BMO World Elite MasterCard


  • Annual fee: $150 (waived for first year)
  • Earn 3 BMO Rewards points per dollar on travel, dining and entertainment purchases; 2 points per dollar on everything else
  • Earn 35,000 bonus points (value: $250) after you spend $1,000 in the first 3 months
  • VIP airport lounge access with the included Priority Pass membership, plus 4 complimentary passes per year

Not what you buy but where you buy

If you’ve been paying attention, you’ve noticed that it’s not the individual items you buy that determine your rewards – it’s the vendor itself. If a vendor is categorized as a grocery store, it doesn’t matter what you buy there – your purchase is categorized as a grocery purchase. These categorizations can either be a benefit or a detriment to your rewards strategy, depending on which credit card you use.

For example, if you have a credit card that rewards grocery purchases more heavily than purchases from the pharmacy, you may want to shift your regular drug store purchases to the pharmacy section of your local grocery store.

Quirky categories

It’s important to pay attention to which stores you shop at and how they are categorized because there are a few anomalies. For example, the Walmart Supercenter stores are considered grocery stores, but standard format Walmart’s are not. While many Canadians do a significant amount of grocery shopping at Costco, this store is not considered a grocery store, so if you do the majority of your grocery shopping there, you may not earn as much cash back as you’d think.

Merchant codes and traveling

While it’s easy to earn rewards when spending inside Canada, some credit card issuers do not offer rewards on purchases outside of the country. If a big part of your budget is travel spending, make sure your purchases outside on foreign soil are eligible for rewards or cash back. This type of restriction is included in your credit card terms and conditions agreement and should be easy to verify.

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