Cre wrote:what are "groceries" to a credit card issuer?
In most cases it's basically the merchant category code applied. The MCC is somehow a merchant tells credit card company the category (if it's grocery, gas, restaurant, etc.).
Cre wrote:If I buy AA batteries for my flashlight at a grocery store like Safeway, is that considered "Groceries" to a bank?
Yes, as long as the MCC is grocery store, which in most cases indeed is when checking out at the lanes.
Cre wrote:Does the bank analyze the line item contents of each receipt, looking for items like spinach, eggs, and orange juice?
Cre wrote:And conversely, if I buy a gallon of milk and a package of lasagna at Target, which is mostly known for being a housewares store, not a grocery store, but some Targets do indeed sell food and groceries... will the bank discern the line item distinctions in the Target transaction as well?
Still depends on what the MCC is. This may even differ between card processing networks, probably how the merchant signs the agreement with the acquirer to assign codes differently between networks.
For Target specifically, American Express classifies it as "Wholesale Stores" while my Visa card recognizes it as grocery store.