A Merchant Category Code (MCC) is a four-digit number assigned to a particular merchant. Each MCC identifies the primary industry of an individual business or entity, and can be found on either your bank’s payment card statement or via credit bureau reports. This code is necessary for reporting accurate sales data to merchants such as Amazon and eBay, as well as for the proper categorization of expenses for tax purposes.
There are a few reasons why it’s important to know your MCC. For starters, understanding your MCC can help you identify fraudulent charges on your credit card statement. If you see a purchase that doesn’t seem to fit into the category of the business that was assigned the corresponding MCC, it’s likely that the charge was made fraudulently. You can then report the charge to your bank and/or credit card company for further investigation.
Another reason to be familiar with your MCC is so you can correctly categorize expenses for tax purposes. The Internal Revenue Service (IRS) requires businesses to report specific expenses, such as office supplies and event tickets, based on their MCC. Therefore, the more familiar you are with your MCCs and what they represent, the better able you will be to accurately file these reports.
Lastly, understanding which merchant category code is assigned to a particular business can help you make decisions about how to market your products and services. If, for example, you own a business that sells sporting goods, you may want to consider targeting retailers that are classified in the MCC of “sporting goods stores.” This will ensure that your marketing efforts are reaching the right audience.
While it’s not necessary to memorize all 4,000+ MCCs, it’s helpful to know whether your business is classified as a wholesale distributor (MCC 5411), retail store (5941), or something entirely different.
There are several ways to find out which MCC represents your business. You can start by looking at the first four digits of charges on your bank statement, though this may not be the most accurate way to identify your MCC. A better option is to look up your business’ MCC using a publicly available database like this one, or by contacting both your bank and the IRS directly.
Who uses Merchant Category Codes?
MCCs are used by banks, credit bureaus, credit card companies, and merchants themselves.
Banks use MCCs to help identify fraudulent charges on customers’ credit card statements.
Credit bureaus use MCCs to help categorize businesses for the purpose of reporting their sales data.
Credit card companies use MCCs to help determine which merchants should be eligible for certain types of rewards programs.
Merchants use MCCs to help determine which expenses should be categorized for tax reporting purposes.
What is the significance of Merchant Category Codes?
The significance of MCCs lies in the fact that they provide a uniform means of classifying businesses by their primary industry. This enables banks, credit bureaus, credit card companies, and merchants to more easily identify the types of transactions that should be categorized together.
MCCs can also help businesses determine which marketing efforts will be most effective for their products and services; by understanding which MCC is assigned to a particular business, you’ll have an easier time identifying potential customers.
What are the different types of Merchant Category Codes?
There are 4,000+ MCCs in use today. The most commonly used types of MCCs include wholesale distributors, retail stores, service companies, and restaurants.
The most common Merchant Category Codes include:
- 5411 Wholesale Distributors
- 5941 Retail Stores
- 4151 Gasoline Stations
- 5011 Restaurants
- 7011 Hotels, Motels, and Inns
- 7211 Personal Service Establishments
- 8351 Repair and Maintenance Shops
- 8532 Computer and Electronic Stores
- 8711 Travel Agencies and Tour Operators
- 8941 Banks and Other Financial Institutions
- 9201 Title Abstract Offices
- 9411 Fuel Dealers
- 9600 Miscellaneous Amusement & Recreation Establishments
- 9912 Investment Advice Firms
Where can I find a list of common Merchant Category Codes?
A full list of MCCs is available here. The IRS also lists certain MCCs on its website, and your bank may be able to provide you with a list of your business’ MCCs.
What is the difference between a DBA name and Merchant Category Codes?
A DBA or “Doing Business As” name is used when an individual or organization operates under a different business entity than their assigned MCC. For instance, if you own a restaurant in San Francisco under your own name but want to open another location in Las Vegas, you would set up a separate MCC and DBA name.
Merchant Category Codes are used to track the spending habits of businesses and their customers. A business’ MCC can be used to determine which expenses they can deduct on their taxes, as well as which marketing efforts will most likely lead to new sales.