Merchant category codes (MCCs), also known as merchant classification codes, are a type of identifier that describes the goods and services a business provides. These codes are just four digits in length, and the meaning behind each is determined by the International Organization for Standardization (ISO). Credit card processors must assign a code to your business. Ensuring that your business is properly classified matters.
What is a Merchant Code?
There are hundreds of MCCs out there, and the four major card networks (Visa, Mastercard, American Express, and Discover) share most of them. However, there is some variance between the codes and their descriptions amongst these card networks.
An MCC consists of four digits, and they’re typically pretty specific. For instance, if you have a contracting business, a card processor would assign a code based on your offer’s primary service. There’s code 1740 for plastering, code 1731 for electrical, and code 1711 for heating, along with countless others in the contracting industry.
Examples of Merchant Codes
Here’s a look at the most popular merchant category codes:
- 5411 – Grocery stores like Whole Foods and Albertson’s
- 5999 – Miscellaneous and Specialty Retail, like Bath and Body Works
- 5541 – Service stations, like Circle K, 7-Eleven, and so on
- 5812 – Eateries and restaurants, like Texas Roadhouse
- 5814 – Fast-food restaurants, like Burger King and Subway
The list goes on and on, with codes for drug stores, sporting goods stores, and countless other niches. The IRS maintains a complete list of merchant codes online.
Finding Your Merchant Code
Not sure which MCC your business currently has assigned to it? The best way to figure out your merchant category code is to visit Visa’s website and use their tool. Visa allows you to search for a business within a given geographical area or narrow things down by looking up a specific company name. You only need to provide an address or zip code to start searching.
If you’re having trouble finding your business, be mindful of how you’re wording your search. For instance, if you type in “Subway Restaurant,” it will not pull up your local Subway because “Restaurant” isn’t actually in the name.
You can also use this handy tool to look up your competitors and see what their MCCs are. This will give you a hint if your business is potentially miscategorized or if there’s a better-suited category for your business. Remember, there are thousands of MCCs out there, so there’s probably a category that suits your business; you need to take some time to find it.
Why Do Merchant Codes Matter?
Merchant codes serve an obvious purpose for consumers. After all, they help banks and credit card companies determine if a purchase is eligible for rewards or cashback based on the business’ MCC. However, they serve other important roles for businesses and customers alike.
Why MCCs Matter to Your Business
Your business’ MCC and the rates credit card processing companies charge you are directly related. Most credit card processing fees are determined by the industry in which you operate. So, if your MCC classifies you in the “travel” industry, that puts you in a high-risk category and would force you to pay more than, say, a clothing store.
Another reason your business should care is that your MCC helps remind customers about what a charge is for on their statement, helping to prevent chargebacks. For instance, if a client forgets your company’s name when looking at their statement, but the MCC explains it was a “hotel” stay, they are more likely to remember the charge.
Your business gets an MCC the moment you start accepting credit card transactions. The details you give to a payment processor about the services you offer will help them assign a code to your business. Getting it changed is possible by contacting your payment processor. They’ll guide you through the steps.
If MCCs Affect Rates, Shouldn’t You Just Pick the MCC with the Lowest Rate?
It’s vital that you choose the MCC that most accurately reflects your business model. For example, if your clothing business is primarily doing selling online through an ecommerce store, it might seem tempting to grab a retail clothing MCC. But this can lead to trouble. First of all, miscategorizing your business may be a violation of your merchant processing agreement (MPA) and may also violate card brand rules. This can put your processing at risk.
But if you’re working with a reputable processor like NMA, there’s more to this than just avoiding trouble. We want to understand the real risk profile of your business so we can provide the right support and ensure a long and healthy life for your merchant account (also called a merchant ID or MID). For example, if you’re in ecommerce, you may have higher chargebacks than a retail establishment, and be less likely to win a chargeback dispute, because card brands generally find in favor of the card holder in these circumstances. So we’d advise that you work with our partners at Fraud Wrangler who provide a comprehensive MID protection system. Our team can also work with you proactively to ensure that you’re doing everything possible to minimize customer issues that can turn into chargebacks. Obscuring your business type through miscoding prevents us from helping you with these issues.
Why MCCs Matter to Your Customers
Credit card issuers group multiple MCCs under one umbrella. For instance, fast food and restaurants are two different MCCs, but issuers would likely put them both under “dining.” Meanwhile, airline booking sites and hotels have different MCCs, but they’re often grouped under “travel.” This matters because these groupings help credit card issuers set up their rewards and cashback programs.
Having your business miscategorized can impact a customer’s ability to earn cashback or rewards on the purchases they make at your business. Ensuring that your business is categorized properly helps your customers enjoy the perks and rewards they expect when shopping at your business. This is the primary reason MCCs make a difference to your customers.
Find The Resources Your Business Needs
Here at National Merchants Association (NMA), we work hard to ensure small businesses like yours have the resources you need to succeed. Unfortunately, the complexities and costs associated with credit card processing can really hold small businesses back. For that reason, NMA strives to simplify the backend processes businesses have to handle.
Is your business caught up in reviewing contracts, paying hidden fees, and juggling all the headaches of typical card processing services? NMA can help. We offer a merchant account that Works For You®. Designed for small businesses, an NMA membership will help you unlock lower fees while enjoying the flexibility you deserve.When your business signs up with NMA, you’ll be met with the friendly, responsive support you’ve always hoped for. Not only that, but NMA’s thoughtful services and modern platform will put your business in a position to thrive. Interested in learning more? Contact us today to get more information about our programs.