How merchant category codes can help you leverage card rewards
Know what MCCs are and how they're used to track card purchases
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Most savvy shoppers want to get the most out of their credit card rewards programs. However, a lack of knowledge can have you leaving points – and money – on the table.
Have you ever strategically made a purchase using a credit card thinking you’d earn rewards, only to learn that the purchase did not count? By understanding merchant category codes (MCC) – numbers used to identify merchants and their line of business – you can lower the odds that your purchases will go to waste.
Ready to learn how MCCs can help you to maximize your rewards and savings? Here’s what you need to know.
Frequently asked questions about merchant category codes
Q: What are MCCs?
Merchant category codes are four-digit numbers assigned to businesses that accept credit cards. Each credit card network – Mastercard, Visa, Discover and American Express – has their own system for assigning MCCs.
MCCs identify the merchant’s primary line of business. For example, one code may be used to identify grocery stores while another code may be used to identify wholesale clubs and yet another may be used to identify clothing stores.
Q: Why do card issuers use MCCs?
When you make a purchase, your card issuer stores the MCC for that business. One reason card issuers use MCCs is to track purchases for rewards programs, says Nessa Feddis, senior vice president of the American Bankers Association. If you receive cash back for groceries, the codes provide an easy way to record the amount of money you spent.
Card issuers also use the codes to help consumers track their spending for budgeting purposes, Feddis adds. “The codes help card issuers create end-of-year statements that break down how people have spent their money."
Card issuers may also use MCCs as part of their risk management processes. If a card is used to make a purchase in a category that’s unusual for the cardholder, it could raise a red flag.
Some may also use the codes to gather information that can be used for marketing.
“If you see that a consumer makes a lot of purchases with a code for jewelry stores, you could come to the conclusion that this consumer probably is a high-end consumer that has a lot of discretionary income, and you can draw conclusions from that for marketing purposes,” says Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse.
Since companies may be able to share such information with companies they are affiliated with, always read the privacy statements your issuer sends each year, Stephens advises.
Q: How can I use MCCs to track rewards?
Rewards programs typically offer points or cash back for certain categories of purchases. Read over the details of the program to learn which purchases count and if there are any exclusions, Feddis says.
Card issuers use MCCs to track your purchases. So if you earn rewards for grocery purchases, your card issuer will count any purchase made at a merchant that has an MCC that classifies it as a grocery store.
Q: Why do some purchases count towards rewards and others don't?
This is where merchant category codes get tricky. Sometimes merchants aren’t classified under the merchant category code that you would assume.
According to Visa, if a merchant has more than one line of business, the merchant can be assigned the MCC of the business line that makes the most money.
Take, for example, a gas station that also has a small grocery store. If the business makes the most money selling gas, it may be assigned the MCC of a gas station. As a result, any groceries purchased there would count toward gas purchases rather than grocery purchases.
Other card networks may have different reasons for classifying merchants in unexpected ways.
Matthew Tilmann, a blogger who helps shoppers find deals on his site Script-Notes.com, recently learned this firsthand. “Recently I had to fly out for a personal trip and figured that the airport's parking garage would classify as ‘travel.’ However, after the transaction posted, I found out that [my issuer] had classified the charge to government services, perhaps because the airport is owned and operated by the county,” Tilmann says.
See related: Travel expenses cover a few surprising areas
Q: Why do issuers characterize the same merchant differently?
Each card network assigns its own MCCs and may categorize merchants differently. For example, one network might categorize a store that sells toys and video games as a toy store, while another might classify it as electronics. The important thing to know is how the credit card issuer that offers a particular rewards promotion classifies merchants that are recognized under that particular reward category.
Q: How can I use MCCs to my advantage?
By knowing what MCC a business is classified under, you can be creative with your purchases. For example, if you’re rewarded for gas purchases, you might rack up extra gas rewards by purchasing a gallon of milk in the grocery area of that gas station.
If you get rewards for buying office supplies, you may earn more office supply points by purchasing candy or paper towels in your office supply center.
Q: How do I find out a business’s MCC?
Chances are the cashier at your local electronics store won’t know what MCC the merchant falls under. However, if you have questions about what types of merchant purchases will qualify under your rewards program, you can always call your issuer, Feddis says.
Another way to identify whether a merchant has an MCC that falls under your rewards program is to make a small purchase, then check your credit card statement, says Lou Haverty, a frequent rewards user and owner of Financialanalystinsider.com, a website that features news and information for financial professionals.
The first time you make a purchase at a certain establishment, check the coding on your statement to make sure the establishment did indeed generate points or cash back under that MCC, Haverty says. Then the next time you shop there, “you will already know in advance that you will receive the bonuses you were expecting.”
If you’re a Visa cardholder, you can learn this information by looking it up. Visa publicly lists all its suppliers, along with their MCCs. While Mastercard, Discover and American Express don’t list their suppliers, there may be some similarities with their classification system.
The key to using MCCs to leverage your rewards program is to pay attention to which specific merchants net you the most rewards and shop with them over and over again. “Find a way to integrate them into your routine shopping habits,” Haverty adds.
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