A Merchant Category Code (MCC) is a four-digit number assigned to a business by credit card networks such as Visa, Mastercard, American Express, and Discover. This code identifies the primary goods or services that a business provides and plays a role in how payment processors classify, track, and assess transactions.
For example, a restaurant might be assigned an MCC like 5812 (Eating Places and Restaurants), while an airline might have MCC 4511 (Airlines, Air Carriers). These codes are used not only for categorizing businesses but also for determining interchange fees, managing fraud risk, and enabling or restricting certain types of purchases.
In some cases, MCCs can influence how transactions are reported for tax purposes or how they qualify for rewards programs on consumer credit cards. Businesses cannot typically choose their own MCC; it is assigned based on how the acquiring bank or processor perceives the company’s primary line of business.
How Are MCCs Used in the Transaction Process
Merchant Category Codes (MCCs) are integral to the transaction process, serving as standardized identifiers that help classify merchants based on the goods or services they provide. When a purchase is made, the merchant’s MCC is included with the transaction data sent to the payment processor and card issuer. This classification influences multiple aspects of the payment lifecycle:
- Interchange Fees: MCCs help determine the interchange fees charged to merchants, which can vary depending on the industry. For example, higher-risk sectors like travel or gambling often face higher fees compared to everyday retail.
- Rewards and Benefits: Card issuers use MCCs to decide if a transaction qualifies for rewards such as points, cashback, or special promotions tied to specific merchant categories.
- Fraud Detection: Banks and payment processors monitor MCCs to detect unusual spending patterns. Transactions that don’t match a cardholder’s typical merchant categories can trigger fraud alerts.
- Reporting and Analytics: MCC data provides valuable insights into consumer spending habits and market trends, helping businesses and financial institutions analyze behavior and tailor services.
- Compliance and Tax Purposes: Government agencies and auditors may use MCCs to classify expenses and ensure regulatory compliance, especially for businesses seeking tax deductions or reporting financial activity.
Why Are Merchant Category Codes Important
Merchant Category Codes (MCCs) provide a consistent system for classifying businesses according to the goods or services they offer, which affects multiple aspects of the payment and financial ecosystem. Their importance can be understood through several functions:
- Fee Assessment: MCCs help payment processors determine the appropriate interchange fees for merchants, which vary by industry and risk level, ensuring fair and accurate pricing.
- Rewards Programs: Credit card issuers rely on MCCs to identify eligible transactions for rewards such as cashback or points, allowing consumers to benefit from category-specific incentives.
- Fraud Prevention: MCCs assist banks and payment networks in detecting suspicious activity and flags transactions that do not align with a cardholder’s typical spending patterns.
- Financial Reporting: MCCs facilitate accurate expense categorization for businesses and government agencies, aiding in tax compliance and financial auditing.
- Consumer Transparency: MCCs allow transactions to be grouped by category on statements, helping cardholders monitor and manage their spending effectively.
How to View MCC for Transactions
Viewing the Merchant Category Code (MCC) for transactions can be useful for understanding how your purchases are categorized, especially if you want to track spending or verify rewards eligibility. Here’s how you can typically find the MCC for your transactions:
- Check Your Credit Card or Bank Statement: Some detailed statements, especially online ones, include the MCC alongside each transaction. Look for a four-digit code next to or within the transaction details.
- Contact Your Card Issuer or Bank: If your statements don’t show MCCs, you can call customer service and ask them to provide the MCC for specific transactions.
- Use Online Banking or Mobile Apps: Certain banking or credit card apps provide enhanced transaction details, including MCCs, accessible through transaction history or detailed views.
- Merchant or Payment Processor Portals: If you are a merchant, your payment processor’s dashboard or reporting tools usually display MCCs associated with your transactions.
- Third-Party Transaction Management Tools: Some expense tracking or accounting software integrates with your bank accounts and can display MCCs to help categorize spending automatically.
Keep in mind that not all banks or card issuers make MCCs easily visible to consumers, so reaching out to your provider may sometimes be necessary.
List of Merchant Category Codes by Industry
There are many Merchant Category Code (MCC) classifications available, but here’s a breakdown of some common MCC ranges organized by industry for easier understanding:
- 0001–1499: Agricultural services
- 1500–2999: Contracted services
- 4000–4799: Transportation services
- 4800–4999: Utility services
- 5000–5599: Retail outlet services
- 5600–5699: Clothing stores
- 5700–7299: Miscellaneous stores
- 7300–7999: Business services
- 8000–8999: Professional services and membership organizations
- 9000–9999: Government services
