When you don’t get the credit card rewards you expected

I had the perfect plan. I successfully maximized the rotating quarterly bonus categories on my Chase Freedom Flex®* card each of the first three quarters of the year, and I had the fourth quarter set up so nicely. From Oct. 1 through Dec. 31, 2024, the Freedom Flex is awarding 5 percent cash back on purchases made via PayPal as well as at McDonald’s, pet shops and veterinary services, and select charitable donations (activation is required and the 5 percent rate applies on up to $1,500 in eligible spending — after that, cardholders earn 1 percent cash back).

My plan was to purchase plane tickets for my family’s February vacation using PayPal, which would have accounted for more than 80 percent of the quarterly spending limit in a single transaction. The best payout I can get on airline tickets using one of my other credit cards is just 2 percent cash back. This is a large transaction we would have made anyway, so taking advantage of the Freedom Flex’s PayPal promotion seemed like an ideal situation. I planned to use PayPal for enough holiday shopping to eat up the remaining $286.08 of the quarterly limit, and I was going to celebrate maxing out the entire year’s worth of bonus categories for the first time since signing up for the card in 2012.

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Of course, you know the saying about best-laid plans. I made the $1,213.92 purchase on Delta Air Lines’ website using PayPal (with my Freedom Flex listed as the underlying source of funds). When I reviewed my Chase statement a few days later, I saw that I was only given the standard 1 percent cash back rate, not the 5 percent promotional rate. That meant just $12.14 in rewards, not the $60.70 I expected.

I called Chase to plead my case and was told that the transaction was not made via PayPal and would, therefore, only receive 1 percent cash back instead of 5 percent back.

“But the transaction was made via PayPal,” I protested. I had a confirmation email from PayPal along with a PayPal transaction confirmation code.

The Chase representative told me that they would investigate, and I could expect a letter with their decision within about two weeks. When the letter showed up, it rather succinctly told me that I would not be getting my 5 percent cash back because my transaction was not made via PayPal.

But no, really, it was!

Why didn’t I earn the rewards I expected?

My best guess is that there was some sort of back-end mix-up. The PayPal hand-off was botched, basically, or at least not clearcut. The transaction showed up as a direct purchase, not one made via the intermediary. I have used my Freedom Flex for other PayPal transactions this quarter and all of them received the 5 percent payout without any issues.

On rare occasions, I’ve had trouble with rewards earning rates on other cards. For example, I used to get 3 percent cash back at restaurants with the Wells Fargo Propel Card (may it rest in peace). I remember flagging a transaction that didn’t get the expected 3 percent back, and I was told it didn’t qualify as a restaurant purchase because the establishment was classified as a bakery.

Merchant category codes affect rewards earning

Card networks assign every business a merchant category code (MCC). Sometimes the semantics don’t match what you expect (as in my example of a restaurant coding as a bakery). It doesn’t matter what you buy, it matters how the store (or even the specific section of a store) is coded. For example, many cardholders are surprised to learn that groceries purchased at Walmart don’t tend to qualify for grocery rewards card categories since Walmart is classified as a discount store, not a grocery store (even though it’s the nation’s largest grocer).

Ironically, my family received 5 percent cash back from a Freedom Flex transaction over the summer that should have paid out at a lower amount. A T.G.I. Friday’s restaurant in the Dallas Fort Worth International Airport oddly coded as a gas station purchase, and gas stations were among the Freedom Flex’s 5 percent categories from July through September (dining purchases usually earn 3 percent cash back on the card).

Surprises occur, and occasionally they’re in the cardholder’s favor. I’ve both benefited and missed out over the years.

The bottom line

Ultimately, credit card rewards distributions are out of our control. The way the transaction rings up is usually final, and even if it walks like a duck and quacks like a duck (er, PayPal transaction), sometimes the merchant category code says it’s a gas station or a bakery and there’s nothing much we can do about it.

I was annoyed by my PayPal/airline tickets mishap, but at least it happened early enough in the quarter that I have time to recover. Between holiday shopping and other household purchases, I’m close to halfway to the $1,500 maximum with a little less than a month remaining in the quarter. I’m actually thinking of buying more airline tickets for a different trip using PayPal, but I’ll only try that if we use an airline other than Delta, since that purchase didn’t work out properly the first time around.

Even though the Paypal purchase rewards didn’t resolve in my favor, I’m still glad I noticed and appealed. It’s a good idea to keep a close eye on your rewards payouts. While you might not be able to change the card issuer’s mind, it’s best to know sooner rather than later if a merchant you frequent isn’t qualifying for the credit card rewards you expect.

The information about the Chase Freedom Flex® has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.