What are Merchant Category Codes (MCCs) and Why They Matter for Your Business

What is an MCC?

In running a business, Merchant Category Codes (MCCs) are a fundamental part of financial transactions, influencing everything from processing fees to fraud protection. If you’ve ever set up a card program or accepted card payments, you’ve likely come across these codes.

An MCC, or Merchant Category Code, is a four-digit number assigned by payment processors to classify a business according to the type of goods or services it provides. Developed initially for tax reporting, MCCs are now a foundational aspect of payment processing. MCCs are defined by the International Organization for Standardization (ISO) and are universally recognised by most card issuers.

How are MCCs Used in the Transaction Process?

MCCs influence several aspects of a transaction:

• Interchange Rates: These are fees that businesses pay to accept payments. Rates can vary depending on perceived risk and typical chargeback rates of the business category.
• Cardholder Fees: Certain MCCs allow businesses to charge additional service fees on transactions, particularly for government or specific service-related transactions.
• Risk Assessment: Payment processors and merchant acquirers use MCCs to gauge the relative risk of a business, affecting the fees and terms of service.
• Chargeback Protections: MCCs influence the level of fraud protection a transaction receives, especially for card-not-present scenarios.
• Tax Reporting: Some transactions identified by their MCCs need to be reported to tax authorities, affecting how businesses report their earnings and expenses.

Why are MCCs Important?

MCCs enhance card programs by offering the following advantages:

• Spending Controls: Businesses can use MCCs to restrict where company-issued cards can be used, tailoring usage to specific types of transactions.
• Data Gathering: Every transaction includes MCC data, which can help businesses analyse spending patterns and optimise their financial strategies.
• Rewards Programs: MCCs allow businesses to identify qualifying transactions for rewards or cashback, enhancing customer loyalty programs.

Finding Your Business’s MCC

To find out your business’s MCC, you can request this information from your payment processor. They assign these based on the primary goods or services you offer. This information helps businesses understand how they are classified and manage their operations accordingly.

For businesses using platforms like Stripe Issuing, the MCC for each transaction can be viewed in the transaction’s authorisation details, typically under the merchant data category. Other online resources you can refer to include the Visa Merchant Data Standards Manual and the Quick Reference Booklet—Merchant Edition for Mastercard.

If you believe your business has been miscategorised, you can request a reclassification to better align with your operations.

List of Common MCCs

Here’s a general breakdown of MCC ranges and the industries they represent:

• 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

Strategic Business Alignment

MCCs are more than just a regulatory requirement; they are a strategic tool that significantly impacts how your business handles transactions. From influencing fees to enabling targeted rewards programs, understanding your MCC helps you better control costs, reduce risks, refine payment processing operations and enhance customer satisfaction.