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Everything You Need to Know about Merchant Category Code (MCC)
Merchant Category Code (MCC) is a four-digit number used to classify businesses by the type of goods or services they provide. This code helps identify the type of business that merchants operate and is used for categorizing transactions when processing credit cards. MCCs are assigned by card associations, such as Visa, Mastercard, American Express, and Discover.
MCCs are used to categorize a merchant’s transactions for reporting purposes and to determine the interchange rate for each card type when settling transactions. Interchange rates are the fees that merchants must pay for each credit or debit card transaction. By accurately assigning an MCC to a transaction, merchants can ensure they are not being charged an incorrect rate.
MCCs are divided into several broad categories, such as retail stores, restaurants, hotels, and health care services. Within each of these categories, there may be more specific codes that further define a merchant’s business activities. For example, retailers may have different MCCs for apparel stores, home improvement stores, and convenience stores.
When setting up a merchant account with a credit card processor or bank, merchants need to provide the correct MCC code in order to ensure they are charged the correct interchange rate. For example, if a retailer tries to set up an account with an apparel store MCC but actually sells home improvement items, the bank may charge them a higher interchange rate for their transactions.
In addition, some banks and credit card processors offer rewards programs or discounts to merchants who use certain MCCs. For example, a gas station may receive discounted fuel prices if they have correct MCC code associated with their merchant account.
Overall, correctly assigning an MCC to a merchant account is important for ensuring merchants are not charged incorrect interchange rates and that they can take advantage of any discounts or rewards programs offered by their processor.
The right MCC code also helps card associations accurately track transactions, which helps them better understand the spending habits of their customers. By understanding this data, card issuers can provide better services and products to their customers. Ultimately, MCCs help make credit card transactions more efficient for all parties involved.
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