What Are Merchant Category Codes?

Merchant Category Codes (MCCs) are four-digit codes assigned to merchants by credit card companies in order to classify the type of goods or services the merchant provides. These codes are used by credit card processors to determine the appropriate interchange rates and fees that should be applied to transactions.

Importance of MCCs

MCCs are important for merchants as they can affect the fees that merchants pay to accept credit card payments. For example, merchants in certain categories, such as travel and dining, may be eligible for lower interchange rates compared to merchants in other categories, such as jewelry and electronics. This is because the credit card companies consider these categories to be higher risk, and therefore charge higher fees to compensate for the increased risk.

Categories of MCCs

There are over 700 different MCCs, and they are grouped into categories based on the type of goods or services they offer. Some common MCC categories include retail, travel, entertainment, and business services. Within each category, there may be subcategories that further define the specific type of goods or services being offered.

Rewards and Benefits

In addition to determining the appropriate interchange rates and fees, MCCs can also be used by credit card issuers to offer rewards or benefits to cardholders. For example, a credit card issuer may offer bonus points or cash back for purchases made at merchants in certain MCC categories, such as dining or travel.

Choosing the Correct MCC

It is important for merchants to accurately classify their business with the correct MCC in order to ensure they are paying the correct fees and to potentially take advantage of any rewards or benefits offered by credit card issuers. Merchants can work with their credit card processors or credit card companies directly to determine the appropriate MCC for their business.

Conclusion

In conclusion, Merchant Category Codes (MCCs) are four-digit codes assigned to merchants by credit card companies in order to classify the type of goods or services they offer. These codes are used to determine the appropriate interchange rates and fees that should be applied to transactions, and can also be used by credit card issuers to offer rewards or benefits to cardholders. It is important for merchants to accurately classify their business with the correct MCC in order to ensure they are paying the correct fees and to potentially take advantage of any rewards or benefits.

FAQs

Here are some frequently asked questions about MCCs, along with their answers:

1. What is the purpose of MCCs?

The main purpose of MCCs is to categorize merchants and the types of transactions they process, in order to facilitate the processing and settlement of card transactions. MCCs are used by card networks, banks, and other financial institutions to classify merchants and transactions for a variety of purposes, including fraud prevention, risk management, and financial reporting.

2. How are MCCs assigned?

MCCs are assigned by the card networks to merchants who accept credit and debit cards as payment. Merchants typically apply for an MCC when they set up their merchant account with a bank or other financial institution. The card networks assign MCCs based on the type of business the merchant operates, the products or services they sell, and the way they process transactions.

3. Can MCCs be changed?

MCCs can be changed under certain circumstances. For example, if a merchant's business changes or if they start processing a different type of transaction (such as online transactions), they may need to request a change to their MCC. MCC changes are typically made by the card network or the financial institution that issued the merchant's merchant account.

4. How do MCCs affect merchants?

MCCs can affect merchants in a variety of ways. For example, some MCCs may be subject to higher transaction fees or chargebacks or may be considered higher risk by card networks or banks. Merchants should be aware of their MCC and the potential impact it may have on their business.

5. Is there a list of MCCs available?

Yes, there is a list of MCCs available. The list of MCCs is maintained by the card networks, and it includes the codes and descriptions for each category of merchant. The list is typically used by merchants, banks, and other financial institutions to classify merchants and transactions.