Merchant Category Code (MCC) – what is it and how it works?
- igorklimkowicz
- Jun 11
- 4 min read
Updated: 7 days ago
Merchant Category Code (MCC) is a four-digit code assigned to merchants that defines the main type of their business activity. These codes are defined by card networks such as Mastercard and Visa, and they play a key role in the authorization and classification of payment transactions.
How does MCC work?
When a store or business sets up a payment terminal (a device enabling card payments), it must declare its primary business activity — this is when an MCC code is assigned. This code is visible in the payment system during every transaction.
For example:
A BP gas station might have the code 5541 – “Service stations (with or without ancillary services).”
A grocery store, like Lidl, would have MCC 5411.
A specialty store, such as one selling nuts – MCC 5441.
Some codes are broad (e.g., “gas station”), while others are very specific. Each transaction can have only one MCC — the one assigned to the terminal by the acquiring bank (acquirer).
Transaction information (amount, terminal location, store name, MCC code, etc.) is transmitted from the terminal to the payment gateway, then to the card network, and finally to the bank. MCC is one of the key elements used by banks to decide whether to approve or reject a transaction.
How many MCC codes are there?
The number of MCC codes depends on the payment network – Visa, Mastercard, Mir, etc. – and typically ranges between 750 and 800. Interestingly, some companies and industries have their own unique codes. For example:
PLL LOT (Polish Airlines) has the code 3182 – “LOT Polish Airlines.”
Grouping MCC codes – a problem without a perfect solution
Each bank and payment institution has its own method for classifying MCCs into broader categories such as: transportation, dining, healthcare, etc. Unfortunately, there is no universal standard – different institutions may assign the same MCC to different categories. Moreover, business activities may change over time, making it difficult to maintain an accurate classification.
This creates challenges for developers of payment solutions, especially those enabling card spending limits based on MCC categories:
Should users be allowed to choose from all 800 codes themselves?
Or is it better to offer pre-built category buckets, like “restaurants” or “pharmacies”?
At Sparados, we chose flexibility – we allow manual MCC assignment via CSV or API, and for user convenience, we offer predefined MCC groups in the corporate panel. This allows users with more advanced needs (e.g., insurance companies) to precisely set where a card can be used – split into pharmacies, private clinics, hospitals, etc.
MCC limits – whitelists and blacklists
Banks and fintechs usually implement two models for filtering transactions based on MCC:
Whitelist – only transactions from specified MCCs are allowed.
Blacklist – transactions from specified MCCs are blocked.
This enables control over where a user can spend money – e.g., a corporate card can be restricted to MCCs related only to business travel.
Limitations and exceptions in practice
Each terminal has only one assigned MCC. This means:
If you buy alcohol at a gas station, the transaction will still have the gas station MCC (5541) – not a liquor store.
A lunch card will accept any purchase at a restaurant, even if it’s not a qualified meal – which can lead to misuse.
That’s why card terms and conditions often include additional rules and clarifications on what can and cannot be financed.
Reporting based on MCC
Issues with MCC classification also affect transaction reporting. Fortunately, solutions are available that learn from user data and dynamically adjust categories to their needs. Automatic classifiers can eventually assign the correct category on their own.
An added difficulty arises when small business owners don’t update their MCC after changing business activity – for example, a fishing gear store starts selling bicycles but forgets to notify the acquiring bank. Luckily, such situations are becoming increasingly rare.
Fun Fact: Valentine’s Day vs Women’s Day – who wins in flower shops?
According to data from Sparados:
Valentine’s Day (14.02.2025): the number of transactions in flower shops rose from an average of 273 to 3122.
Women’s Day (08.03.2025): a whopping 4532 transactions – over a 1560% increase from the daily average!
On Women’s Day, the number of purchases was 45% higher than on Valentine’s Day – it looks like March 8th is the real flower holiday in Poland.
Chart from card transactions in the period 10.02.2025 – 10.03.2025
Summary:
MCC is the foundation of how payment systems work, impacting transaction control, classification, and reporting. Although the system is not perfect and requires constant updating, it offers tremendous customization potential – both for financial institutions and end users. At Sparados, we believe that flexibility and automation are key to modern payment solutions.
