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What Is a Merchant Categorization Code, and How Does It Affect My Credit Card Rewards?

March 27, 2014
Credit Cards, Rewards Credit Cards
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There’s an awful lot of data thrown at credit card consumers, so probably the last thing you want to know about is something called a “merchant categorization code.” However, the MCC is actually a useful tool because it does affect the rewards you earn using your credit card, and you want to be armed with as much information as possible so you can take maximum advantage of those reward policies.

Back in 2004, the IRS required that businesses be classified based upon the market segment that they occupy. An MCC is a four-digit code that a business is assigned once it starts accepting MasterCard or Visa. Businesses that purchase some kind of service are required to report that purchase on a 1099 form at the end of the year, while purchases of goods do not have this requirement. Certain businesses are also tagged for lower interchange fees depending on the type of business they are, which is what the code identifies. These are fees charged by the issuing card agency (Visa, MasterCard, Discover, American Express) to the merchant for the privilege of allowing consumers to charge purchases.

That information doesn’t particularly affect you, the consumer. What does affect you is exactly which four-digit code is assigned to the businesses you regularly charge your purchases at. That business is going to have a single given code, even if it sells a wide variety of things. Target, for example, is given code 5411 — grocery store! So if your card gives you bonus points for shopping at a grocery store, knowing that Target qualifies may influence where you do your shopping. The same goes for Wal-Mart, which has the same grocery store classification. However, because things are often not as simple as they seem, many credit cards that offer bonus rewards at grocery stores specifically exclude superstores like … Target and Wal-Mart. Those cards’ systems override the MCC for those particular merchants.

So, let’s say you have a lot of shopping to do and it doesn’t just involve groceries. Knowing that Wal-Mart and Target (and others) are considered grocery stores by your card, and they in fact sell groceries, you can consolidate your shopping at one location and earn those rewards. Otherwise, you might think you have to shop at a traditional grocery store for your groceries and a department store for your other items. So, not only do you save yourself trips to multiple stores, you’ll get credit for spending money on items that are not, in fact, strictly considered groceries.

Conversely, however, you should keep an eye out to make sure that a business that you think may be in one category isn’t, in fact, in another. For example, you may think that 7-Eleven might qualify as groceries (#5411) but in fact it falls into “gas stations/fuel/supplies” (#5541). So it behooves you to know just who you are doing business with, and there’s a fabulous tool that permits this — if you pay a visit to Visa’s Supplier Locator website, which is right here.

There are other services that you should check on with your credit card company to see what category they fall into. Uber, for example, is listed as “ground transportation services.” That may or may not be considered travel to your credit card company. appears to have many different codes. I checked my Citi statements, where I charge my Amazon purchases, and found the MCC code to be “bookstores” — despite having purchased an awful lot of things that are not books.

Shopping cart image via Shutterstock