Everything You Ever Wanted to Know About High Risk Merchant Category Codes* (*But Were Afraid to Ask)

Merchant Category Codes (MCC) are an essential but often poorly understood aspect of merchant businesses. These codes are assigned to businesses by the card brands and can have significant effects on how businesses operate and accept payment.

What Are MCCs?

Merchant Category Codes are four-digit numerical codes that identify a business by the kinds of goods and services that it sells. They can be assigned to designate specific businesses or to indicate the general type of business which a merchant operates.

MCCs are categorized by the International Organization for Standardization under ISO 18425 and individual merchants are assigned their MCC by each card brand. It is entirely possible for different card brands to assign different MCCs to the same business or for one business to be assigned multiple MCCs by a card brand, depending on the structure of the business.

MCCs are important for such things as determining the interchange fee that a merchant will pay, enabling card brand rewards programs that relate to spending in specific categories, controlling purchases by category for business credit cards, and determining how purchases are categorized for tax purposes.

How Do I Find My MCC?

The most direct way to find out what MCC your business has been assigned is to contact all of the card brands that you accept as payment. There are also potentially helpful tools such as AwardWallet’s Merchant Category Lookup Tool, Visa’s Supplier Locator, and the Visa Merchant Data Standards Manual. It is also possible to find some indication to your MCC by looking at the “transaction category” section in a credit card statement for any purchases made at your business.

What Are High Risk MCCs?

Certain industries and business models are considered “high risk” by the card brands. Card brands may find a particular category of business to be high risk because it has an elevated potential for fraud, it is in a highly regulated industry, it has a tendency toward high numbers of chargebacks, or some other business sector tendency toward risk.

What Are the Consequences of Having a High Risk MCC?

Businesses with high risk MCCs are subject to higher rates for such things as interchange fees and chargeback fees. Businesses with high risk MCCs are often restricted to high risk merchant accounts, which bring their own additional level of fees and regulations. Some card processors may prohibit their customers from doing business with certain industries with high risk MCCs. Similarly, since MCCs are often used to set limits for corporate credit cards, a high risk MCC could potentially prevent a business from accepting payment from certain corporate cards.

How Should I Manage a High Risk MCC?

It depends on whether or not that high risk MCC is an accurate reflection of your business. If you feel that a card brand has inaccurately labeled your business with a high risk MCC, there are methods by which you can attempt to acquire a different MCC. Card companies do allow merchants to request a new MCC code if they feel that their current one does not accurately fit their business and can provide evidence supporting such a claim.

However, if a high risk MCC is an accurate reflection of your business, it would be ill-advised to try to intentionally misrepresent your business. In 2020, two merchants who sold cannabis products online were arrested and charged with bank fraud for selling cannabis products that were intentionally mislabeled with MCCs for such items as dog toys and soda.

Being labeled as high risk is not something that should prevent your business from operating. There are high risk merchant accounts and procedures that high risk businesses can employ in order to manage chargebacks.