Many businesses may not know, but an MCC code can you reduce chargebacks.
What is a MCC?
Credit card networks, such as Visa and MasterCard, assign A merchant category code (MCC), which is a four-digit number, to every business when it applies to accept credit cards. MCC codes are assigned based on the information about the products and services that you submit to your payment processor and merchant bank. Card networks use merchant category codes to categorize and track purchases and to define the rules and restrictions, such as authorization and clearing messages, for card transactions.
How to Find a Merchant Category Code
- Merchant banks assign MCCs and the U.S. Internal Revenue Service publishes the list.
- MasterCard, Visa, American Express, and Discover also create their own lists.
Why Merchants Should Care About MCCs
There is a direct correlation between the MCC and credit card processing rates you pay. Merchant service providers charge transaction rates and fees based on their business types. For example, a higher risk business, like a such as a credit repair business, will cost more per transaction than a grocery store.
Merchant category codes also help business owners combat chargebacks. If a customer does not remember a charge, but then sees the category for “office supply store,” and remembers that charge was for upgrading business equipment. If a shopper is able to determine where the charge originated, the merchant can avoid a chargeback.
Other Uses for MCCs
In some cases, businesses use merchant category codes to prevent the cardholder from making some purchases. For example, businesses that give employees corporate credit cards may ask credit card networks to limit certain travel and lodging choices. Businesses may use this as way to keep costs down, by preventing its employees from booking first class airfare.
Additionally, merchant category codes often determine the rewards customers receive for using certain credit cards. The codes determine whether a business transaction needs to be reported to the IRS, as well.
Get Your MCC Changed
If you think your business has been given an inaccurate code, reach out to your processor. Then, ask the processor what code you were given from each card network. Once you find out, you will be able to determine the origin of the problem.
Though many merchants likely do not understand MCC codes, it is important to find out whether your business is classified properly. An MCC code impacts the rates you pay to process payments and it can help prevent chargebacks, both of which can make or break your business.
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