All businesses that apply to take credit card payments are assigned a four-digit number by the major credit card companies (Visa, MasterCard, Discover, and AmericanExpress). This number is called a Merchant Category Code or MCC. It serves as a designation to identify the type of business or service it is in. In 2004, merchant category codes became a requirement by the IRS.
These merchant category codes help credit card companies to categorize, track, or even restrict certain types of purchases. If a business happens to offer more than one category, they are required to use the MCC code for the product or service that makes up the majority of their business.
If you happen to own a rewards credit card, you might already be familiar with which types of purchases qualify for earning you points or even cash back.
How does your credit card know that you have made an eligible purchase? It is through MCC codes.
So How Do MCC’s Work?
All purchases are automatically categorized by the MCC of a store when it’s reported to your credit card company. It uses these specific codes to determine whether you get additional rewards.
For example, if you happen to be shopping at a candy store, and according to the IRS list, it has an MCC code of 5441, which stands for “candy, nuts, and confectionery stores”, and your credit card offers you rewards for purchasing in this particular category, then your credit card company will issue you those rewards based on that MCC.
If you happen to purchase the same item at a local grocery store with a different MCC code, then your purchase will not qualify for the same rewards as in the candy store.
How Can I Find A Store’s MCC Code?
The IRS typically publishes a complete list of codes, however, each credit card company also has its own list. Due to this, each credit card company may differ in their use of codes.
The Visa Supplier Locator is also a great resource to look up the MCC’s for the stores where you want to shop. You can also look up the multiple MCC’s used within the same store.
There’s also the Quick Reference Booklet – Merchant Edition for MasterCard and AmericanExpress.
It’s always good to review your credit card’s terms and conditions to ensure what counts towards those extra rewards.
Sometimes, you may run into the issue of not earning your rewards, despite the store being categorized correctly. At this point, this could mean that you have reached your cap of earning bonus rewards for the quarter or year.
Perhaps your purchase was made through a system that your credit card company deems unqualified. If you made your purchase through a third-party payment system, an online marketplace, or a wireless card reader, it may not process correctly in the eyes of your credit card company. When in doubt, reach out to them to clarify the discrepancy.
If you make substantial purchases for your business, it is critical to get familiar with the MCC codes of your favorite businesses as this can add much-needed funds to your bottom line.
If you are able to identify how your rewards credit card is categorizing your purchases, you will make strategic purchasing decisions that will benefit you now and in the future.