The Ultimate Guide to Merchant Category Codes (MCCs) and Why They Matter

What Are Merchant Category Codes (MCCs)?

Why MCC Codes Matter for Merchants & Banks

How MCC Codes Impact Businesses

• Chargeback Risk by MCC Code

• Processing Fees & Payment Restrictions

• Payment Approvals & Restrictions

  
  

How to Optimize Your MCC Code & Reduce Risk

The Importance of Managing Your MCC Correctly

What is Merchant Category Code (MCC)?

A Merchant Category Code (MCC) is a four-digit number assigned to businesses by credit card networks (Visa, Mastercard, American Express, Discover) that classifies the type of products or services they sell.

Why MCC Codes Matter:

✔ Banks use MCCs to assess transaction risk.

✔ Payment processors use MCCs to set processing fees.

✔ Visa & Mastercard track MCCs for chargeback monitoring & fraud prevention.

Example:

• A luxury watch retailer (MCC 5094 — Precious Stones & Jewelry) faces higher fraud risks than a grocery store (MCC 5411 — Supermarkets).

• A cryptocurrency exchange (MCC 6051 — Digital Currency Services) is subject to tighter compliance requirements than an online bookstore (MCC 5942 — Books & Media).

• A digital goods merchant (MCC 5815 — Digital Content) may face higher chargeback risk than a grocery store (MCC 5411 — Supermarkets), leading to stricter fraud monitoring & higher fees.

  
  

Why Do Banks & Payment Providers Care About MCCs?

MCC codes help financial institutions manage:

Chargeback Risk: Some industries have higher dispute rates, leading to stricter monitoring.

Processing Fees & Restrictions: High-risk MCCs often pay higher fees or face transaction limits.

Regulatory Compliance: Some industries require

KYC (Know Your Customer) & AML (Anti-Money Laundering) measures (e.g., Crypto, Gambling, Forex).

Approval for Payment Processing: Some banks & payment processors refuse to work with certain MCCs due to high risk or legal restrictions.

Example:

• MCC 7995 (Gambling & Online Betting): Banks classify this as very high risk due to fraud exposure & strict regulations.

• MCC 5967 (Subscription Services): Faces higher chargeback rates due to users forgetting to cancel recurring payments.

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Understanding your MCC is critical for managing fees, preventing chargebacks, and maintaining good standing with processors.

How MCC Codes Impact Businesses

Chargeback Risk by MCC Code

Some MCCs have a much higher chargeback rate than others.

Merchants in high-risk MCC categories need strong chargeback prevention strategies to avoid penalties.

Chargeback Rates by Industry (Estimated Averages):

Industry | MCC Code | Chargeback Rate

Gaming & Digital Goods | 5734, 5815 | 🔴 0.83%+

Luxury E-Commerce & Jewelry | 5094, 5699 | 🔴 0.52%+

Subscription Services | 5967, 7841 | 🔴 0.66%+

Crypto & Financial Services | 6051, 6012 | 🔴 0.55%+

Travel & Hospitality | 4511 | 🟡 0.89%

Gambling & Betting | 7995 | 🔴 Very High

Why These Industries Get Hit Hardest:

✔ Subscription businesses suffer from auto-renewal disputes.

✔ Digital goods are easy to consume & dispute later.

✔ Luxury e-commerce attracts high-value chargeback fraud.

✔ Cross-border transactions create chargeback confusion.

Processing Fees & Payment Restrictions for Low Risk, Medium Risk and High-Risk MCCs

High-risk MCCs pay higher transaction fees due to: ✔ Increased fraud exposure (crypto, gambling, gaming). ✔ Higher refund & dispute rates (subscription services, travel). ✔ Strict regulatory compliance (forex, financial services).

Example:

• A forex trading platform (MCC 6211 — Securities Trading) pays higher fees due to regulatory concerns & fraud risks.

• A CBD business (MCC 5499 — Specialty Food Stores) faces extra compliance checks due to industry regulations.

How MCC Codes Affect Payment Approvals & Restrictions

Some payment processors refuse to work with certain MCCs due to high risk.

High-Risk MCCs That Face Processing Restrictions:

MCC Code | Industry | Approval Difficulty 6051 | Cryptocurrency Exchanges | 🔴 Hard 7995 | Online Gambling & Betting | 🔴 Hard 6211 | Forex & Securities Trading | 🔴 Hard 5993 | Adult Entertainment | 🔴 Hard 5912 | CBD & Cannabis Products | 🔴 Hard 5967 | Subscription Billing | 🟡 Medium

If a business has a high-risk MCC, they may need to:

✔ Work with high-risk payment processors.

✔ Implement strong fraud & chargeback prevention measures.

Optimizing Your MCC Code & Reducing Risk

If your business is wrongly classified under a high-risk MCC, you might be:

• Paying higher processing fees due to perceived risk.

• Experiencing more chargebacks because of stricter monitoring.

• Facing transaction limits or restrictions from payment processors.

  
  

How to Optimize Your MCC Code for Better Payment Processing Terms

1. Check Your Current MCC Classification

• Where to find it: Check your merchant account statement or ask your payment provider.

• Compare it with the official MCC list to ensure you are categorized correctly.

  
  

Example: If you sell fashion accessories but your MCC is 5094 (Jewelry — High Risk) instead of 5699 (Apparel & Accessories — Medium Risk), you might be overpaying in fees.

2. Request a Reclassification If Necessary

• When to request: If your business model does not match your MCC category.

• How to apply: Contact your payment provider and provide:

• A business description (what you sell and how you process payments).

• Supporting documents (invoices, product lists, website screenshots).

• Alternative MCC codes that better fit your business.

  
  

Example: A digital marketing agency wrongly classified as “Direct Marketing — High Risk (5964)” can request to be reclassified as “Advertising Services (7311)” to lower fees.

3. Implement Chargeback Prevention Strategies

If you are in a high-risk MCC, switching might not be possible. Instead, focus on:

• Fraud prevention tools such as AI-based fraud filters and 3D Secure.

• Clear refund policies to avoid disputes.

• Chargeback alerts to receive early warnings before disputes escalate.

  
  

Example: Subscription-based businesses (MCC 5968) should send pre-renewal reminders to reduce “I forgot to cancel” chargebacks.

4. Monitor Your Chargeback Ratio

Visa and Mastercard closely monitor merchants with chargeback rates above 1 percent.

• Keep chargebacks below 0.9 percent to avoid penalties or account termination.

• Use dispute management tools to fight chargebacks effectively.

  
  

Example: A cryptocurrency exchange (MCC 6051) that exceeds chargeback thresholds may be forced to use high-risk payment processors.

The Importance of Managing Your MCC Correctly

Choosing the right Merchant Category Code (MCC) is not just about compliance — it directly impacts:

• Processing fees — The wrong MCC can cost your business thousands in extra fees.

• Chargeback risk — High-risk MCCs face stricter monitoring and intervention.

• Payment approvals — Some MCCs face transaction limits or outright bans.

  
  

Key Takeaways:

• Regularly check your MCC classification as it may be outdated or incorrect.

• Reclassify if necessary — a small change can lower fees and reduce risk.

• If stuck with a high-risk MCC, use fraud prevention and chargeback reduction tools.

  
  

Final Tip: Work with a payment processor that understands your industry to ensure seamless payments and fewer restrictions.

MCC Code Trends & Emerging High-Risk Categories

Merchant Category Codes (MCCs) are not static — some industries become higher risk due to regulatory shifts, while others see reduced restrictions.

Industries Becoming Higher Risk Due to Stricter Compliance & Monitoring

• Cryptocurrency & Financial Services (MCC 6051, 6211, 6012) — New anti-money laundering (AML) rules and stricter KYC verification.

• AI-Generated Content & Online Services (MCC 5815, 5816, 7372) — Increased fraud risks from deepfake content and fake accounts.

• Subscription Services (MCC 5968, 7841) — Higher chargeback rates leading to increased oversight by Visa and Mastercard.

  
  

Industries Facing Reduced Risk and Greater Payment Acceptance

• Telehealth & Online Medical Services (MCC 8099, 8011) — More widely accepted following the expansion of virtual healthcare.

• Cannabis & CBD (MCC 5912, 5499, 5122) — More payment providers are now supporting these businesses.

• Luxury Goods (MCC 5094, 5699, 5944) — Improved fraud prevention tools are reducing chargeback risks.

  
  

Why This Matters:

• Helps businesses stay ahead of compliance changes.

• Allows merchants to anticipate payment processor restrictions.

• Enables strategic planning for future reclassification requests.

  
  

Need help adjusting to these changes? avoided.io can help protect your business from chargebacks and fraud.