Skip to main content
Ratehub logo
Ratehub logo

Merchant codes & bonus categories: How credit cards know when to offer extra rewards

This post is sponsored by CIBC. The views and opinions expressed in this blog, however, are my own. CIBC is not responsible for maintaining or monitoring the accuracy of information on this website.

Some of the most popular credit cards in Canada offer extra rewards (either cash back, points, or miles) on certain types of purchases, known as bonus categories. For instance, swiping the CIBC Dividend® Visa Infinite Card* at a supermarket1 earns you a bonus of 4% cash back1 – making it one of the best card to use for groceries.

But have you ever wondered how a credit card knows how to classify which purchases qualify for bonus rewards, and how a card can differentiate a dollar spent at a grocery store from, say, a restaurant or pharmacy?

Well, wonder no more because the answer is merchant category codes (or MCC for short). Read on to discover how this important classification system works.

 

What are merchant category codes (and how do they work)

The basics: what is a merchant code?

Merchant codes are a classification system that uses a four-digit code to categorize credit card purchases.

Credit card networks assign each retailer a specific merchant code based on their primary line of business. For example, a retailer that’s assigned a merchant code of 5411 is recognized as a grocery store by Visa. Thanks to merchant codes, your credit card is able to identify whether you made a purchase at a restaurant, gas station, grocery store, and so on.

Card details

  • Annual fee: $120 (rebated for the first year)
  • Welcome offer: Get 10% cash back on all purchases for the first four statement periods (up to $200 cash back)
  • 4% cash back on eligible groceries and gas
  • 2% on eligible dining, daily transit, and recurring bill payments
  • 1% on all other purchases
  • Annual income required: $60,000 (personal) or $100,000 (household)
  • ‡ Conditions apply

Merchant codes are based on retailers – not individual purchases

If you buy eggs and milk from your neighbourhood pharmacy, you might assume you’ll earn bonus cash back with the CIBC Dividend® Visa Infinite* because you’re technically purchasing “groceries” right?

Wrong.

Merchant codes – and thus bonus rewards – are assigned at the macro level (i.e., the overall retailer) rather than the micro level (what you actually buy at the store). Hence, it’s where you shop and not what you purchase that’s important. The retailer needs to have the right merchant code – regardless of what they sell – in order for you to rack up extra rewards for the corresponding bonus category. In a roundabout way, this can come in handy since it means you can earn bonus rewards no matter what you buy at a grocery store with the right merchant code – whether it’s cleaning supplies, fresh flowers or food.

In the case of recurring bills – another popular credit card bonus category – the retailer or service provider must schedule pre-authorized payments to charge your credit card automatically on a recurring basis either weekly, monthly or yearly.

Credit card networks set the codes – not banks

Merchant codes are set by the credit card companies (e.g. Visa) not by individual banks or card issuers (e.g. CIBC doesn’t have any say over retailer merchant codes). So, if you notice that you’re not racking up bonus rewards on grocery purchases at a particular store like you think you should, your bank won’t be able to help.

Furthermore, while all Visa credit cards have the same merchant codes and classify a retailer in the same way, there can be some slight variations between Visa, Mastercard, and American Express cards. Truth is though, the differences are usually negligible, and all three credit card processing networks generally classify most major retailers under the same broad categories.

Merchant codes are based on what the retailer is most known for

Retailers are assigned merchant codes based on their primary line of business. In that way, merchant codes are often intuitive. For example, Loblaws and Metro are generally categorized as groceries stores, Esso as a gas station for obvious reasons.

Merchant codes aren’t an exact science

Merchant codes are a great system, but they’re not perfect. As mentioned above, merchant codes are assigned at the retailer level, so if a particular store, like your local corner shop, doesn’t have the right merchant code, you won’t rack up bonus rewards on groceries even if they basically sell everything a grocery store does.

Walmart Discount Stores for example isn’t categorized as a grocery store by Visa. For Mastercard holders, neither is Costco.

Another issue that can sometimes arise with smaller retailers, like local mom-and-pop corner stores, is they can often have incorrect MCCs. Furthermore, in some niche cases, certain branches of a large franchise may not have the right MCC set up, even if its other store locations do.


Why merchant codes matter

Rewards

Clearly, merchant codes are directly tied to your ability to earn extra points or cash back in your credit card’s bonus categories. And that’s important because bonus categories can have a huge impact on how much rewards you rack up on your card.

Considering not all cards have the same bonus categories and earn rates, you want to be sure to choose a card with bonus categories that align with what you spend on the most.

Card details

  • Annual fee: $120 (rebated for the first year)
  • Welcome offer: Get 10% cash back on all purchases for the first four statement periods (up to $200 cash back)
  • 4% cash back on eligible groceries and gas
  • 2% on eligible dining, daily transit, and recurring bill payments
  • 1% on all other purchases
  • Annual income required: $60,000 (personal) or $100,000 (household)
  • ‡ Conditions apply

Rewards Redemptions

While not relevant to cash back cards, in the case of some travel credit cards, merchant codes can have a direct impact on your points or miles redemptions.

Several travel credit cards let you make a travel-related purchase and redeem your points at a later date to offset the cost. But if the travel provider you bought from isn’t categorized as a travel service (with the right merchant code) you might not be able to redeem your points as a travel reward. For instance, if you book a rental car with your credit card and want to redeem your points to offset the cost, you might face a few hurdles if the particular rental car agency doesn’t have the right travel merchant code.


How to look up merchant codes

Admittedly, finding a merchant code for a business isn’t all that easy. There isn’t one central database and finding out if a retailer has the “right” merchant code may involve some trial and error.

I know this from personal experience. I used to think Walmart Discount Stores were considered grocery stores, until I got my credit card statement and saw that I had not earned any bonus rewards despite the fact my card had groceries as a bonus category. Now I know that Walmart Discount Stores notoriously aren’t categorized as a grocery by Visa. The same goes for Costco and Mastercard.

You’ll want to carefully review your credit card statement and check your previous transaction history for bonus rewards and the MCCs of the stores you have visited. It can also be worth trying to call your credit card provider to see if they do have any insight on what a retailer’s merchant code is.

Below, we’ve gathered a list of popular retailers and their corresponding merchant codes as recognized by Visa.2

Grocery Stores
(Code 5411)
Gas stations
(Codes 5541 & 5542)
Food BasicsHusky
FoodlandEsso
FortinosShell
Grocery Gateway
Loblaws
Longo’s
Maxi
Metro
Real Canadian Super Stores
Valu Mart
Your Independent Grocers

Other popular merchant codes:

  • Restaurants, Fast Food, and Drinking Places: 5812, 5813, 5814
  • Entertainment:  7941, 7922, 7996, 7991, 7929, 7998, 7832, 7829
  • Daily transit: 4111
  • Pharmacies/Drug stores: MCC 5912

This post is sponsored by CIBC. The views and opinions expressed in this blog, however, are my own. CIBC is not responsible for maintaining or monitoring the accuracy of information on this website.

Footnotes (+/-)

The knowledge bank

A wealth of wealth knowledge delivered right to your inbox.

By submitting your email address, you acknowledge and agree to Ratehub.ca‘s Terms of Use and Privacy Policy. Contact us for more information. You can unsubscribe at any time.