Merchant Category Codes - Explained
What is a Merchant Category Code?
Written by J. Mance Gordon
Updated at April 18th, 2022
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Table of Contents
What is a Merchant Category Code?How Does a Merchant Category Code Work?How Merchant Category Codes Can Boost Credit Card RewardsWhat is a Merchant Category Code?
A Merchant category code (MCC) is a four-digit code used to categorize the specific services and transactions that consumers complete using their credit cards. MCCs are used by credit card issuers or companies such as Visa, MasterCard, Discover, American Express, and others to classify specific transactions executed on a credit card. Merchant Category Codes are also used to classify businesses based on the types of goods or services they provide. Credit card companies assign MCC to determine whether the type of business a company operates is legal or not. Illegal business transactions are reported to the IRS by credit card issuers.
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How Does a Merchant Category Code Work?
There are several classifications under the Merchant category code (MCC), such as A-allowable, P-prohibited, R-restricted, and others. MCC are four digits codes generated by credit card companies to categorize services and transactions executed by consumers and businesses. There are many importance of MCC, credit card companies also use these for digit codes to determine the percentage of a transaction that a business must remit to them. With the MCC, illegal or fraudulent business transactions can easily be reported to the Internal Revenue Service. Businesses whose services are classified under MCC are required to pay certain fees to the credit card processor.
How Merchant Category Codes Can Boost Credit Card Rewards
The knowledge of MCCs offers many benefits to credit card users. MCCs are four digits codes that consumers can master, for instance, the MCCs for companies that offer the services below are; Landscaping (0780), Veterinary Services (0742), and Agricultural Co-operatives (0763). Sometimes, credit card companies offer rewards to consumers when they use their credit cards for croissant services. If a consumer is unaware of which service has which MCC code, such a consumer can miss out on the reward. Credit card users can check the categories of services and transactions in their credit card statements under the 'category' section.