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 Are Merchant Category Codes (MCCs)?

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.

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.