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What Is an MCC (Merchant Category Code)?
A Merchant Category Code (MCC) is a four-digit code used by credit card companies, like Visa and Mastercard, to classify businesses based on the goods or services they provide. MCCs help categorize transactions made through credit and debit cards, and are an essential part of payment processing systems. These codes are used by payment processors and card networks to identify and verify transaction types.
‘Merchant Category Code’ in some of the Indian Languages
How to explain ‘Merchant Category Code (MCC)’ to kids?
A Merchant Category Code (MCC) is like a special number that tells credit card companies what type of store or service you’re buying from. For example, if you buy gas, the code tells them it's a petrol station. If you buy food, it’s a restaurant. These codes help companies decide how much to charge for processing payments.
Why Is MCC Important for Credit Card Transactions?
MCCs play a key role in determining the type of business a transaction is associated with, which in turn affects the fees associated with processing those transactions. The classification helps payment processors decide on the applicable charges, reward points, and whether any special offers or benefits apply to cardholders. Additionally, the code can impact how transactions are reported for tax purposes.
Understanding the MCC Code List: Categories Explained
MCC codes are used to categorize businesses into different types, including retail, services, entertainment, and more. Below is a summary of some common MCC categories and their uses:
- Retail and Grocery: Supermarkets, organic food stores
- Restaurants: Casual dining, fast food chains, cafes
- Fuel: Petrol stations, fuel delivery
- Transportation: Taxi services, car rentals
How Does MCC Affect Merchant Fees?
The type of MCC assigned to a business can directly impact the fees charged by payment processors. Different categories of businesses often face varying transaction fees depending on the risk, service type, and transaction volume. Merchants must ensure their MCC is accurately assigned to avoid higher fees or misclassifications.
How MCC Codes Are Used in Payment Processing
Payment processors rely on MCC codes to ensure transactions are processed appropriately. For example, a transaction at a restaurant will be processed under an MCC related to dining services, which may qualify for specific rewards for cardholders. Additionally, the MCC determines whether any special restrictions or charges apply to the transaction.
Examples of MCC Codes (Grocery, Restaurant, Fuel, and More)
MCC for Grocery Stores
For grocery stores, the MCC is typically 5411. This category is used for supermarkets and food stores, including organic food stores and retailers who primarily sell food products.
MCC for Restaurants and Food Delivery
Restaurants generally fall under the 5812 MCC code. Fast food chains, casual dining restaurants, and cafes are classified under this code.
Fuel Merchant Category Codes
MCC 5542 is used for fuel sales. This code is applicable to petrol stations, fuel delivery services, and other fuel-related businesses.
How to Choose the Right MCC for Your Business
Choosing the right MCC for your business is crucial to ensure that your transactions are classified correctly. You can check with your payment processor to confirm the MCC for your business, especially if your business falls into multiple categories.
Examples of Common MCC Codes and Their Categories
We are sharing some of the category codes from NPCI based on the frequency of transactions that they have sorted for merchants. Source: NPCI
High Transacting Categories
These are the merchant categories with the highest RuPay transaction volumes:
Medium Transacting Categories
All Other Categories
These are additional merchant categories
If you need an exhaustive list of MCC, you can check this list shared by Citibank: MCC for different types of businesses
FAQs
Q1. What is an MCC (Merchant Category Code)?
An MCC is a four-digit code used to classify businesses based on the goods or services they provide. It is used in payment processing to identify transaction types.
Q2. Why are MCC codes important for credit card transactions?
MCC codes help in determining the merchant's transaction fees, the type of business, and in some cases, the rewards or benefits linked to card purchases.
Q3. How do I find the MCC code for my business?
You can find the MCC for your business by checking with your payment processor, credit card company, or merchant bank.
Q4. What happens if my MCC is misclassified?
Misclassification can lead to higher fees, delayed transactions, and incorrect taxation or reporting.
Q5. Can MCC codes be changed?
Yes, merchants can apply for a change in MCC if their business model changes. This typically requires approval from the payment processors or banks.
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