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I've seen a few responses scattered on the internet that attempt to answer this but they seem to disagree on the matter.

When dealing with cash-back credit cards, they offer different percentages for different categories like gas, groceries, dining, etc.

How do they know which category your purchases fall in? Do they guess based on the merchant? Does the merchant send them totals of each category in each transaction? I can't imagine that the credit card company sees individual items purchased.

(Secondary question but not necessary)In general do all credit cards get this information or is this something that only cash-back/rewards cards get?

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Each merchant is assigned a category, and all the purchases through that merchant fall into that category. If a merchant qualifies for more than one category (e.g.: Costco & Costco Gas), then for different purchases the merchant will use different merchant ID's.

These codes are called "MCC codes", and the merchant fees are also decided based on the category assigned to the merchant (the same merchant with several codes will pay higher fees on some codes than the others).

You can see the purchase categories on your credit card purchases regardless of whether you get rewards or not, this information is usually available through your statement or on-line.

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    Indeed. So when I have a card that gives a 5% rebate at office supply stores, by buying say, a Home Depot gift card there, I still get that 5%. Maybe not worth it on small purchases, but for the $800 grill.... – JTP - Apologise to Monica Sep 17 '11 at 0:05
  • That doesn't fall under a cash advance clause? – jldugger Sep 17 '11 at 14:42
  • @jldugger - no. I bought gift cards in my neighborhood Safeway several times for precisely that reason. – littleadv Sep 17 '11 at 18:02

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