If you are like most consumers, there is a good chance that the credit card in your wallet comes with a rewards program. Most cards limit the rewards to certain types of purchases, such as gas or groceries. What you may not realize is that you do not accrue points based on what you purchase but where you purchase. That is where understanding merchant category codes can help you get the most out of your rewards credit card.

What Is a Merchant Category Code?

When a merchant signs up to accept credit cards with MasterCard, Visa, American Express, or Discover, they are assigned a four-digit code that identifies the type of goods or services that the merchant provides. The code, sometimes referred to as an MCC, was originally meant to assist the Internal Revenue Service and businesses with certain tax reporting requirements. The major credit card networks also use the codes to determine how much they charge certain merchants for the privilege of accepting credit card payments.

MCCs and Rewards:

Merchant category codes allow credit card issuers to easily classify purchases for the purpose of providing rewards benefits. To maximize your rewards, you need to frequent merchants with the appropriate MCCs; however, this can be a little tricky. First of all, these codes are assigned storewide and have nothing to do with the items purchased. For example, your local Walmart may have an MCC classifying it as a grocery store. If you have a credit card issuer that includes groceries in its rewards program, you will earn points even if you purchase paint or a pair of jeans.

Unfortunately, determining a particular store’s merchant category can be somewhat confusing. For example, the local deli where you eat lunch every day may be categorized as a convenience store. This means that you are missing out if your card only awards dining rewards points for merchants listed as eating places or restaurants. To make the waters even murkier, different locations of the same merchant may be classified with a different code depending on that location’s primary line of business.

How to Find a Merchant’s Category Code:

There are several ways in which you can identify a store’s MCC:

  • Most credit card statements will list the merchant’s industry or the spending category along with the purchase information. This lets you know at a glance how the issuer classifies a merchant.
  • Some credit card issuers will only list the four-digit category number, such as 5251, with your purchase information. In this instance, you can use the code table that is available on the Internal Revenue Service website to look up the merchant category. For example, a merchant with an MCC of 5251 is considered a hardware store.
  • You can also use the Visa supplier locator to identify the MCC of any merchant in your area that is signed up to accept Visa. All of the major credit card networks typically identify a particular merchant with the same code, so the MCC should be the same even if your card is not a Visa.

Maximizing Your Rewards Points:

Before signing up for a rewards card, be sure to review the cardholder agreement carefully. The agreement will specify the MCCs that the issuer is including in the rewards program. Review your spending habits to see if the businesses where you spend the most money are included in order to determine if the card is worthwhile. As a general rule, it is best to avoid rewards programs that change categories every few months as these force you to constantly check which merchants are included so that you can adapt your spending patterns.