Ever looked at the fees businesses pay for payment processing and wondered why they seem higher than expected? Or had a customer dispute a charge because they didn’t recognize the transaction? The answer might lie in your Merchant Category Code (MCC).
MCCs are the hidden labels behind every credit card transaction, classifying businesses based on what they sell. Get the right code, and you can enjoy lower fees, better fraud protection, and smoother transactions. Get it wrong, and you might face unnecessary costs, compliance issues, or even chargeback headaches.
Let’s break it down in this straightforward guide so you can take control of your MCC and make sure it’s working for you, not against you.
What are Merchant Category Codes?
Merchant Category Codes (MCCs) are four-digit numbers assigned by credit card companies to classify businesses based on the products or services they sell. Every transaction you process is tagged with an MCC, helping banks and payment processors categorize your business.
Credit card networks like Visa, Mastercard, American Express, and Discover set MCC codes, but they don’t always use the same classifications. One network might label a business under MCC 7999 (Recreation Services), while another might use a different code entirely. This inconsistency makes it important for merchants to verify their assigned MCC.
How MCCs Impact Businesses
MCCs affect more than just transaction categorization; they impact processing fees, taxes, and even risk assessments. The fees businesses pay can vary significantly based on their assigned MCC. Here’s why they matter:
- Processing Fees & Rates – Some MCCs come with higher fees due to perceived risk. For example, businesses classified under high-risk MCCs often pay more per transaction. Ensuring your MCC accurately reflects your business type can prevent unnecessary fees.
- Fraud Prevention & Security – Payment processors use MCCs to detect suspicious activity. High-risk MCCs may trigger additional verification steps, while low-risk businesses benefit from smoother transactions.
- Tax & Compliance Reporting – Certain MCCs affect how sales tax is applied. For instance, some nonprofit organizations receive tax exemptions, which are linked to their MCC classification.
- Chargeback Risks – If your MCC is misclassified, you might see an increase in chargebacks. Customers unfamiliar with how your business is categorized might dispute transactions, leading to lost revenue and penalties.
Since MCCs are assigned by payment processors, it’s tempting to leave it all in their hands. However, reviewing your assigned MCC can save you money, improve transaction accuracy, and reduce headaches down the road. If your code doesn’t match your actual business type, request a correction—your bottom line will thank you.
How MCCs are Used in Credit Card Processing
Merchant Category Codes (MCCs) might not be the first thing on a business owner’s mind, but they play a big role in how transactions are processed. These four-digit codes, assigned by credit card processors, help banks and payment networks classify businesses based on the products or services they sell, which in turn affects the fees businesses pay.
Why does this matter? Because MCCs influence processing fees, fraud risk, credit card rewards, and even how transactions show up on customer statements. Having the right MCC can save money, prevent unnecessary chargebacks, and make accounting easier.
Here’s how MCCs are used in different aspects of credit card processing:
- Credit Card Rewards Programs – Ever noticed how some purchases earn more points or cash back? That’s because card networks use MCCs to classify transactions. For example, a restaurant (MCC 5812) might qualify for higher rewards on a dining credit card, while a gas station (MCC 5541) earns bonus points on a fuel card.
- Interchange Fees – The type of MCC assigned to your business directly affects how much you pay in processing fees. High-risk industries, such as travel or online gaming, often have higher interchange fees, while lower-risk businesses benefit from lower rates.
- Accounting & Reporting – Many businesses use MCCs for invoicing and financial reporting. Payment processors and accounting software can categorize transactions automatically based on MCCs, making it easier to track expenses and prepare financial reports.
- Fraud Prevention & Security Reviews – MCCs also help banks and payment processors flag suspicious activity. Certain industries, like electronics or luxury goods, are more prone to fraud, so transactions under those MCCs might trigger additional security checks before approval.
Since certain MCCs come with a higher chargeback risk, businesses classified incorrectly may see more payment disputes. If your MCC puts you in a high-risk category when you don’t belong there, you could end up paying unnecessary fees or dealing with declined transactions.
How to Find and Determine Your MCC Code
MCCs are assigned by your payment processor, so it’s important to check that yours is accurate. There are several ways to find your MCC:
- Review Your Merchant Statement – Your monthly processing statement should list your MCC along with your transaction details and fees.
- Check Your Payment Processor’s Online Portal – Most providers offer a dashboard where you can find account details, including your MCC.
- Contact Your Payment Processor Directly – If you’re unsure or suspect an incorrect MCC, reach out to your processor and ask for confirmation.
- Look at Interchange Rate Tables – Visa, Mastercard, American Express, and Discover publish interchange rate tables that include MCCs and their associated fees. These tables can help you understand how your code affects your costs.
If your business operates in multiple categories, such as a gas station with an attached convenience store, your processor will assign the MCC that best represents your primary source of revenue. However, if you believe your classification is incorrect, you may be able to request a change.
Choosing a Low-Risk MCC for Your Business
Not all MCCs are treated equally. Some are flagged as higher risk, leading to higher fees, stricter security checks, and more chargeback disputes. Choosing the correct, low-risk MCC can help lower chargebacks, costs, and reduce headaches.
Here’s how different MCCs impact businesses:
- Lower-risk MCCs (preferred by payment processors)
- MCC 5812 – Restaurants (lower risk than fast food chains due to fewer chargebacks)
- MCC 7298 – Health and Beauty Spas (steady revenue and fewer fraud concerns)
- MCC 5732 – Electronics Stores (consistent consumer spending patterns)
- Higher-risk MCCs (could face higher fees and stricter rules)
- MCC 7995 – Gambling Transactions (high fraud risk and regulatory concerns)
- MCC 5966 – Direct Marketing – Outbound Telemarketing (prone to chargebacks and disputes)
- MCC 5311 – Department Stores (high transaction volume, increased fraud risk)
If your business falls under a higher-risk MCC, you may face higher interchange fees and more security reviews. In some cases, merchants can request a different MCC if their business activities align better with a lower-risk category.
Let's take a look at these two examples:
- A consulting firm could be classified as MCC 8999 (Professional Services), a lower-risk category, instead of MCC 7399 (Miscellaneous Business Services), which is often flagged for higher fraud risk.
- An online clothing store may want to be under MCC 5691 (Men’s and Women’s Clothing Stores) rather than a broader e-commerce MCC, which might carry higher fees.
While you can’t choose any MCC you want, clearly describing your business model when setting up a merchant account can help ensure you’re classified correctly.
How to Change Your Merchant Category Code
If your MCC is incorrect or causing issues, you may be able to request a change. Here’s what to do:
- Contact Your Payment Processor – Ask them why you were assigned your current MCC. If you believe another code fits better, explain why.
- Provide Supporting Documents – The processor may ask for:
- A business license
- A website or sales materials showing your products or services
- Transaction history that reflects the type of purchases you process
- Request a Reclassification – If your processor agrees, they’ll update your MCC in their system. This change may take time and require approval from card networks.
- Consider Switching Processors – If your provider refuses to adjust your MCC and it’s costing you money, it might be worth looking for a different processor that offers better classification options.
Having the right MCC helps keep costs down, reduces fraud risk, and ensures transactions are processed smoothly. If you think your current MCC isn’t accurate, take the time to review it—you might find a better fit that saves you money in the long run.
Final Thoughts
MCCs might not be something you think about every day, but they have a bigger impact than you might realize. A correct code means smoother transactions, lower fees, and less risk for your business. Taking a moment to check and update your MCC can save you from unexpected charges and headaches later. It’s a small step that can make a big difference in how you do business.
An incorrect MCC could lead you to higher chargeback rates, and that’s where Chargeblast steps in. We help you spot issues early and intervene before they escalate into costly disputes. By ensuring your MCC is accurate and keeping track of potential red flags, Chargeblast works to reduce the risk of chargebacks, saving you time, money, and stress.
Don’t wait for problems to pile up, take control of your payments today. Sign up or book a demo now to see how Chargeblast can keep your business running smoothly and chargeback-free!
Frequently Asked Questions
Who determines the merchant category codes?
Merchant Category Codes (MCCs) are set by the card networks like Visa, Mastercard, American Express, and Discover. However, it’s your payment processor who assigns the correct MCC to your business.
Can I choose my merchant category code?
You can’t exactly choose your MCC, but you can influence it. Your payment processor will assign a code based on the primary activity of your business. However, if your business has multiple types of services, you can work with your processor to ensure the right code is assigned based on your main revenue stream.
Can I change my merchant category code?
Yes, you can change your MCC if it’s incorrect or no longer matches your business. If you think your current code doesn’t reflect your business type, reach out to your payment processor and request a change.
Can merchant category codes change over time?
Yes, MCCs can change, especially if your business model evolves. For instance, if your business expands to offer new services, your payment processor may update your MCC to reflect the change. It's a good idea to periodically check your MCC to ensure it's still the best fit for your business.
Are merchant category codes the same across all card networks?
Not necessarily. While the main purpose of MCCs is the same across all card networks, different networks can assign different codes to the same type of business. This can cause confusion, so it’s important to be aware of how each card network classifies your business and ensure the right code is used for each one.
What happens if I choose an incorrect merchant category code for my business?
Choosing the wrong MCC can lead to a number of problems, like higher processing fees, tax issues, or even fraud alerts. If the code doesn't match your business type, you might end up paying more than necessary, and your transactions could be flagged for additional checks.
