The Ultimate Guide to High-Risk MCC Codes

Navigating the world of payment processing can be particularly challenging for businesses operating in high-risk industries. Among the myriad of Merchant Category Codes (MCC) used to classify business types, those deemed “high-risk” often signal greater hurdles in obtaining credit card processing services. Despite these challenges, accepting credit cards is crucial, especially in Latin America where they dominate as the preferred payment method.

Fortunately, there are merchant service providers that specialize in supporting high-risk businesses. By selecting the right provider, not only can you secure credit card processing, but you can also access essential tools and resources to safeguard your business from financial risks.

This guide will walk you through high-risk MCC codes, their significance, and how they can influence your ability to process payments.

What is a High-Risk MCC Code?

When a business applies for a merchant account, it is assigned a four-digit Merchant Category Code (MCC) along with a Merchant Identification Number (MID). While the MID identifies the individual merchant, the MCC code classifies the type of industry the merchant operates in.

High-risk MCC codes designate businesses operating in sectors with elevated payment processing risks. These industries often experience higher rates of chargebacks, fraud, and disputes. Consequently, many payment processors are hesitant to work with high-risk merchants due to the increased liability.

Beyond risk assessment, MCCs serve other critical functions. Card networks like Visa and Mastercard use them to determine interchange fees, establish industry-specific rules, and provide incentives. For instance, businesses with high-risk MCCs processing card-not-present transactions might require additional registration due to increased fraud risks. These regulations aim to protect the entire payment ecosystem while ensuring access to payment processing for high-risk merchants.

Essentially, high-risk MCC codes reflect a business’s potential for payment-related issues, influencing the terms and costs of payment processing.

High-Risk MCC Codes

Mandatory Registration for High-Risk MCCs

Certain high-risk industries, such as gambling (MCC 7995), or video games (MCC 7994), require mandatory registration with card associations for enhanced risk monitoring. This process involves adhering to specific regulations and paying annual fees typically ranging from 480 to 950 (€). By imposing these measures, card associations aim to mitigate risks associated with these businesses, protecting both service providers and consumers.

Fees and Rates: The Impact of MCC

Your business’s Merchant Category Code (MCC) significantly influences the cost of processing customer payments.

• Interchange Rates

The core fee you pay to accept credit cards is the interchange rate. This fee is charged by the customer’s bank for processing the payment. While various factors determine interchange rates, your business’s MCC is a key influencer. High-risk businesses, as categorized by their MCC, typically face higher interchange rates due to the increased risk of fraud and chargebacks.

• Cardholder Fees

Cardholder fees are charges passed on to the customer to offset processing costs. However, not all businesses can impose cardholder fees. The ability to do so is determined by your MCC. For instance, government services are often permitted to charge these fees, while most other businesses are not.

• Chargeback Fees

Chargebacks occur when a customer disputes a transaction. High-risk businesses are more susceptible to chargebacks. As a result, they typically face higher chargeback fees. These fees can vary significantly between providers and can be a substantial expense.

• Monthly Fees

Many high-risk merchant account providers impose monthly fees. These fees cover the costs of managing the increased risk and providing specialized services. The amount of the monthly fee can vary widely based on the provider and the specific risks associated with the business.

Navigating the High-Risk Merchant Account Landscape

Businesses classified as high-risk due to their MCC often encounter significant challenges in securing traditional merchant services. Fortunately, specialized high-risk merchant account providers cater to these industries.

By partnering with a high-risk merchant account provider, businesses gain access to essential payment tools like credit card processing, payment gateways, and virtual terminals. These providers possess in-depth knowledge of the unique challenges faced by high-risk industries and offer tailored solutions such as higher chargeback thresholds and industry-specific support.

If your business operates in a high-risk sector, securing a suitable merchant account is crucial. By selecting a reliable provider with expertise in your industry, you can ensure your business has the necessary payment infrastructure and support to thrive.

CommerceGate: Your Trusted Partner for High-Risk Businesses in LATAM

If you’re an online business operating in a high-risk industry, especially within the dynamic markets of Latin America, CommerceGate is your ideal partner. We offer secure, reliable, and fully compliant payment solutions tailored for Brazil, Mexico, Colombia, Chile, Peru, and Ecuador. Our deep understanding of local regulations, combined with cutting-edge technology like our native PIX Payment solutions in Brazil, ensures seamless transactions, enhanced customer experiences, and higher authorization rates.

With decades of experience and advanced AI-enabled fraud prevention, CommerceGate delivers the trust and security your business needs to thrive. Our cloud-based payment platform offers99.999% reliability, providingyou unmatched transparency, immediate access to funds, and detailed transaction analysis for complete control over your operations.

Choose CommerceGate to unlock the full potential of your online business in Latin America’s high-growth markets. Let us accelerate your growth and profits with our tailored payment solutions, designed to meet the unique demands of high-risk industries.

Contact us today for a free consultation!