Merchant Category Codes (MCC)

Categories: Credit, Regulations

A “merchant category code,” or MCC, is a four-digit code attached to plastic-accepting businesses that operate within a given industry. For example, all wallpaper and paint stores that accept credit and/or debit cards are given the same MCC (5231, for the curious). But if we buy our paint at a hardware store, hardware stores’ MCC is 5251, so we might see our purchase show up as a 5251 instead of a 5231 on our credit card statement.

Why is this important, and why should we care? Well, there are a few reasons. As cardholders, we might have one of them nifty cash-back credit cards that gives us, say, 1.5% back on every paint purchase during the month of June. If we buy our paint at a 5231 merchant, we’re golden. But if we buy it at a 5251 merchant, we might not automatically get that sweet cash back, since the seller isn’t coded as a paint store, it’s coded as a hardware store. So there’s that. If it happens to us, we can always call our card company and see what can be done about it.

If we’re a business or business owner, we should be especially interested in MCCs, since they can often help the IRS determine what we can claim as business expenses and what we can’t. Also, if we’re a business that excepts credit or debit cards for our goods and services, we want to make sure we’ve got the right MCC code, because that can sometimes determine the transaction fees we owe to the actual card vendors.

Long story short (okay…long story kind of long), MCCs are super helpful in identifying, organizing, streamlining, and taxing credit-and-debit-card-related purchases. If we want to know what a specific organization or industry’s MCC is, the IRS has a published list online, along with plenty of print about how MCCs relate to taxes in general.

Related or Semi-related Video

Finance: What is a Merchant Account?4 Views

00:00

Finance allah shmoop What is a merchant account All right

00:07

You sell earrings at the mall hearings for years and

00:10

you know other regions private ones You're a merchant You

00:14

take credit cards visa amex mastercard A customer pays for

00:18

her ear ring with a visa card charge for three

00:22

hundred bucks Alright Well where does that money go How

00:24

does it get there Well because you pierce on earth

00:28

have a merchant account you take her little mag strip

00:32

thing Me on her card with all our information has

00:35

everything on it like her name bank number address phone

00:39

a whole bunch of other codes on it You swipe

00:42

it in your little reader and voila Three hundred boxes

00:45

taken from her account with visa taking about five bucks

00:49

of this transaction for the pleasure or pain of doing

00:52

it And then visa room it's two hundred ninety five

00:55

dollars into your bank of america merchant account that's How

01:00

you got paid So who gets a merchant account Do

01:04

you need a fundamental genetic resistance teo Kryptonite to be

01:08

granted such lofty status No not at all Generally speaking

01:13

all you need is a few grand in a basic

01:15

bank account Reasonable credit scores like above six hundred ish

01:19

And you have to be willing to fork over some

01:21

minimum initial amount as well as minimum monthly amount So

01:25

it's still worth it for the credit card companies and

01:28

banks to continue to be in business with you like

01:30

there's A basic monthly fee for most of them Well

01:33

how do you lose your merchant account status Well you

01:36

offer lousy product to your customers who demand their money

01:39

back through charge cards in what's called a charged back

01:43

like they dispute the charge and make the credit card

01:46

company go after you for the refund And that then

01:49

violates some minimum few percent floor from a credit card

01:53

taking perspective and well then visa mastercard amex will They

01:56

could just stop issuing you a credit taken stopped taking

02:00

customers cards from you and then you have to only

02:03

take cash You're screwed But as long as you follow

02:05

the rules pay your bills and continue to attract creative

02:08

people who want piercings in you know interesting places like

02:12

the mall Then you'll remain in business for a long

02:14

as you want more or less and well so that's

02:17

It You're one of the few the proud the merchants

Find other enlightening terms in Shmoop Finance Genius Bar(f)