Merchant category code: how to get or change your MCC

MCC is an internationally recognized determiner of the business type

mcc

Merchant category code: how to get or change your MCC. Source: shutterstock.com

The abbreviation MCC becomes familiar to all types of businesses as soon as they register for payment processing services. Nobody asks if you want it or not, you are obligated to get one as a retailer. Moreover, you may not even know what code you have got until you are required to fill this information in your tax or chargeback forms.

It is important for any PSP to classify their clients according to international standards so that they can provide proper financial products. The Merchant Category Code is an internationally recognized determiner of the business type. What is it for? Let’s get into more details.

What the MCC is

Merchant Category Code (MCC) is a four-digit number assigned to a merchant account during the setup process. It is not random but specified by ISO 18245:2003. Currently, the standard is under regular review and will be substituted by ISO/AWI 18245 soon. The MCC is used to define types of business & industries. Values are specified only for those merchant categories that are generally expected to originate retail financial transactions.

ISO 18245:2003 also establishes the procedures for the Registration and Maintenance Management Group (RMMG), which considers requests for new code values, and a Maintenance Agency (MA), which provides the administrative procedures required to maintain an up-to-date list of codes.

What is it for?

It is crucial in the financial sector to differentiate the category of payment acquirer. Various businesses have different transaction patterns and differing levels of fraud risk. Moreover, some high-risk businesses are on the verge of illegality (like gambling, adult, e-cigarettes, or escort services) depending on the region. Thus, the payment processing agency should always know what type of purchase it is dealing with. In addition, they are also used for collecting data about the customer’s purchasing behavior, tax informing, interchange promotions, controlling usage of corporate credit cards, etc. When a purchase is added to your bank statement, the category assigned to it, such as “entertainment”, “grocery store”, etc. is tied to the Merchant Category Code.

MCCs are recognized by all payment brands. Source: shutterstock.com

It is also important for a merchant to make sure they are assigned the appropriate code since it can affect the merchant’s processing rates. An improper classification as one of the high-risk businesses, for instance, can cause a merchant to pay higher than necessary processing fees.

If you make purchases for your business, being aware of Merchant Category Codes can also help you to maximize your credit card rewards. The rewards programs for certain cards will give you points for purchases that are in specific coding categories.

Most often, MCCs are recognized by all payment brands; however, some codes are unique for certain payment processors. Payment brands frequently add, eliminate, or change the codes with regularly-scheduled enhancements.

How to get an MCC

While the International Organization for Standardization (ISO) sets the MCC codes and meanings, nowadays credit card processors assign codes to a merchant. MCC codes are distributed by large credit card networks and payment processors like VISA, Mastercard, American Express, etc. The payment card organization assigns the merchant a particular code when they apply for a commercial account.

The important thing to remember is that the MCC code is chosen by the processor during the application process. It cannot be chosen by the merchant. Certainly, some merchants can request a specific MCC. But, they will only get it if they qualify for it.
Trace Wendell, VP of Sales and Operations at Dharma Merchant Services

Each card network has its own list of MCCs. While some codes are common for a particular business type, some organizations receive a unique code. For instance, major hotel chains may get their own 4-digit number rather than a general MCC defined as “hotel”. This may be done for the convenience of the employers who track their employees’ expenses during a work trip. As a result, a merchant may have a different code in the Visa system than with American Express. In addition, both Visa and MasterCard require specific abbreviations for airline MCCs.

You can find the list of general merchant category codes, as well as the PSP they are valid for, using this resource from Citibank. Another great option is the Visa Merchant Data Standards Manual which is a global document used by members in all Visa Regions.

At the same time, when you deal with some fintech solutions like Square, WePay, etc., you have the option to personally set your MCC by selecting a business type while activating POS accounts.

How to change an MCC

As mentioned above, the MCC deeply affects the organization’s processing fees and risk assessment. If you want to know what your code is, the right thing to do is contact your processor and ask for this information.

If in your opinion that code doesn’t fit your actual business activities, you can contact a card company to explain why you think it should be changed. The card company may need more information to investigate your request and will tell you what procedures to follow to challenge the MCC assignment. Although it’s hard to get an MCC changed, it’s worth a try if you feel your business has been put in the wrong category.

One business typically has a single MCC even when it operates in various categories. Payment processors usually support a single MCC code per account. They are supposed to use the most logical code if a business falls into multiple categories. However, there are certain exceptions too.

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