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Merchants charge more to make up for the thinner margins on credit card transactions.

As for what cards have higher payout... here's a list I made so I know which card to use where:

# Amazon * 3x amazon.com * 2x gas * 2x restaurant * 2x office supply * 2x drugstore

# Chase Sapphire * 2x travel * 2x dining * travel bonus booked via ultimate rewards * no intl fees

# Discover (open road - apparently no longer offered?) * 2x gas * 2x restaurant

# Citi Forward * 5x restaurants * 5x entertainment * 1 point ~ $0.008

# Virgin * 3x virginamerica.com * 1 point ~ $0.024 towards flights

I also have an AmEx (blue) which has utterly crap rewards. I use it only for Costco and some electronics to get the extended warranty they provide. Other AmEx cards have much better payout.

So basically I use the Citi Forward any time I go out to eat, bars, bookstores, etc. While the points are worth only about 80% of most points, the multiplier more than makes up for it. Incidentally because Amazon is classified as a bookstore, it actually has a better return than the Chase Amazon.com card. If I'm buying anything that doesn't have an actual multiplier (which is fairly rare; most of my purchases are restaurants and Amazon) I put it on the virgin card since the points are worth over 2x what other points are worth - typical of most airline cards.



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