How MCC and SIC Codes Impact Payment Processing Costs

For businesses that process high volumes of credit cards or other forms of electronic payments, it can benefit them greatly to reduce spending in this cost category.

Many factors contribute to how much a business pays in merchant processing costs including the Standard Industrial Classification Code (SIC) and Merchant Category Code (MCC) their business qualifies for. You may be familiar with these terms, however, forming a deeper understanding of how these codes impact your business is vital for cost savings.

In this article, we will explore what MCC and SIC codes are, why they are important, and how you can reduce spending by using these codes correctly.

What Is a MCC?

A Merchant Category Code (MCC) is a 4 digit code given to a business by credit card companies to properly distinguish the types of goods and/or services a business provides. The MCC assigned to a business impacts their payment processing interchange fees and is also used to simplify the reporting of payments received for tax purposes.

Additionally, the MCC assigned to your business is used by credit card companies to analyze the level of “risk” associated with your business’s transactions — another factor that determines your payment processing fees.

What Is a SIC Code?

Standard Industrial Classification (SIC) codes are 4 digit codes used to classify businesses by their industry type. The 4 digits within SIC codes follow a specific pattern that organizes businesses by their division, major group, and industry group.

When looking at a SIC code, the first three numbers describe the industry group, while the first two numbers describe which major group a business functions under. 11 divisions are divided into 83 major groups, which are then further divided into 416 industry groups.

SIC codes are used by the IRS and processing banks in contrast with MCC codes which are assigned by the credit card companies.

For example:

SIC codes 2000 – 3999 are used to classify businesses in the Manufacturing division, while codes 4000 – 4999 are used to classify businesses in the Construction division.

Why Are MCC and SIC Codes Important?

Now that we have an understanding of what MCC and SIC codes are, we need to explore some key ways these codes impact your business and bottom line.

Help Determine Interchange Rates

The credit card associations and merchant payment processors both use MCC and SIC codes to determine if your business qualifies for certain discounts or increased rates based on your industry. If you provide services or products in a high-risk industry, you’ll likely be charged more for these transactions. Certain industries are deemed higher risk due to the increased amount of chargeback disputes, fraud, and other factors.

On the other hand, certain industries and sectors can qualify for interchange discounts based on the services and products they provide. For example, industries such as healthcare, education, non-profits, government, and even supermarkets tend to reap the benefits of lower interchange rates. Therefore, it makes sense to have your business categorized correctly, to receive the discounts you may be entitled to.

Determine Your Ability to Charge Convenience Fees

Depending on your industry and the services or products you provide, you may be able to charge a convenience fee for credit card transactions. A convenience fee can typically be applied to businesses that offer a “standard” way to pay besides using credit cards. By offering the ability to pay by credit card, your business is providing a “convenience” to the customer, thus, an extra fee can be applied.

It’s best to check with your credit card acquirer if your business is suitable for a convenience fee and what rules you need to follow.

How to Find Your MCC and SIC Codes

Since MCCs are assigned by your credit card processor, and each credit card company will have its own list of MCCs that may vary slightly from one brand to the other, most credit card companies will have an MCC list posted on their website or merchant portal.

Since SIC codes are self-selected when you first start your business, you likely already have your SIC code documented. However, if someone else set up the SIC code or you misplaced your documentation, there are resources online to help you find your code. For example, allows you to browse SIC codes based on your industry, primary line of business, and secondary line of business.

How to Save on Merchant Processing Costs

As we’ve explored above, each business has an MCC and SIC code that impacts how much they pay in interchange fees. While many businesses feel they understand what these codes are, many still function within categories that don’t serve them best. This is one of the reasons we find that over 90% of businesses are overpaying.

If a business functions under the wrong SIC code(s), they may be paying more than they need to on interchange fees and are missing out on discounts they may qualify for. In most cases, it takes expert-level knowledge to truly understand which SIC codes will suit your business best.

At P3 Cost Analysts, our Merchant Processing Auditors understand the many nuances of this industry and can use our expertise to help businesses qualify for the best SIC codes possible. This in turn can bring many savings to our clients.

In addition to selecting the best SIC codes for your business, there are other ways we can find you savings on merchant processing costs.

These include:

  • Helping you process level 3 data: We can reduce your interchange fees by helping you process level 3 data because it is the most detailed kind of transaction data and is preferred by your merchant processing provider.
  • Negotiating better merchant processing fees: Our deep industry knowledge and nationwide pricing data allow us to negotiate better rates than customers can do themselves.
  • Reducing chargeback fees: Chargeback fees can add up quickly if you’re not paying attention. Fortunately, with our expertise, we are able to help you trim down your losses from these chargebacks.
  • Prescribing optimized payment gateways: Depending on your unique needs, it may make sense for us to implement ACH solutions or other aggregators such as PayPal or Square to help you reduce costs.
  • Correcting padded interchange fees: If we find that your merchant processor is padding their interchange fees, we are able to quickly spot this and bring you the correct pricing for interchange fees.

Not only does working with us bring you savings, but it’s also a risk-free process. We simply leverage our expertise to reduce your spending and share in the savings we find.

Reduce Merchant Processing Costs Today

All businesses have MCC and SIC codes that contribute to how much they’ll ultimately end up paying to accept credit cards and other forms of electronic payments.

Many businesses take a brief look at these codes when they first start their business but then forget about them. Even if a business does pay attention to these codes, there are industry nuances that will still be difficult for them to understand.

For these reasons, it’s recommended to work with a third-party cost reduction agency such as P3 Cost Analysts to optimize your spending in this cost category. With our expertise, we will help you qualify for the right codes and much more which can bring many savings to your business.

If you’re interested in having us take a look at your merchant processing situation and help you reduce spending, schedule your free expense audit today.

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