What is a Merchant Category Code (MCC)?

The Merchant Category Code (MCC) classifies the category of company. To categorize and distinguish retailers and companies according to the services/goods they sell, payment systems use merchant category codes.

Retail stores, for example, are using one code, while booking sites will be entirely different. Moreover, the professional business code is specified by standard ISO 18245. To identify, register, and restrict payments, issuers often introduce these codes with acquirers.

Also, they are often used to gather data on the consumer’s purchasing activity, tax details, and exchange PR. Usually, PS detects those codes. Not every machine, though, will understand all codes. This occurs because the codes are regularly increased, deleted, or changed by devices.

Importance of Merchant Category Codes

• Companies have several ‘average buyers,’ so they check their MCC to help banks recognize what sorts of sales they can expect from a retailer (mostly online, or credit cards, or recurrent, etc.).
• In addition to cardholder reporting, the big title companies (American Express, Visa, MasterCard, and Discover) use merchant category codes to affect the exchange fees that a customer pays.
• Enterprises with such merchant category codes are qualified for exchange rates, which often result in lower transaction charges than standard credit card charges.
• It is essential to remember that most merchant category codes do not qualify a company for lower exchange rates. Certain codes will qualify a company for industry-specific exchange rates that become specific, but not significantly lower, than normal rates.
• It is necessary, though, to make sure that your organization is properly categorized both for accounting purposes and to ensure that it does not miss out on possibly lower prices.

Why you need MCC?

Merchant category codes offer credit card processors with valuable insight as well. The issuing bank of the account holder will use retailer category codes to assess the categories of stores, hotels, entertainment activities, etc. commonly visited by their clients. This data is used for the objectives of the advertisement. It may also be used to prevent thieves as well.

Merchant category codes from companies beyond the usual collection of shopping locations of a cardholder may raise a warning alert at their issuing branch. This warning system alert will save huge amounts of money and time for both the vendor and the cardholder.

Companies use merchant category codes in some situations to discourage some transactions from being made by the cardholder. For example, companies that offer corporate credit cards to workers can request credit card providers to restrict those services for travel and lodging. Companies may do this to hold prices low by stopping first-class plane tickets from being reserved by their workers.

Conclusion

Although many businessmen do not know MCC codes, it is crucial to identify if your business is fully categorized. An MCC code influences the prices that you pay to accept payments, which can help reduce penalties, all of which can greatly affect the business.