Merchant Category Codes (MCCs) play a huge role in how your payment system operates, influencing everything from transaction fees to fraud prevention. These codes categorize your transactions, making managing costs easier and streamlining your reporting.
Keep reading to learn more about merchant category codes, why they’re important, and how you can quickly set them up using Stripe in this simple guide.
What is a Merchant Category Code?
A Merchant Category Code (MCC) is a four-digit identifier used by payment processors, banks, and credit card issuers to classify businesses based on the type of goods or services they provide. MCCs ensure that transactions are categorized correctly, which helps in determining fees, taxes, and rewards programs.
For customers, these codes make it easier to recognize the type of business on their credit card statements, providing a quick reminder of where purchases were made. MCCs streamline payment processing and improve transparency for both merchants and consumers.
What are Merchant Category Codes Used For?
Merchant Category Codes (MCCs) are vital for optimizing and securing business transactions. These codes provide crucial information for managing various aspects of payment processing, including:
Determines Interchange Fees
MCCs are essential for determining interchange fees, which are the costs merchants pay for processing credit card transactions. Card issuers set these fees based on the MCC, with different rates for various business categories. Lower-risk categories might enjoy reduced fees, while higher-risk ones face increased costs due to greater fraud potential and chargebacks.
Risk Analysis
MCCs also play a role in assessing risk levels. Payment processors and acquirers use these codes to gauge the potential risk associated with different types of businesses. While the exact formulas used by Visa and Mastercard for risk scoring are proprietary, MCCs are a key factor in this analysis.
Tax Reporting Purposes
For tax reporting, MCCs help classify transactions into categories that may be subject to different tax rates or exemptions. This classification allows accurate reporting and helps businesses determine which transactions need to be reported to the IRS. Typically, only service purchases require reporting, not goods.
Influences Cardholder Fees
MCCs impact cardholder fees, such as annual or foreign transaction fees. Transactions in higher-risk or more costly categories can lead to higher fees for cardholders. This alignment helps issuers manage the financial risks associated with different transaction types.
Prevents Fraud
MCCs are integral to fraud prevention strategies. They enable more precise monitoring and analysis of transactions, enhancing the ability to detect and prevent fraudulent activities. Businesses and payment processors are able to safeguard against suspicious transactions when incorporating MCCs in internal security reviews.
How Merchant Category Codes Work
Merchant category codes (MCCs) are a crucial part of the payment processing system. These four-digit codes classify businesses based on the products or services they offer. Credit card companies, such as Visa and Mastercard, use MCCs to track and restrict spending, gather transaction data, and determine fees. When a business sets up a merchant account, it is automatically assigned an MCC during the underwriting process. In some cases, businesses can request a specific MCC if they meet certain criteria.
MCCs play a significant role in calculating credit card rewards and transaction fees. For example, a business categorized under a low-risk MCC might enjoy lower transaction fees, while a high-risk category could face higher costs. Additionally, MCCs influence the rules and regulations governing how a merchant can process transactions. Understanding and correctly managing your MCC can lead to optimized payment processing and better financial outcomes for your business.
Why MCCs Matter
Merchant Category Codes (MCCs) offer several key benefits that make managing transactions easier and more effective. Here’s how MCCs can help both merchants and payment processors:
Better Fraud Protection
MCCs help detect and prevent fraud by categorizing transactions based on the type of business. For example, high-risk businesses like online gambling get extra scrutiny, making it easier to spot and stop fraudulent activities before they happen.
Easier Tax and Financial Reporting
MCCs simplify the process of tracking and reporting expenses. By grouping transactions into categories like office supplies or travel, businesses can handle their tax filings and financial statements more efficiently.
Clear Transaction Tracking
MCCs provide clear details about each transaction, helping businesses accurately record expenses and income. For instance, a retailer can separate inventory purchases from marketing costs, making financial tracking more precise.
Better Rates and Lower Fees
With the right MCCs, businesses can get better rates and lower fees for payment processing. Lower-risk categories often enjoy reduced processing costs compared to higher-risk ones, making transactions more cost-effective.
Useful Payment Data
MCCs give valuable insights into spending habits and business performance. For example, a restaurant seeing a lot of transactions in the “dining” category can use this information to create targeted offers and attract more customers.
Controlled Spending Limits
MCCs allow businesses to set spending limits and manage card use. For instance, a company can limit card transactions to office supply categories and block high-risk transactions like online gambling.
Accurate Spending Tracking
MCCs track where cardholders are spending their money. This helps businesses ensure that rewards, like cashback on office supplies, are given accurately based on the MCC data.
Effective Reward Programs
MCCs are important for running successful reward programs. For example, if a business offers cashback for purchases at technology stores, the MCC helps ensure that only suitable transactions are rewarded.
Visa's Merchant Data Requirements
Choosing a Merchant Name
Your merchant name isn’t just a label—it’s the key to your customers recognizing and trusting their transactions. A clear and accurate merchant name helps prevent misunderstandings and reduces the chance of disputes. This boosts customer confidence and saves time and money for acquirers, issuers, and merchants by cutting down on unnecessary reviews and inquiries.
Picking a Merchant Location
The correct merchant location is important for accurate transaction processing. The acquirer assigns this location, and it must be consistently reflected throughout the transaction. For card-present purchases, the location is recorded at the point of sale. Card-absent transactions, such as online or phone orders, should be clearly communicated and maintained in all records—from authorization to clearing to chargebacks.
How to Set Up Visa Merchant Category Codes via Stripe
Stripe is a payment processing platform that helps businesses handle online payments smoothly. It also provides tools for managing your Merchant Category Code (MCC) with Visa. Here’s how you can get your Visa MCC through Stripe in a few steps:
- Log In to Your Stripe Account: Begin by logging into your Stripe dashboard using your credentials.
- Navigate to Account Settings: From the dashboard, go to the “Account Settings” section. This is usually found in the sidebar or under your account profile.
- Access the Connected Accounts Section: In the Account Settings, find the “Connected Accounts” tab. This is where you manage settings for accounts that are linked to your Stripe account.
- Select Your Connected Account: Choose the connected account for which you want to set or update the MCC. If you only have one account, it will be selected by default.
- Edit Account Information: Click on the option to edit or update the account information. Look for the section labeled “Merchant Category Code” or similar.
- Enter Your MCC: Enter the Visa MCC that corresponds to your business type. If you’re unsure which MCC to use, refer to Visa’s guidelines or consult Stripe’s documentation for guidance on selecting the appropriate code. If you’re unsure which MCC to use, refer to Visa’s merchant category code list to find the appropriate code for your business type.
- Save Your Changes: After entering the MCC, make sure to save or update the information. This ensures that the new code is recorded in Stripe’s system.
- Verify Your MCC: It’s a good idea to double-check that the MCC has been correctly updated. You can do this by revisiting the account settings or contacting Stripe support if needed.
Visa Merchant Category Code Examples
Here’s a quick look at how Visa sorts different types of businesses using MCC codes. This chart breaks down the categories and code ranges, making it easy to see how various businesses are classified.
Category | MCC Range | Description |
Airlines and Travel | 3000-3299 | Airlines and Airline-related Services |
Travel Agencies | 3500-3799 | Travel Agencies and Tour Operators |
Automotive | 3400-3499 | Automotive Parts and Accessories |
3500-3599 | Gas Stations | |
Retail | 5200-5299 | Home Improvement Stores |
5300-5399 | General Merchandise Stores | |
5400-5499 | Grocery Stores | |
5600-5699 | Clothing and Shoe Stores | |
5700-5799 | Furniture Stores | |
Restaurants and Dining | 5810-5819 | Restaurants |
5820-5829 | Bars and Clubs | |
Professional Services | 8000-8099 | Medical and Health Services |
8100-8199 | Legal and Accounting Services | |
Entertainment and Leisure | 7800-7899 | Entertainment and Recreational Services |
7900-7999 | Gambling and Betting | |
Transportation and Shipping | 4111-4112 | Taxi Services and Limousines |
4214-4215 | Courier Services and Shipping | |
Utilities and Services | 4900-4999 | Utilities (Electric, Gas, Water) |
7600-7699 | Miscellaneous Services (e.g., Postal Services) |
Merchant Examples and Alternative MCCs
Merchant Category Codes (MCCs) are necessary for classifying businesses in the payment process. Sometimes, a business can fall into more than one category depending on the services it offers, which is where alternative MCCs come into play. Choosing the right MCC can make a difference in transaction fees and how your business is assessed for risk. Here are some examples of businesses and their MCCs, along with possible alternatives.
MCC | Merchant Category | Examples | Alternative MCCs |
0742 | Veterinary services | Animal hospitals, pet clinics | 5995 - Pet shops, pet foods, and supplies |
0763 | Agricultural Co-operatives | Farm services, vineyards | 0780 - Landscaping 4225 - Public warehousing |
0780 | Landscaping and horticultural | Lawn care, garden services | 5193 - Florist supplies 5261 - Garden supply stores |
1520 | General contractors (Residential and commercial) | Construction, building contractors | 1711 - HVAC contractors 1731 - Electrical contractors 1740 - Masonry, stonework, tile setting contractors 1750 - Carpentry contractors 1761 - Roofing, siding, and sheet metal contractors 1771 - Concrete work contractors |
1799 | Special trade contractors | Swimming pool builders, glasswork | 1520 - General contractors 1731 - Electrical contractors |
1711 | Heating, plumbing, and air conditioning contractors | Air conditioning contractors, heating contractors, plumbing contractors | 1520 - General contractors 5074 - Plumbing and heating equipment and supplies 1799 - Special trade contractors |
2741 | Miscellaneous publishing and printing | Bookbinding services, printing services, publishing services | 5192 - Books, periodicals, and newspapers 5941 - Book stores 7338 - Quick copy, reproduction, and blueprinting services |
2791 | Typesetting, plate making, and related services | Plate making services | 2741 - Miscellaneous publishing and printing 7338 - Quick copy, reproduction, and blueprinting services |
2842 | Specialty cleaning, polishing, and sanitation preparations | Cleaning preparations materials, polishing preparations, sanitation preparations | 5085 - Industrials supplies 5169 - Chemical and allied products |
4112 | Passenger railways | Railways - passenger trains | 4011 - Railroads 4789 - Transportation services |
4199 | Ambulance services | Air ambulance services, emergency vehicle services | 8099 - Medical services and health practitioners 4789 - Transportation |
4215 | Courier services | Air or ground courier services, Freight forwarders, courier services | 4214 - Motor freight carriers and trucking (local and long) 9402 - Postal services (government only) 4411 - Steamship and cruise lines |
4468 | Marinas, marine service, and supplies | Harbors, yacht harbors, | 4457 - Boat rentals and leasing 7999 - Recreation services |
4511 | Airlines and air carriers | Airlines/Air carriers that do not have a specific MCC | 3000-3350 - Individual airline MCCs |
4812 | Telecommunication equipment and telephone sales | Cellular telephone equipment, Pagers, paging equipment | 4814 - Telecommunication services, including local and long-distance calls, credit card calls through use of magnetic stripe reading telephones, and fax services |
4829 | Money transfer | Wire transfer | 4821 - Telegraph services 6051 - Non-financial institutions, foreign currency, liquid and cryptocurrency assets |
4900 | Utilities – electric, gas, water, and sanitary | Electric utilities, garbage collectors, gas utilities, public utilities, sanitary utilities | 4814 - Telecommunication services, including local and long-distance calls, credit card calls through use of magnetic stripe reading telephones, and fax services |
5013 | Motor vehicle supplies and new parts | Automobile – motor vehicle supplies, new parts | 5532 - Automotive tire stores 5533 - Automotive parts and accessories stores 7531 - Automotive body repair shops 7538 - Automotive service shops (non-dealer) |
5044 | Photographic, photocopy, microfilm equipment and supplies | Copy services – photographic, photocopy, microfilm supplies equipment – photographic, photocopy, microfilm equipment, supplies microfilm supplies photocopy supplies supplies – photographic, photocopy, microfilm equipment, supplies | 5021 - Office and commercial furniture 5045 - Computers and computer peripheral equipment and software 5943 - Stationery stores, office, and school supply stores 5946 - Camera and photographic supply stores 7338 - Quick Ccpy, reproduction, and blueprinting services 7395 - Photofinishing laboratories and photo developing |
5111 | Stationery, office supplies, printing and writing paper | Business supplies (stationery, office, printing, writing supplies) Office supplies Printing supplies | 5021 – Office and commercial furniture 5044 - Photographic, photocopy, microfilm equipment and supplies 5943 - Stationery stores, office and school supply stores 5978 - typewriter stores - sales, rentals and services |
5122 | Drugs, drug proprietaries, druggist sundries | Distributors - drugs, druggists’ sundries Pharmaceuticals supplies - drugs, drug proprietaries, druggist sundries | 5047 - Medical, dental, ophthalmic and hospital equipment and supplies 5912 - Drug stores and pharmacies |
5200 | Home supply warehouse stores | Warehouse stores - home supply | 5211 - Lumber and building materials stores 5231 - Glass, paint, and wallpaper stores 5251 - Hardware stores 5713 - Floor covering stores |
5300 | Wholesale clubs | Club stores - wholesale clubs Discount goods - wholesale clubs Warehouse retail - wholesale clubs | 5200 - Home supply warehouse stores 5310 - Discount stores 5311 - Department stores 5331 - Variety stores 5399 - Miscellaneous general merchandise 5712 - Furniture, home furnishings, and equipment stores, except appliances 5719 - Miscellaneous home furnishing specialty stores |
5399 | Miscellaneous general merchandise | General merchandise - miscellaneous | 5300 - Wholesale clubs 5310 - Discount stores 5311 - Department stores 5331 - Variety stores 5931 - Used merchandise and secondhand stores |
5441 | Candy, nut, and confectionery stores | Chocolate shops, confectionary shops, dried fruit shops, nut shops, popcorn stands | 5451 - Dairy product stores 5462 - Bakeries 5499 - Miscellaneous food stores (convenience stores and specialty markets) |
5561 | Camper, recreational, and utility trailer dealers | Accessories (RVs) camper dealers, dealers (recreational) | 5571 – Motorcycle shops and dealers 5592 – Motor home dealers 5598 – Snowmobile dealers 5599 – Miscellaneous automotive, aircraft, and farm equipment dealers |
5722 | Household appliance stores | Sewing machine stores, vacuum cleaner stores | 5712 - Furniture, home furnishings and equipment stores, except appliances 5719 - Miscellaneous home furnishing specialty stores 7623 - Air conditioning and refrigeration repair shops 7629 - Electrical and small appliance repair shops 7699 - Miscellaneous repair shops and related services |
5968 | Direct marketing - continuity/subscription merchant | Magazine subscription (direct mail only), direct mail merchants | 4900 - Utilities (electric, gas, water, sanitary) 5621 - Women’s Ready-to-Wear Stores 5499 - Miscellaneous food stores (convenience stores and specialty markets) 5969 - Direct marketing (other direct marketers) 5977 - Cosmetic stores 6300 - Insurance sales underwriting and premiums 7997 - Membership clubs (sports, recreation, athletic), country clubs, and private golf courses |
6211 | Security brokers/dealers | Bond dealers, investment firms (dealers, brokers), mutual funds brokers, stockbrokers | 6010 - Financial institutions (manual cash disbursements) 6012 - Financial institutions (Merchandise, services, and debt repayment) |
7032 | Sporting and recreational camps | Boys’ camps, dude ranches, nudist camp | 7033 - Trailer parks and campgrounds 7999 - Recreation services |
7298 | Health and beauty spas | Tanning salons | 7011 - Lodging (hotel, motels, resorts, central reservation services) 7297 - Massage parlors 7299 - Miscellaneous personal services |
7832 | Motion picture theaters | Cinemas, entertainment (movie theaters), films (movie theaters), movie theaters | 7841 - DVD/Video tape rental stores 7922 - Theatrical producers (except motion pictures) and ticket agencies |
8011 | Doctors and physicians | Cosmetic surgeons, dermatologists, gynecologists, medical professionals (doctors), neurologists, obstetricians, orthopedists, pediatricians, physicians, plastic surgeons, psychiatrists, radiologists, surgeons | 8021 - Dentists and orthodontists 8031 - Osteopaths 8041 - Chiropractors 8042 - Optometrists and opthalmologists 8043 - Opticians, optical goods, and eyeglasses 8049 - Podiatrists and chiropodists 8099 - Medical services and health practitioners |
8220 | Colleges, universities, professional schools, and junior colleges | Community colleges, graduate schools | 8211 - Elementary and secondary schools 8241 - Corresponde schools 8244 - Business and secretarial schools 8249 - Vocational and trade schools 8299 - Schools and educational services |
8661 | Religious organizations | Chapels, churches, mosques, synagogues, temples | 8398 - Charitable social service organizations 8641 - Civic, social, and fraternal organizations 8699 - Membership organizations |
9311 | Tax payments | Customs bureaus | 9399 - Government services |
Suppose you run a candy store and are currently using MCC code 5441. If you’re experiencing credit card declines a lot, switching to MCC code 5499 for miscellaneous food stores could help, as it might offer a broader and less risky classification that can improve transaction approvals.
Switching to a lower-risk MCC code can improve your transaction approval rates. MCC codes classify businesses based on their activities, and lower-risk codes are considered safer, leading to higher approval rates from banks and payment processors.
It’s common for merchants to change their MCC codes to improve their transaction success. If you’re facing frequent declines, updating your MCC could help increase your approval rates and drive more successful sales.
New MCC or MCC Change Requests
If you need a new Merchant Category Code (MCC) or want to change your current one, follow these simple steps:
- Fill Out the Request Form: First, complete the Visa Merchant Category Code Request Form. You can find this form on the Visa Online portal or download it directly here.
- Submit the Form to Visa: Send your completed form to Visa. Make sure all the details are accurate to avoid delays.
- Wait for Visa’s Decision: Visa will review your request and let you know their decision. If your request is approved, the new MCC or the change to your existing MCC will be updated in the next edition of the Visa Merchant Data Standards Manual.
How to Identify Low-Risk Merchant Category Codes
Low-risk MCCs are codes assigned to businesses that typically have fewer problems with fraud and chargebacks. Think of them as the “good guys” in the transaction world. Common low-risk MCCs include:
- Retail Stores: Places like clothing boutiques or electronics shops.
- Professional Services: Businesses such as medical offices or legal firms.
- Restaurants: Family-owned diners or local cafes.
How to Spot Low-Risk MCCs
- Look at Transaction Patterns: Check your transaction records for stability. Businesses with low-risk MCCs usually show consistent spending patterns and minimal disputes.
- Consult Industry Reports: Dive into industry reports or risk assessments. These documents can pinpoint which MCCs are considered low-risk based on the latest data.
- Review Visa and Mastercard Guidelines: Look at Visa and Mastercard’s guidelines on MCC risk levels. They provide a clear picture of which categories are deemed low-risk.
- Watch Fraud Trends: Keep an eye on current fraud trends. Low-risk MCCs generally belong to industries with lower fraud rates.
Are All Merchant Category Codes the Same?
Not all Merchant Category Codes (MCCs) are the same. Different card issuers and processing networks, such as Visa, Mastercard, and American Express, use their own codes to categorize merchants. This means that while many MCCs are standardized and recognized across various networks, there are differences in how some codes are assigned and used.
Despite these variations, most MCCs are consistent enough to ensure smooth processing and widespread recognition, especially for major categories like retail stores or restaurants. So, while there may be some discrepancies, most MCCs function similarly across different payment systems.
Conclusion
Getting your Merchant Category Code (MCC) right is more than a detail—it’s a must for managing chargebacks effectively. The MCC helps ensure transactions are categorized correctly, which can significantly reduce the risk of chargeback disputes. If your MCC is accurate, it makes resolving disputes quickly and accurately easier, minimizing the impact on your business.
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