Merchant Category Codes (MCC)

Merchant Category Codes (MCC)

MCC Codes (merchant category codes) are provided to merchant accounts during the setup process to distinguish between different types of businesses and industries. Each industry has its own set of transaction patterns and risk levels (potential for fraud). Issuing banks utilise MCC codes to assess whether or not to accept a transaction. Online gambling, for example, is only legal in the states of Delaware, New Jersey, and Nevada. The code 7995 can be used to block transactions from states where online gaming is prohibited.

The merchant's processing rates may also be affected by MCC codes. An incorrect classification could result in a merchant paying more processing fees than necessary. There are about 500 different MCC Codes used by Visa, and it is vital for a merchant to make sure they are assigned to the correct code.

In order to track and restrict transactions, payment companies employ merchant category codes to identify merchants and enterprises based on the sort of goods or services they supply. Tax reporting, interchange marketing, and data collection on cardholder purchase trends are all possible uses for MCCs.

Merchant Category Codes:

There are various reasons why merchant category codes exist. They typically determine whether or not a firm transaction must be reported to the IRS, as well as the benefits that individuals obtain for using their credit cards.Furthermore, they calculate the proportion of each transaction that a company must pay to the credit card processor. Merchant category codes are commonly used in the following ways.

If a customer has a credit card that offers 5% back on airline purchases, the incentive should be applied to any purchase that falls within MCC 4511, which covers airlines and air carriers.

Companies and government entities must record service purchases to the IRS in order for the IRS to ensure that those services pay all income taxes due. Businesses can utilise MCCs to identify whether transactions are considered services if they make these purchases with a credit card.

A gas station classed under the MCC may pay a different interchange fee to its credit card processor than a vehicle rental firm listed under the MCC.

If a consumer has a credit card that gives 5% back on airline purchases, the offer should be applied to any purchase that falls under MCC 4511, which includes airlines and air carriers.

Companies and government bodies must report service purchases to the IRS so that the IRS may ensure that those services pay all required income taxes. If a business uses a credit card to make a purchase, MCCs can help them determine whether the transaction is considered a service.

A fueling station classified under the MCC may pay its credit card processor a different interchange fee than a vehicle rental company classified under the MCC.

List of the MCC codes https://chargebackhelp.com/mcc-code-list/

The Visa Merchant Data Standards Manual is a valuable source of information regarding merchant categories and related policies and procedures. Even under a broader category (e.g., repair shops), the codes get much more precise depending on the products and services a merchant offers.

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