What are Merchant Category Codes (MCC)?

MCC stands for Merchant Category Codes. MCC codes are four-digit numbers used to categorize businesses in specific industries. This code is used by all major credit card networks – Visa, Master Card, American Express, and Discover. The merchant category code may be different per credit card company, but for each one, they help maintain a uniform system for opening merchant accounts.

What Are MCC Codes Used For?

MCC codes will appear on a merchant statement as a category. Additionally, banks use them to monitor changes in consumer purchasing habits. They help aggregate data and track trends in various verticals.

Major credit card companies and banks investigate if they need to more closely monitor certain business types. For example, as the nutraceutical market grew, banks saw higher cases of chargebacks and were able to respond by classifying these companies as high-risk.

Who Assigns Your MCC Code?

An MCC code is selected by your payment processing company. At an early stage of the application process, your account broker picks the most accurate code that reflects your business or service. This code is verified by the ISO before the underwriting process.

ISO's sometimes try to game the system by misrepresenting a code and classifying your company as a different business. In turn, they will open a merchant account fast, but as a result, they may get in trouble down the line. For example, if a company is selling CBD online, there are specific regulations they will have to follow. Opening a CBD merchant account can help manage these unique requirements efficiently.

How to Find Your MCC Code

To find your MCC code, you'll want to know which card network you are working with. As mentioned before, there are different MCC codes for each network. However, the IRS has its own list of MCC codes that you can use to categorize your business.

The type of business entity is determined when the merchant account initially opens. From there, a business is locked into the MCC code unless their business changes substantially, in which case, they may need to open a new merchant account altogether.

Why Are MCC Codes Important?

MCC codes play a vital role in determining how purchases are categorized for both merchants and consumers. For businesses, understanding these codes can help in identifying whether they qualify for bonus rewards or cashback programs offered by credit card issuers. Especially if they operate in niche markets like the ecommerce merchant account providers.

Moreover, MCC codes help credit card issuers calculate interchange fees and manage the risk associated with high-risk businesses. For certain business types, these fees may be higher due to increased risks, such as those involving a high volume of chargebacks or fraud.

Understanding A High-Risk Merchant Category Code

Certain business types, like online gaming or nutraceutical sales, or those needing a high-risk merchant account, fall under high-risk MCC categories due to their higher chargeback ratios or compliance concerns. Payment processors often scrutinize these businesses more closely and may charge higher fees or impose stricter requirements for merchant accounts in these industries.

Examples of Visa MCC Codes

Grocery Stores (5411): Purchases made at grocery stores typically earn bonus rewards on many credit cards.
Fast Food Restaurants (5814): Many credit cards offer higher cashback percentages for dining out or fast food purchases.
Airlines (3000–3299): Airline tickets and services are categorized under specific MCCs that often qualify for travel-related rewards.
Gambling Establishments (7995): Casinos and online gambling platforms fall under high-risk MCC categories.
Office Supplies (5111): Purchases at office supply stores, often qualifying for cashback on business expense credit cards.
Lottery Tickets (7995): Retailers selling lottery tickets often have their purchases categorized under this code.
Alcoholic Beverages (5813): Retailers of alcoholic beverages, such as liquor stores, fall under this code, often offering bonus rewards depending on the credit card.
Home Furnishings (5712): Furniture and home decor stores are categorized under this MCC, often affecting the types of rewards consumers can earn for large purchases.
Tourist Attractions (7991): Tickets for theme parks, museums, and other attractions fall under this code.
Digital Goods (5815): Companies providing online gaming, media, and other digital services are categorized here.
Central Reservation Services (7011): Companies that provide central reservation systems for travel bookings.
Drug Stores (5912): Pharmacies and drug stores are categorized under this MCC, allowing consumers to earn rewards or cashback based on their purchases.
Air Carriers (4511): Major airlines and air travel services fall into this MCC category.
Personal Finance Services (6012): Services such as bill payment and financial institutions fall under this MCC, often impacting fee structures and consumer rewards.
Ancillary Services (5541): Services that provide supplementary support to businesses, such as printing or mailing, are categorized here.
Foreign Currency (6051): Currency exchange services, often found at airports or travel agencies, are categorized under this MCC.

How MCC Codes Affect Interchange Fees

Interchange fees, which are paid by merchants to process credit card transactions, can vary depending on the MCC code. Higher-risk businesses typically face higher fees to offset the potential for fraud or chargebacks. For example, payment processors may charge more for transactions involving certain industries like gambling or nutraceuticals.

Bonus Rewards and MCC Codes

For credit cardholders, MCC codes can be used to maximize rewards programs. Knowing which businesses fall under certain MCC categories helps consumers identify where they can earn extra cashback or bonus rewards. For example, some credit cards offer extra points for dining at fast food restaurants or purchasing from grocery stores, while others provide more rewards for travel or entertainment expenses.

Why Business Owners Should Care About MCC Codes

For business owners, the MCC code assigned to their merchant account affects more than just interchange fees. It influences the rewards consumers can earn when they shop with you, which in turn can impact where they choose to spend their money. Additionally, certain MCC codes may classify your business as high-risk, which could lead to higher processing fees and stricter compliance requirements.

The Value of MCC Codes

MCC codes are integral for both businesses and consumers. They help categorize purchases, manage risks, and determine rewards and interchange fees. Whether you’re a business owner or a credit card user, understanding MCC codes can help you navigate the complexities of credit card transactions and make informed decisions about your spending and payment processing.

Key Takeaways

Visa MCC Codes are four-digit numbers used by credit card companies to categorize businesses and transactions based on industry.
MCC Codes Impact Rewards: Consumers can earn cashback or bonus rewards on purchases depending on the MCC assigned to a business, such as grocery stores, fast food restaurants, or airlines.
MCC Codes for High-Risk Businesses: Certain industries like gambling or nutraceuticals are considered high-risk and are subject to higher fees and closer scrutiny by payment processors.
Assigned by Payment Processors: MCC codes are determined by payment processors during the application process and are essential for determining risk levels and rewards programs.

Visa MCC Codes: What Are They?