Category Codes for Merchant Payment Processing

If you're a business owner, it's important you know about something called merchant category codes (MCC).

While at first credit card processing might appear to be a difficult and even overwhelming necessity, once you grasp the fundamentals, everything else falls into place. Understanding MCC codes and their role in payment processing is key. Once the fundamentals are clear, you’ll be able to make smarter business decisions.

What is an MCC Code?

Merchant Category Codes (MCC) are unique identifiers assigned to each merchant account, and usually consist of four digit numbers. MCCs help merchants identify their accounts and perform various functions such as payment processing, fraud detection, and other services.

How to Acquire Your Merchant Category Code

As you register for a merchant account, make sure to be conscious of what sorts of MCCs apply to your business. Keep in mind, however, that there are specified qualifications for these MCCs. Due to the specifics of their day-to-day operations, some merchants may blur the boundary between categories yet fall short of qualifying for the reduced interchange rates of a certain merchant category code, which is okay.

After your business is set up, you may not even notice your MCC code. Because it doesn’t appear on your merchant statement, you may not even know what it is!



To figure out your specific MCC code, call or email your credit card processor and ask a representative which code has been assigned to your company.

How to apply for a MCC code?

The International Organization for Standardization (ISO) is the entity which establishes MCC codes and their meanings, but the credit card processors are the ones who issue the codes to merchants.

Large credit card networks and payment processors such as VISA, Mastercard, American Express, and others distribute MCC codes. Each card network has its own MCC list. When a merchant applies for a business account, the payment card association offers them a unique code.



While certain codes are widespread for a specific company type, some businesses are assigned a one-of-a-kind code. For example, rather than a generic MCC defined as "restaurant," big restaurant chains may be assigned their own 4-digit number.

Do merchant category codes affect payment processing?

The answer is yes. Because your MCC code indicates the primary business activity of the merchant, it might have an impact on payment processing in a variety of ways:

Credit card companies might reject your Merchant Services Application

Certain payment service providers simply refuse to accept specific types of businesses. Although this is unfortunate if it applies to you, don't worry because other businesses actually specialize in representing higher-risk customers.

Consumer Credit Card Rewards

In examining incentives for customers who make purchases from particular merchants, it may be interesting to explore how different offshoots of your business may require new MCCs. Whenever customers can qualify for points, it gives them incentive to buy from you. After all, everyone loves a reward!

Payment processors markup to MCC interchange rates vary

Visa and Mastercard and other credit card companies use these codes to calculate interchange fees and rates. This is the wholesale price paid by merchants for each credit card transaction. However, payment processors add a markup to these rates - larger companies usually adding a higher markup.



Because businesses pay different interchange rates according to their MCC code, codes must be carefully chosen.

High Risk Processing

Before signing a merchant up for services, a person called an acquirer examines the MCC code to detect restricted company categories as well as to assess risk.

Chargebacks

MCCs for such things as money orders and betting do not have the same fraud safeguards as transactions where a card is not present. Furthermore, if your company has been issued a high-risk code, you will likely incur greater costs for each individual chargeback.

Convenience Fees

Not all types of businesses are permitted to assess and impose a convenience fee for credit card payments. Your MCC code is one of the factors that indicates your capacity to do so.