The Mysteries of Merchant Category Codes Unveiled

March 10, 2020

Every company that accepts payments is assigned a Merchant Category Code (or MCC). This is usually quite simple, but things can get difficult if you find your MCC is considered ‘high-risk’. While there is nothing wrong with being in a high-risk category, it does affect how your merchant account works and the credit card processing options open to you. So, if you are wondering what makes you a high-risk merchant, read on.

What is a Merchant Category Code (or MCC for short)?

credit card processing

An MCC is a four-digit number that specifies your industry vertical and the types of goods/services you offer. You cannot choose your MCC. It is applied by the credit card networks such as American Express, Visa, Discover and Mastercard, to every single business that accepts card payments.  The card networks use MCCs to categorize and track purchases. For example, the name assigned to the category code, such as ‘grocery stores’ appears on bank statements, so helps people identify where they have spent their money.

The codes are defined by the International Organization for Standardization. The credit card processors assign a code to every merchant at the time they begin accepting cards, depending on the network they are processing for. The codes are then used by acquiring banks and Payment Service Providers (PSPs) to determine how details such as fees and assess risk. Although the codes are usually the same for each of the credit card networks, they do have their own MCC lists with some variations for different types of business[1].

merchant category codes infographic

What puts your business into a high-risk MCC?

A high-risk MCC is assigned to a business when its product or service is associated with an industry that has either stringent regulations, increased potential for fraud or higher volumes of disputed card transactions know as chargebacks. Some examples of high-risk industries include providers of Vapes, e-cigarettes and tobacco, Adult novelties, Firearm ammunition and accessories, Nutraceuticals and supplements and Cannabidiol (CBD). Being a high-risk merchant can mean that some payment processors avoid working with you as they do not wish to take on this additional liability.

A high-risk MCC is no barrier to card acceptance

The good news is that a high-risk MCC doesn’t need to stop you accepting card payments. Donald Kadson, of T1 Payments, that specialises in credit card processing for high-risk merchants, explains: “It can be incredibly frustrating for merchants who find themselves in high-risk categories. They are legitimate businesses that face certain challenges, but many merchant account providers will not take the time to address those complexities. We have a close understanding of high-risk merchants and what underpins their type of business. For us, risk is not about the category, it’s about the company.”

High-Risk Merchant Processing can be complicated, our experts are on hand to assist you with every aspect regarding your credit card processing needs. Contact us today or Apply now! We look forward to hearing from you.