Merchant category codes (MCC) are numerical four-digit codes used to identify the type of business category that a business falls into.
Think of it like a Dewey Decimal system but instead of classifying books, it classifies businesses.
The International Organization for Standardization (ISO) sets the codes along with their meanings and classifications.
This is a universal system used by payment brands, issuers and acquirers in the credit world.
Each card network (Visa, MasterCard, etc.) updates MCCs regularly by adding or eliminating categories as commerce evolves.
Though they are largely similar when comparing lists, some differences may exist.
Payment processors assign these codes to merchants to categorize businesses. Your payment processor will work with you when setting up your account to determine your MCC.
Just like the Dewey Decimal system, businesses that are similar in nature have similar codes. General categories are chunked into intervals and within each larger category are many smaller categories.
Here is a general overview:
Within the Retail Outlet Services category, for example, there are hundreds of additional categories.
Game, toy, and hobby shops are represented by 5945, while businesses that sell fireplace accessories would be assigned 5718.
As you can see, these categories can be incredibly specific and there are thousands of them.
A full list of MCCs from Citibank can be found here.
For a business, the merchant category code assigned to the business has a direct relationship with the rates and fees that the payment processor will charge.
Data from industries is constantly being analyzed and thus the higher the risk for fraud the industry has, the higher rates and fees a business will incur.
Some payment processing companies may have a list of prohibited industry types.
Conversely, some providers may offer special incentives or perks to businesses with more favorable MCCs.
Some cards may have restrictions on what types of merchants can accept them. This can result in a declined transaction if the MCC code does not accurately reflect the type of purchase that’s being made.
For example, an EBT card, or Electronic Benefits Transfer card, may be restricted to merchants with select MCCs.
A patron may attempt to use the card if they believe the business falls within the category, but the transaction can be declined if the MCC is not authorized.
Some credit cards offer certain incentives for purchases made at restaurants, grocery stores, or gas stations. If a customer chooses a business based on this incentive, they may be disappointed if the purchase does not qualify for a reward because the MCC code was not correct.
Most businesses never need to change their MCC code but occasionally it may be appropriate. If your business changes the products or services it offers, it may put you into a new classification.
If you are receiving an unusually high number of declined transactions, it may be that your MCC is inappropriate and that is the reason for declined transactions as discussed above.
Figuring out your MCC is not always straightforward so we recommend discussing it with your payment processor to make sure you are correctly categorized.
MCCs are another simple yet critical component to establishing a well-functioning credit card processing account.
Ensuring you are classified appropriately will help ensure you receive the best processing rates and your customers’ transactions process smoothly.
If you’d like to review your MCC, our team is always ready to answer any questions you may have.
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