Acquiring
Merchant Category Code
Also: MCC
Four-digit ISO 18245 code used by card schemes to classify a merchant's business.
A Merchant Category Code (MCC) is a four-digit number assigned by an acquirer or payment processor to classify a merchant based on the primary type of goods or services provided. Defined under ISO 18245, these codes are utilised by card schemes like Visa and Mastercard to determine the interchange rates applied to transactions, as businesses in higher-risk categories such as gambling or adult services often face different pricing structures. Issuers rely on these codes to trigger specific fraud monitoring rules or to identify eligible transactions for cardholder reward programmes and cashback schemes. Beyond pricing, MCCs dictate the application of certain scheme rules, including requirements for Strong Customer Authentication (SCA) or the ability to process specific types of recurring payments. Incorrectly mapping a Merchant Identification Number (MID) to a specific MCC can lead to financial penalties, diverted settlement, or the systematic declining of legitimate cardholder transactions during the authorization process.
Frequently asked
Can a merchant have multiple MCCs for different business lines?
Yes, if a merchant operates distinct business units with significantly different risk profiles or product types, an acquirer may assign multiple MIDs, each with its own MCC. This ensures that interchange is calculated accurately and that scheme rules relevant to each specific trade category are correctly applied.
How does an MCC impact interchange fees and profitability?
Card schemes set various interchange tiers based on the MCC, with lower rates often reserved for essential services like utilities or education and higher rates for high-risk or discretionary sectors. Choosing an inaccurate code to lower costs is generally considered 'miscoding,' which may result in heavy fines from schemes or the termination of the acquiring agreement.
Related terms
The fee paid by the acquirer to the issuer on every card transaction, set by the schemes.
The licensed bank or financial institution that holds the merchant's MID and settles card transactions on the merchant's behalf.
A unique identifier issued by an acquirer that ties transactions to a specific merchant account.
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