What Are Merchant Category Codes (MCCs)?
Merchant Category Codes (MCCs) are unique four-digit numbers designated by credit card issuers to categorize purchases based on the type of merchant where the transaction occurred. These codes play a crucial role in various aspects, including the calculation of credit card rewards for consumers.
Key Takeaways
- MCCs are four-digit codes assigned to different business types for classification purposes.
- They are utilized in credit and debit card transactions for tax reporting and calculating cash back rewards.
- MCCs can impact the fees that merchants need to pay when accepting card payments.
Understanding Merchant Category Codes
Every transaction made using a credit card is assigned a specific MCC based on the nature of the business involved in the transaction.
These MCCs serve multiple purposes. Apart from assisting card issuers in calculating consumer rewards, they indicate reporting requirements for businesses to the IRS and influence the fees merchants pay for card acceptance.
MCCs, derived from International Organization for Standardization (ISO) and Standard Industrial Classification (SIC) codes, are adapted by card networks for their specific needs. Visa, for instance, consolidates some SIC codes into MCCs for better management and introduces MCCs that don’t align with SIC codes for certain merchant categories.
While most MCCs are universally recognized, variations exist among card issuers and processing networks. Businesses offering diverse products/services may have multiple MCCs, subject to changes over time.
Below are common scenarios illustrating the usage of merchant category codes.
- For instance, purchases classified under MCC 4511 (airlines and air carriers) qualify for a credit card offering 3% cash back on airline travel.
- Businesses need to report services bought from external entities to the IRS based on the recipient’s MCC, with exceptions for product purchases.
- MCCs also dictate interchange fees for businesses, influencing transaction costs depending on the assigned code.
Note
Specific industries like airlines and hotels may have unique MCCs.
Examples of Merchant Category Codes
These are examples of travel and transportation-related MCCs utilized by Citibank.
| MCC | Description |
|---|---|
| 4011 | Railroads – Freight |
| 4111 | Suburban and Local Commuter Passenger Transportation, Including Ferries |
| 4112 | Passenger Railways |
| 4119 | Ambulance Services |
| 4121 | Taxicabs and Limousines |
| 4131 | Bus Lines |
| 4214 | Motor Freight Carriers, Trucking, Moving & Storage, Local Delivery |
| 4215 | Courier Services and Freight Forwarders |
| 4225 | Warehousing or Storage of Farm Products, Refrigerated & Household Goods |
| 4411 | Cruise Lines |
| 4457 | Boat Leases and Rentals |
| 4468 | Marinas & Marine Service/Supplies |
| 4511 | Airlines and Air Carriers |
| 4582 | Airports and Airport Terminals |
| 4722 | Travel Agencies and Tour Operators |
| 4784 | Bridge and Road Fees and Tolls |
How Consumers Can Use MCCs to Maximize Their Rewards
Consumers with rewards cards can optimize their rewards by leveraging their understanding of MCCs.
For example, if a credit card offers bonus points for restaurant expenses, transactions at establishments misclassified under a different MCC may not yield the expected rewards. Adapting card usage based on MCCs can enhance cash back benefits.
Frequent patrons of certain businesses can benefit from using cards aligned with the merchant’s MCC to maximize rewards.
Shopping at large retailers may result in varied rewards based on MCC classifications, prompting consumers to select cards offering optimal benefits.
In case of reward discrepancies, consumers can leverage MCC information to rectify underpaid bonuses from card issuers.
How Can You Find the Merchant Category Code for a Business?
Your monthly credit card statement typically categorizes transactions without displaying the MCC directly. Contacting your card issuer or the merchant can help you obtain the specific MCC assigned to a business. Additionally, some card networks and issuers publish MCC lists online for reference.
What Is an Interchange Fee?
Interchange fees, also known as swipe fees, are charges imposed on merchants by payment networks and issuers for each credit or debit card transaction to cover processing costs.
What Is a 1099 Tax Form?
A 1099 form is a tax document used to report various non-wage types of income to the IRS, provided by payers like businesses to income recipients. Different types of 1099 forms exist, such as 1099-INT for interest income and 1099-DIV for dividends.
Businesses are required to issue a 1099-NEC for payments exceeding a set threshold to non-employee service providers.
The Bottom Line
Understanding Merchant Category Codes is crucial for credit card users as it impacts rewards and fees. By leveraging knowledge of MCCs, consumers can maximize benefits and rectify reward discrepancies.
