Merchant Category Codes: The Mysteries Unveiled


March 10, 2020

Every business that accepts credit cards is assigned a Merchant Category Code (MCC) by their acquiring bank or payment processor. If your merchant code is in high-risk business categories, your company will have a difficult working relationship with most financial institutions. Getting labeled as a high-risk business will make it more challenging to obtain a merchant account and credit card processing services. In this post, T1 Payments will explain MCCs in more detail and discuss why some businesses are placed in the high-risk category.

What is a Merchant Category Code (MCC)?

An MCC is a four-digit number that specifies your industry vertical and the type of goods and services that you offer. MCCs are assigned to companies by the credit card networks such as American Express, Visa, Discover, and Mastercard to identify a merchant’s line of business. When a new company signs up for a merchant account, the acquiring bank automatically assigns the relevant code to the business so they can process credit card payments from customers.

While general merchant category codes are identical across the banking network, some credit card companies have their own special identification numbers for different types of businesses. For example, the MCC code 5942 is used to identify book stores while MCC 7801 is used to classify online gambling. In addition to identifying industry verticals, merchant category codes are also used to assess business risk and determine credit card processing fees. If your business operates in a high-risk industry, you will pay higher rates for processing credit card payments.

Why are Some Businesses Assigned High-Risk MCCs?

High-risk MCCs are assigned to businesses that might be a financial liability to banks and other financial institutions. A high-risk merchant category code is given to businesses that encounter stringent or insufficient regulations, increased incidence of fraud, and high rates of disputed card transactions ⎼ known as chargebacks ⎼ in their industry. Some examples of merchants in high-risk industry verticals include vape and e-cigarette, adult entertainment, firearm and ammunition, cannabidiol (CBD), and nutraceutical and supplement businesses.

When a business is classified as high-risk, most banks and payment processors will refuse to work with them to reduce the risk of legal trouble, reputational damage, and financial loss. If your business is given a high-risk merchant category code, you will struggle to find a bank or payment company that is willing to provide you with a merchant account and credit card processing services. Not being able to process credit card payments can decrease sales opportunities, limiting business growth.

Processing Card Payments With a High-Risk MCC

A man on a laptop using his credit card to make an online payment

Many legal and reputable businesses operate in high-risk industry verticals. Running a business in a high-risk industry should not prevent you from acquiring a merchant account and accepting credit card payments from customers. Fortunately, there are many specialized payment companies that can help businesses with a high-risk merchant category code process credit card transactions with ease.

These specialized payment companies ⎼ like T1 Payments ⎼ can provide merchant accounts and credit card processing services to high-risk businesses to help them boost sales and increase profits. High-risk processors often charge higher fees for their services to offset the liabilities of working with your business but will provide a secure payment solution with a global reach to help your business reach its full potential.

Process Credit Cards With T1 Payments

Do banks and traditional payment processors refuse to work with you because your business has a high-risk merchant category code? T1 Payments can help. We offer merchant processing services to businesses in high-risk industry verticals. Our partnership with banks around the world allows us to process credit card payments in 160 different currencies, helping your high-risk business access international markets. Contact us now to learn how we can help your high-risk business go global.