Merchant Category Codes and Rewards Cards
Consumers who are after every dollar of savings available often turn to rewards credit cards to maximize their benefits. Depending on the card, plan and retailer, they can earn rewards from one to six percent on purchases.
As with many credit card related issues, there’s a good deal of fine print. These details often impact how points, miles or cash back accrue. Rewards cards use Merchant Category Codes, or MMCs, to define purchase streams eligible for rewards earnings.
Perhaps the easiest way to explain MCC codes is to compare these with grocery store PLU codes, or price lookups. You’re probably familiar with the stickers on various fruits and vegetables. If you compared these from store to store, you’d find that yellow bananas usually have code 4011 on them. Every grocery store uses that code in its pricing, ordering and inventory management systems to keep, well, apples and bananas apart for tracking purposes.
MCC codes serve a similar purpose. While the name suggests it may be the merchants who are coded, in fact, it’s a way of categorizing what they sell. Rewards programs use these MCC codes to collate the rates at which a card holder collects reward earnings. This is particularly important for cards that aren’t limited to reward benefits through a single retailer.
How MCCs stream qualifying rewards purchases
Let’s consider two grocery stores as an example. A rewards car holder shops both, to take advantage of sales at each, since their card offers rewards benefits on groceries. Supermarkets and grocery stores use MCC 5411. When the cardholder makes a grocery purchase at Store #1 using their rewards card, the purchase falls under MCC 5411 for rewards purposes. Say the rewards card offers 4 percent on grocery shopping. Four percent of the purchase counts toward rewards.
Between stores, the card holders stops to fill up the car. Their rewards card also pays benefits on categories 5541 and 5542. These cover service stations and automated gas pumps. Therefore, a purchase at one of these streams into the rewards program under these codes. Since the card holder’s rewards plan only pays 2 percent on fuel purchases, this lesser percentage, under MCCs 5541 and 5542, adds to the overall bonus earnings.
On to store #2. Again, it’s a grocery store, and again, MCC 5411 comes into play. The shopper adds 4 percent of this grocery purchase to their qualifying rewards purchases.
Finally, the card holder stops at a drug store for a few remaining items. Pharmacies and drug stores use MCC 5912, so qualifying purchases at the drug store collect under that MCC code at whatever discount the rewards card offers for these.
What businesses have MCC codes assigned to them?
Virtually every business, retail and wholesale falls into an MCC category. There are even “all other business” codes for companies who may fall through the cracks. You can find a comprehensive list of MCC codes posted here.
What about cards that offer rewards on all purchases? Do they use all MCC categories?
Every rewards program has its own rules, discounts, target MCCs and other special considerations. Many of these aid in preventing “gaming” of the reward program. That refers to using tricks and manipulations to earn more rewards than intended under a plan.
A typical plan that offers rewards on all purchases usually does so at a low rate, such as 1 percent. There may be certain categories that pay more, but these usually carry restrictions.
As an example, let’s look at Tangerine’s Money-Back credit card. This is one the most aggressive no-fee rewards cards in Canada. The rewards plan that has no annual fee, no limits on reward earnings, and with rewards paid out monthly. Rewards can either pay down your balance or deposit into a Tangerine savings account.
This card pays 1 percent on all purchases, and 2 percent on select MCC categories. A cardholder picks which two of 10 classes, comprising over 350 MCC categories, receive the higher percentage. If the card holder chooses the savings account option, they can choose three MCC categories.
Note that Tangerine is used here as an example. Other banks’ reward programs vary. Some rewards cards with fees pay rewards benefits that are higher than Tangerine’s plan.
The 10 categories are:
- Drug Stores and Pharmacies (MCC 5912)
- Eating Places, Restaurants, Bars, Lounges, Discos, Nightclub Taverns and Fast Food Restaurants (MCC 5812 – 5814)
- Sports Venues, Theatres, Amusement Parks, Carnivals, Circus, Tourist Attractions and Exhibits, Movie Theatres, Zoos, Bands, Orchestras, Aquariums (MCC 7941, 7922, 7996, 7991, 7929, 7998, 7832, 7829)
- Home Furnishing Stores and Furniture Reupholstery” (MCC 5712, 5719, 7641)
- Service Stations and automated gas pumps (MCC 5541/5542)
- Grocery Stores and Supermarkets (MCC 5411, 5422, 5462)
- Hardware Stores, Home Supply Warehouse Stores, Lawn and Garden Supply Stores and other home improvement retailers (MCC 5251, 5200, 5261, 5231, 5718, 5713, 5714)
- Hotels, Motels and other lodging. Note: each hotel chain has its own MCC code (MCC 7011, 3500-3828)
- Public Transportation and Parking (including Buses, Trains, Ferries), Taxis, Road Tolls (MCC 7523, 4111, 7524, 4121, 4784)
- Recurring Bill Payments. Any monthly payment automatically billed to your credit card. There are some restrictions on the definition of “recurring payment.” Card holders should check with the merchant in question.
What MCC Codes Does Costco Come Under?
Costco purchases most often fall under the MCC code 5300, the code for discount clubs. However, some locations also have gas bars. Purchases there would logically fall under MCC 5541 and 5542. Gas purchases may then qualify for rewards earnings if these MCC categories fall under the rewards card terms.
What MCC Codes Does Walmart Come Under?
Walmart may fall under different categories as well, depending on the purchase. The most obvious MCCs would be 5310-discount stores or 5311-department stores. However, it’s possible that Walmarts with full grocery sections could add the 5541 MCC code. Stores with service centres may also use one of several automotive MCCs.
Not all stores use the same MCCs, even within the same store chain. The assignment and use of an MCC is up to the retailer, not the rewards card issuer. It falls to the rewards card holder to determine the MCC of a purchase. While there is usually a process for adjusting qualifying purchases in a rewards card plan, it’s not likely that the rewards card issuer will make changes based on the card holder’s expectation.