Merchant Category Codes (MCC): All You Need To Know

by Stax

Merchant Category Codes are an important identifier used in the payment processing industry to segment transactions into specific categories. Although this is done automatically by most payment processors, merchants need to understand what the codes represent and what they mean for each business.

MCCs affect your business in a variety of ways. They help with risk management and fraud prevention by ensuring that specific merchant activities are identified correctly for taxation, reporting, and compliance purposes. Additionally, having accurate MCCs helps payment processors assess the credit risk associated with your business.

Mastering your MCC knowledge will help you make the best-informed decisions for your business. And it can also provide you with insight into how your payments are being classified and used by payment processors.

Let’s take a closer look at Merchant Category Codes (MCC) and why they matter for merchants.

TL;DR

Credit card networks use Merchant Category Codes (MCCs) to categorize the type of business a merchant operates.
MCCs help processors determine applicable interchange fees, simplify invoicing and reporting, and reduce the risk of fraud through additional security measures.
Understanding these codes and reviewing what you are assigned will ensure you’re accurately charged and compliant for your industry.

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What Are Merchant Category Codes (MCCs)?

MCCs are standard codes used by the payment processing industry, specifically merchants, banks, and credit card companies. This four-digit number provides a way of categorizing goods, services, and the types of transactions that businesses conduct on a regular basis.

For example, your MCC might be classified as 5691 (Men’s and Women’s Clothing Stores) if you’re selling clothing online. By using this code, your payment processor will know how to classify, categorize and process the transaction for accounting purposes.

It’s also helpful for your customers, so they can easily identify what type of business they’re making a payment to. When reviewing their credit card transactions, the MCC code will help refresh their memory as to the type of business that payment was to.

Who Sets the MCCs?

The card networks (Visa, Mastercard, American Express, and Discover) set the MCC codes to ensure that merchants are classified correctly. Each code corresponds with a specific type of merchant activity. However, frustratingly, the codes are not always consistent across the different networks.

For example, one credit card company may assign a merchant an MCC code of 7999 for recreation services, while another credit card network may give them a different code instead. This means merchants must be aware of each network’s code to ensure accuracy and compliance.

Thankfully, MCC codes are applied to businesses by credit card processing companies. It is their job to identify the right code. However, as a merchant, you should always be aware of what codes are being used and ensure that they accurately reflect your business type. Incorrect codes may lead to higher processing fees, incorrect taxation of your transactions, and other problems.

Let your payment processor do the groundwork but take it upon yourself to review their code assignments.

How Do You Get a Merchant Category Code Applied to Your Business?

The MCC is assigned to a business when it first sets up its merchant account with a payment processor.

When signing up, the processor will either assign a code or provide a list of codes that can be used to classify different types of businesses. It’s important to go through the list carefully and make sure that your code is correctly assigned and accurately reflects the type of business you are conducting.

It’s also important to note that MCCs may change over time. Regularly check with the processor to make sure that your MCC is up-to-date.

Examples of MCC codes

The list below is by no means complete, but it will help to give you an idea of just how specific the MCCs are to ensure they account for the nuance of each business category.

4121 – Taxi cabs and Limousines
4131 – Bus Lines
4215 – Courier Services and Ground Freight Forwarders
4468 – Marinas & Marine Service/Supplies
4722 – Travel agencies and tour operators
4784 – Bridge and Road Fees and Tolls
4829 – Money Orders – Wire Transfer
5094 – Precious Stones and Metals, Watches and Jewelry
5122 – Drugs, Drug Proprietors, and Druggist’s Sundries
5211 – Lumber and Building Materials Stores
5310 – Discount Stores
5411 – Grocery Stores and Supermarkets
5441 – Confectionery Stores
5499 – Misc. Food Stores – Convenience Stores and Specialty Markets
5533 – Automotive Parts, Accessories Stores
5541 – Service Stations ( with or without ancillary services)
5542 – Automated Fuel Dispensers
5722 – Household Appliance Stores
5734 – Computer Software Stores
5812 – Eating Places and Restaurants
5814 – Fast Food Restaurants
5912 – Drug Stores and Pharmacies
5932 – Antique Shops – Sales, Repairs, and Restoration Services
5933 – Pawn Shops and Salvage Yards
5940 – Bicycle Shops – Sales and Service
5941 – Sporting Goods Stores
5942 – Book Stores
5943 – Stationery Stores, Office and School Supply Stores
5944 – Watch, Clock, Jewelry, and Silverware Stores
5945 – Hobby, Toy, and Game Shops
5966 – Direct Marketing – Outbound telemarketing
5967 – Direct Marketing -Inbound Teleservices Merchant
5992 – Florists
5993 – Cigar Stores and Stands
5996 – Swimming Pools – Sales, Service, and Supplies
6012 – Financial Institutions – Merchandise and Services
6300 – Insurance Sales, Underwriting, and Premiums
7011 – Lodging – Hotels, Motels, Resorts, Central Reservation Services (not elsewhere classified)
7033 – Trailer Parks and Camp Grounds
7217 – Carpet and Upholstery Cleaning
7230 – Barber and Beauty Shops
7261 – Funeral Service and Crematories
7394 – Equipment Rental and Leasing Services, Tool Rental, Furniture Rental, and Appliance Rental
7512 – Car Rental Companies
7523 – Automobile Parking Lots and Garages
7699 – Repair Shops and Related Services, Not Elsewhere Classified
7995 – Gambling and Betting (Lottery Tickets, Casino Gaming Chips, Off–track Betting and Wagers)
8099 – Medical Services and Health Practitioners (Not Elsewhere Classified)
8021 – Dentists and Orthodontists
8699 – Membership Organizations
8999 – Professional Services
9311 – Tax Payments
9399 – Government Services.

Generally speaking, codes 7300–7999 refer to business services, while codes 4000–4899 are for goods, including transportation services. Letter prefixes may also be used to identify specific types of services or businesses – such as S (service) and R (retail). The letters, however, are not on all networks’ MCCs. You will need to visit the websites of Visa, Mastercard, American Express, or Discover to check how they write the codes. You can find Visa’s MCCs here and Mastercard’s MCCs here.

While there are some differences in the codes between the networks, they are most often the same or similar.

Why Do Merchant Category Codes Matter?

MCCs help payment processors and merchants protect their businesses.

For payment processors, MCCs are used to assess the credit risk associated with specific merchants. Using MCC codes, payment processors can quickly identify high-risk transactions and businesses that require additional security measures or stricter checks before payments are processed.

For merchants, MCCs ensure they get the best rates and most favorable terms for their payment processing services. By having accurate MCC codes, merchants can be sure they’re getting the proper rate and fee structure for their transactions.

Key benefits include:

Improved fraud protection
Easier compliance with tax and financial reporting regulations
Better rates and fees for payment processing services
More accurate accounting of transactions
Richer insights into payment processing data.

Accurately categorizing transactions makes it easier to identify suspicious activity or fraudulent payments. It helps merchants to comply with reporting requirements, and MCC codes make it easier to analyze payment data, giving merchants valuable insights into their business.

With accurate MCCs, merchants are best positioned to get paid accurately and on time – without any issues or delays. It also helps to reduce the risk of chargebacks and non-payment issues down the line.

How Are MCCs Used in Credit Card Processing?

MCCs have an interesting history. Initially designed to simplify year-end accounting for the 1099 tax form, they have become a staple for setting fees and assessing risk. While the card networks set them, they are assigned by the credit card processors and used by every institution in between.

But how are they used more practically? Some practical examples include:

Credit card rewards programs

Many credit card rewards programs use MCCs to determine which transactions qualify for points or other rewards. For example, cardholders may get additional rewards or cash back for purchases at restaurants or retailers with a certain MCC code.

Determining interchange fees

As we’ve mentioned above, MCCs are used to identify the type of transaction, which in turn helps to determine the applicable interchange fee. This is determined by the card issuer and is a fee that the merchant pays to the processor for processing a credit card transaction.

Invoicing and reporting

Useful for merchants, many accounting systems will use a merchant’s MCC code to categorize transactions automatically for easier invoicing and reporting. This helps to streamline quarterly or annual reporting processes to leave merchants with more time to focus on the day-to-day running of the business.

ISR (Internal Security Reviews) and other fraud prevention measures

MCCs are used in ISRs, and other additional security measures or stricter checks before payments are processed. This helps to reduce the risk of fraud by making it easier to identify suspicious activity or transactions.

FAQs

How do I find my merchant category code?

Merchants can find their MCC code by checking their merchant agreement or contacting their payment processor. The processor will be able to provide the merchant with an up-to-date code that accurately reflects the type of goods and services being provided.

If you believe your MCC needs to be reviewed or changed, you can ask them to provide a list of codes and help you select the one that best matches your business. Generally, it’s not possible to change an MCC once it has been assigned, so it’s important to make sure that you get it right the first time.

What is the difference between a Merchant Category Code and a PCI code?

A Merchant Category Code is used to classify a business and identify the type of goods or services that it provides. A PCI code, also known as a Payment Card Industry Data Security Standard (PCI DSS), is an industry standard designed to protect customer data and help ensure secure credit card payments.

What happens if I have a high-risk MMC?

Say, for example, you are in the gambling or adult entertainment industry. These MCCs are typically considered high-risk. If your business falls within one of these or another high-risk MCC, you can expect to pay higher fees and potentially face additional security requirements. There is no way around this. All merchants can do is be transparent with their payment provider and take the necessary steps to establish the MCC that best reflects the industry.

Do I need to enter an MCC for each transaction?

No. The merchant’s MCC code is assigned when a business opens its account with its payment processor and remains the same for all subsequent transactions. It only needs to be updated if the business changes its type of goods or services.

Do I need a different MCC for each type of product I sell?

No. You can use a single MCC that accurately reflects the types of products you sell without assigning different codes for each.

Can I use multiple MCCs?

No. Credit card networks generally only allow one merchant category code per merchant account. If you are running multiple types of businesses, opening multiple accounts, each with its own MCC, may be necessary. Alternatively, you could use a single account but make sure the MCC accurately reflects all of the goods and services being provided.

Do all payment processors assign MCCs?

Yes. All payment processors assign MCCs to merchants when they open an account.

Setting Up Your Merchant Account and MCC

Although all payment processors assign MCCs, they do not all offer the same benefits that MCCs afford. For example, MCCs help merchants to streamline reporting and analyze business performance. However, not all processors have back-end solutions that allow merchants to access these insights.

Stax Payments does. We offer a range of features that enable merchants to track, analyze and report on transactions easily. This information helps you to reach larger audiences and streamline day-to-day operations. Our MCCs are regularly updated to ensure that they best reflect our clients’ businesses and our powerful reporting dashboard allows merchants to get an overview of their performance and make data-driven decisions.

Moreover, we offer the industry’s first flat-rate subscription pricing with no lock-in contract or hidden fees. This allows members to save up to 40% on credit card processing.

Contact Stax Payments today to learn how we can save you money on credit card processing fees and boost performance with MCC data and insights.