How Merchant Category Codes (MCCs) are secretly sabotaging your credit card rewards

Merchant Category Codes (MCC) are four-digit codes assigned to businesses based on their services. Among other things, they determine credit card reward points.

Credit card rewards

You may have noticed that different transactions earn you different reward points if you're a credit card holder. While you may get cashback for dining at a restaurant, you may not earn anything when paying your rent. Credit card companies decide cashback rates through the MCC or Merchant Category Code. 


  • Merchant Category Codes (MCCs) are four-digit numbers used to classify businesses.

  • Payment service providers like Visa, Mastercard, or RuPay use these codes to determine your credit card rewards.

  • If there's a mismatch between a business's actual service and its MCC, your rewards and shopping experience may be affected.

What's MCC?

MCC stands for Merchant Category Code, a four-digit number credit card companies use to classify the products or services a business offers. These codes, assigned by the International Organization for Standardisation (ISO), hold immense importance for consumers and businesses. The cashback or reward points you receive on your card transactions depend on the MCC of the merchant. MCC is also closely related to the Merchant Discount Rate (MDR). 

Also Read: Best credit card management apps

Why is MCC important?

MCCs help determine, among other things, the MDR of a business. MDR is a fee that gateway providers charge merchants for accepting credit/debit card payments. 

The MCC, depending on payment approval rates, chargeback rates, etc., determines the risk profile of a business. Higher-risk businesses attract higher MDRs. 

MCCs also help decide other parameters, such as whether a business can charge a convenience fee.

Credit card issuers give customers different cashback for transactions with different categories of merchants, depending on their MCC. For instance, the HDFC Millenia Credit Card offers 5% cashback on merchants like Amazon or BookMyShow, but no cashback for rent payments or government transactions.

Also Read: Best travel credit cards

What is the impact of the wrong MCC on your rewards?

Your shopping experience may be affected if the merchant you're transacting with is covered under an incorrect MCC.

Unfortunately, businesses sometimes do have the wrong MCC. This discrepancy typically arises from the payment gateway provider's side, but occasionally, merchants may provide incorrect information about their businesses to secure a lower MDR.

If the merchant has an incorrect MCC, you may not receive the standard cashback applicable to such payments. Further, payment to certain businesses, such as hotels, if covered under the wrong MCC, such as rent, can even attract an income tax notice if the concerned value exceeds a certain amount.

Closing thoughts

While a consumer cannot remedy incorrect MCCs, you may always try to see if you can find the MCC of a merchant before you transact to know if you're eligible for cashback. Knowing a merchant's MCC can also help you make informed decisions regarding potential taxation benefits or liabilities related to your credit card transactions.

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