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Getting your payment setup right goes far beyond which card networks or digital wallets you accept. One detail that's often overlooked—but critical to your financial operations—is your Merchant Category Code (MCC).
If you've ever asked, what is an MCC, how is it assigned, or why does it matter for my fees or compliance?, you're not alone. Let's walk through the basics and explore how merchant category codes affect your bottom line, region by region.
What is a merchant category code?
A Merchant Category Code (MCC) is the four-digit number used by the big payment networks like Visa, Mastercard, and American Express to categorise your business based on what you sell. It's their way of saying: "This business is a restaurant," or "This one sells electronics."
In the simplest terms you can think of your MCC as a shortcut for banks and processors to group businesses. For example:
- Restaurants might get coded as 5812
- Travel agencies may be tagged as 4722
- Online retailers often fall under 5999
Your MCC classification impacts everything from how fees are applied, to which transactions get flagged for review. It also helps route payments correctly and ensures you're staying in line with regional regulations.
Why merchant category codes matter to your business
1. Your MCC shapes your fees
Not all MCCs are treated equally. Some categories—like airlines or online gambling—may be seen as higher risk and come with steeper interchange fees. Others, such as education or groceries, may qualify for reduced rates under certain regulations.
Knowing your MCC can help you understand why your costs are what they are—and whether you're paying more than you should. If your code doesn't reflect your actual business activity, you might be leaving money on the table.
2. It's used to evaluate risk
Card networks and payment providers use your MCC to determine how risky your business might be. A subscription service that charges recurring payments (MCC 5968) is evaluated differently than a one-time e-commerce purchase.
High-risk MCCs may trigger additional fraud checks or even limits on transaction volume. If your business model changes—say you move into new verticals or geographies—your MCC might need to change too.
3. Rewards programs use MCCs to decide perks
Credit card rewards are often tied to MCCs. A customer might earn extra points for spending in certain categories—like dining or travel—but not others. That makes your MCC part of how customers perceive your brand and value proposition.
4. It plays a role in regulatory compliance
Some industries carry compliance obligations. MCCs help financial institutions identify transactions that may fall under stricter scrutiny. For example, certain codes are flagged under anti-money laundering (AML) or consumer protection rules.
How merchant category codes work in different markets
United States
In the US, MCCs directly affect how much you pay in interchange fees. Laws like the Durbin Amendment influence fee caps for certain merchant types—especially in sectors like fuel or groceries.
Digital wallets and credit card programs use MCCs here to calculate rewards, block restricted categories (like adult content or gambling), or enforce corporate spending policies.
Asia
In Asia's fast-moving digital payments space, MCCs help streamline approval rates across systems like UPI in India, AliPay in China, or GrabPay in Singapore. Many local wallets rely on accurate MCC data to ensure payment routing and compliance with local rules—especially when it comes to settlement and tax reporting.
Europe
The European Union's regulatory environment—GDPR, PSD2, and local equivalents—makes it crucial that MCCs are accurate. Some MCCs determine whether transactions fall under Strong Customer Authentication (SCA) or how cross-border payments are treated from a fee and reporting standpoint.
For businesses operating across multiple EU countries, the right MCC can mean smoother audits and lower processing fees.
How to find your merchant category code
To determine your current MCC, start by reviewing your merchant account or payment processor dashboard. You'll almost certainly find it there. If not, you can also:
- Ask your account manager or payment services provider support team directly.
- Check your monthly merchant statement for MCC references.
- Test with a card that tracks category rewards (some bank apps show the code post-transaction).
If your MCC doesn't match your core activity, request a reclassification. This might involve submitting documentation to your processor or acquiring bank, but can be very worthwhile if it means a lower risk category and so better fees.
Managing your MCC effectively
A little attention to your MCC can have a big payoff. Here's how to manage it:
- Double-check your current MCC. Make sure it reflects your actual services. A mismatch can increase fees or block certain payments.
- Review your fees. Use your MCC to compare rates across providers. Local acquirers may offer better terms for your category.
- Ensure compliance. Especially important if you operate in regulated sectors or across multiple jurisdictions.
- Promote rewards-eligible categories. If your MCC qualifies for cardholder rewards, highlight that in your marketing to encourage card use.
Understanding your merchant category code is more than a technical detail—it's a lever for smarter financial management. Whether you're scaling across borders or just refining your fee strategy, your MCC plays a role in costs, compliance, and customer experience.
If you are still unsure about your setup talk to the experts at Antom. We would be happy to review your current MCC and see how we can align it with your business goals. Let's talk.
