eCommerce Basics: Merchant Category Codes (MCCs)

Merchant Category Codes

An important aspect of processing and accepting card payments is Merchant Category Codes (MCCs). These codes can influence your chargebacks and the fees you pay for processing your customers’ card payments. In this article, we will explain what these codes are, how they are used and how they can affect you.

What are Merchant Category Codes (MCCs)?

Merchant Category Codes, commonly referred to as MCCs, are four-digit numbers which are applied to merchants by card networks (such as VISA and Mastercard). The codes are defined by the International Organization for Standardization (ISO) and are assigned to you by your card processor.

Originally, these codes were created for tax and accounting purposes, but they have since become an integral part of payment processing.

How are these codes used?

Card networks use MCCs to categorise and track your customers’ purchases. When a customer makes a purchase from your online store, a category is assigned to it (such as grocery stores) which will appear on their card statement. This helps them identify where they have spent their money, which in turn can help you reduce chargebacks and refunds from customer who don’t recognise the transaction on their statement.

For payment providers, MCCs are used to measure the risk of a business and to identify prohibited business types. In some occasions, MCCs are used to prevent certain types of purchases. If a company issues corporate cards, they may decide to block purchases that fall under certain categories to prevent them being misused by employees.

Why are they important to merchants?

The card networks use MCCs to determine interchange fee qualification which means that the costs you pay for processing card payments can be influenced by your MCC. It’s important that your business is classified under the correct category code, otherwise your processing fees may be higher than necessary, and your chargebacks could increase due to customers not recognising your transactions.

Want to know more?

In our next article we will be covering the chargeback process and the challenges these can present. To stay up to date with the latest from our eCommerce basics series, search for #PixxlesPowerUps. Alternatively, you can watch our ecommerce video guides here or visit our resources page for more helpful blogs.