1. What is MCC and How Does It Impact MDR and Reward Points?
- MCC Overview:
- A four-digit code used by credit card companies to classify businesses by the products and services they offer.
- Crucial for both consumers and business owners as it influences the MDR (Merchant Discount Rate).
- Impact on MDR:
- Determines the percentage of MDR charged during transactions.
- Lower MDR for low-risk categories like groceries and utilities (1%-1.5% depending on bank and gateway).
- Allows businesses in certain categories, like fuel stations, to pass convenience fees to customers.
- Impact on Reward Points:
- MCC influences cashback and reward points availability.
- Rewards typically available for groceries, utilities, apparel, restaurants, supermarkets, telecom, and entertainment.
- Encourages spending in low-risk consumption categories, with up to 5% cashback on online shopping and 1% on utility bill payments.
- Certain payments, like education fees and rent, usually do not earn rewards.
2. What Happens with the Wrong MCC?
- Assignment of MCC:
- Payment providers like MasterCard and Visa assign MCCs based on business categories.
- Errors can occur due to wrong entries or incorrect business information from merchants.
- Effects of Wrong MCC:
- Can lead to higher MDR and lost reward points.
- Example: A customer in Gujarat was charged a fuel surcharge on a car purchase due to incorrect MCC categorization as a fuel station.
3. How to Avoid Issues with MCC?
- Verify MCC with a Small Transaction:
- Conduct a small transaction (e.g., ₹100) to check the MCC before proceeding with larger purchases.
- Ensures that the MCC is not random or excluded.
- Addressing Wrong MCC:
- Contact the issuing bank if an MCC error occurs.
- Escalate unresolved issues to the banking financial regulator for further assistance.
Understanding MCC can help you optimize your credit card usage, avoid unnecessary fees, and maximize reward points.