Merchant category codes (MCC) are 4-digit numbers that are used by credit card issuing authorities to assign categories to the transactions that customers have done using the card. The MCC is listed in ISO 18245. MCC can be assigned by the type of merchant or by the name of the merchant.
How is MCC connected to corporate cards?
Corporate credit cards are issued to businesses rather than individuals and can be used specifically for incurring business-related expenses. Often businesses use their overall credit limit to issue credit cards of smaller amounts to their employees to decentralize payments and ensure a certain level of freedom. Enabling employees to pay for certain business expenses ensures that payments are made on time, and reduces the burden on the finance department.
However, there need to be some restrictions on the way corporate cards are used to ensure that there is accountability and transparency. Corporates often ask the card-issuing authority to restrict the usage to certain merchant categories and this is where merchant codes come into play.
Merchant codes are used to limit the type of transactions that customers can do using a particular card. For example, fuel cards are issued specifically to be used to buy fuel for vehicles. The company may issue fuel cards to its employees out on the field for business purposes and in such cases, the card can be used only for the purpose of purchasing fuel.
A chargeback occurs when the electronic payment is reversed to the payer for some reason or due to a dispute raised by one of the parties. However, certain MCC codes do not offer chargeback protection to customers.
Not all businesses can impose a convenience fee on credit card transactions. The MCC code of your company helps determine whether you will be allowed to impose a convenience fee for card transactions or not.
Based on the type of credit card that the customer is using, the rewards could differ based on the MCC codes. This differential can motivate customers to frequent certain businesses or outlets.
Believe it or not, some merchant category codes are considered risky and will not be accepted by certain credit card companies. However, there are some companies that specialize in processing high-risk codes and these companies undertake the assessment of risk and go ahead with the processing with certain conditions.
MCCs are also used to report tax issues, track promotions, and gather data on the buying patterns of customers. MCC is also used to determine the transaction percentage a business will have to pay the processor of the credit card transaction.
As Asia’s 1st and largest spend management platform, EnKash helps its customers manage corporate cards along with other financial transactions like collections, expense management, and more. We believe in equipping our customers with the ability to spend smart and save more using corporate cards. Whether it is restricting the kind of spend or the best rewards possible, you will be able to manage all these on our platform.