By Paul Martinez
/ September 29, 2022 October 21, 2022
Table of Contents
Businesses that deal with credit cards come across the MCC abbreviation quite frequently. MCC abbreviation stands for Merchant Category Code. Credit card issuers and merchant account providers often employ merchant category codes (MCCs) in the retail sector to calculate transaction fees.
Here is what MCC stands for and the possibilities this abbreviation holds in an e-commerce world.
MCCs: What Do They Mean for Merchants?
A credit card issuer utilizes a merchant category code, a four-digit number, to classify the transactions users of a particular card make. This is important to track and limit transactions and charge for them as needed.
In the credit card industry, companies have set standard categories for businesses based on their products or services. These companies use the categories to assign the MCCs to merchants. However, this can also be on the basis of their name. As a result, a merchant may have multiple MCCs, each specific to a particular credit card issuer.
MCCs can be used for interchange marketing, tax reporting, and data collection on cardholder spending habits.
Issuers often add, remove, or modify regulations with regularly scheduled updates.
What Use Are Made of These Codes?
Card networks use MCCs to classify and monitor user purchases through their merchants. They allocate a category to your business, for instance, ‘grocery store.’ The MCC you receive will be according to that category.
Thus, when a user pays for your offerings through their card, your MCC appears on their credit card statement. This also makes it easier for card companies to track the POS and charge accordingly.
At times, customers fail to recognize a transaction on their account and tend to initiate complaints. By providing an MCC, you assist the consumers in locating their purchases, which lessens the likelihood of chargebacks and refunds on you.
Payment processors use MCCs to assess a company’s risk and identify categories of businesses that are not allowed to operate.
Merchants often use MCCs to forbid specific kinds of purchases. To prevent employees from abusing corporate cards, a corporation may elect to ban purchases that fall into particular categories.
Where to Find My MCC
Each credit card company has its own MCC list. This implies that you can access a card network’s MCC listings.
Search for the processor’s name and “merchant category codes” to acquire its list. To make this easier, many merchant account companies publish MCC listings.
For assistance from the corporation, you may also phone the number on the back of your credit card.
To check for MCCs, Visa offers a helpful Merchant Locator Tool. This enables people to search for MCCs wherever they are shopping. Just perform a simple regional or exact company name search to find local businesses. Users of this service may also look up merchants using MCC.
Do MCC Lower Processing Costs?
For a few different kinds of organizations, yes. As discussed earlier, merchant account providers use the MCC code to establish interchange rates based on the sort of business you are in.
B2B, healthcare, education, and charitable organizations often have lower exchange rates than other businesses.
Businesses in “developing markets,” or those that haven’t used credit cards as their primary payment method, might benefit from cheaper interchange fees from both Visa and Mastercard.
That covers government agencies, utilities, and even the selling of insurance, healthcare, and education. Of course, particular qualifications exist to be eligible for these MCC codes.
This is because, while you can seek a review for some codes, the credit card processor allocates them based on particular standards.
Retailers may have many MCCs for various facets of their operations. For example, a store that sells both lottery tickets and home furnishings can have two distinct MCCs depending on the risk associated with each aspect of the business.
The sectors with the most significant percentage of cardholder disputes or the most considerable financial risk to the banks have high-risk merchant category codes.
You may process your transactions at a higher interchange rate due to a high-risk MCC, or you might have fewer options for chargeback protection.
Your MCC may impact the interchange fees you pay for processing credit card payments since the card networks utilize MCCs to establish interchange fee qualifications.
You must categorize your company correctly to avoid paying extra processing costs. It also saves you from chargebacks due to clients who don’t recognize your transactions.
Final Thoughts on What Does MCC Stand For
MCC codes are essential to any organization that allows payments through credit cards.
Credit card processors assign you MCCs before handing out your cards. They serve to identify the nature of your company and the goods or services you offer.
By understanding how this code impacts you, you can determine whether or not to register as a charity or ask for more MCC codes for your organization.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.
