RBC new fee schedule and cash back Visa | Tax Free Savings Accounts | Discussion forum

On the subject of which purchases may qualify as "grocery", I did a little hunting around on this a while ago.

My conclusion was that both MC and Visa use a 4-digit code system to identify the category into which the store falls. They all seem to use the same system, certainly within all Visa accounts, no matter what bank issues the card. I think that MC is the same.

The key issue is in the coding, not what you buy. 5411 is the code for grocery stores, so if it has that code, no matter what you buy, it counts as grocery. 5541 is gas stations. 5542 is automatic fuel dispensers. 5192 is Pharmacy. It's possible that pharmacies within larager stores have separate coding if they bill under their own label, but I don't know this.

I have been wondering how MC codes Costco, as it could make a big difference to some people if it is coded as grocery.

I found that it's quite difficult to get the info about which stores have which codes assigned. People in the stores don't seem to know. Trial and error may be the answer.

Merchant Category Codes (MCC) do seem to be common across all credit cards. The Internal Revenue Service uses them as well!

The IRS has a list at Merchant Category Codes to Determine Reportable Payment Card Transactions.

The online site of President's Choice Financial MasterCard shows the merchant category of each transaction. The MCC is not shown. But, the merchant category shown seems to match what's in the Merchant Category column of the table on the IRS site.

Costco transactions have the merchant category "WHOLESALE CLUBS" which matches what's in the Merchant Category column for 5300.

Looks like the MCC is assigned by the acquiring financial institution that the merchants deals directly with and not necessarily MasterCard, Visa, or American Express. This is from Visa USA's booklet Visa Commercial Solutions: Merchant Category Codes for IRS Form 1099-MISC Reporting:

1. What is a Merchant Category Code?

A Merchant Category Code (MCC) is a four-digit number used by the bankcard industry to classify suppliers into market segments. There are approximately 600 MCCs that denote various types of business (e.g., 5111 Office Supplies, 7299 Dog Grooming Services, 5722 Household Appliance Stores).

2. How is the MCC assigned?

The MCC is assigned by the Acquiring financial institution when a supplier first begins accepting Visa payment cards. The MCC is assigned based on the supplier’s primary line of business. For example, if a supplier primarily sells computers, it may be assigned MCC 5732 “Computer Hardware”. If a supplier primarily repairs computers, it may be assigned MCC 7379 “Computer Maintenance, Repair, and Services”.

Yes, it is my understanding too that Walmart Superstores are coded differently than ordinary Walmarts.

Apart from that, I remain vague on all the other aspects. I really don't know what an "acquiring financial institution" is. Is it a bank? a credit card company? some kind of intermediary that processes payments? I don't know.

I think there is consistency on the application of the codes somehow but still not sure how it happens.

Thanks, Norman. I see what you're saying, sort of.

I will call them clearing houses, as that makes more sense to me. So, if each clearing house gets to make its own interpretation of codes in terms of applying them, how is it that they seem to all turn out the same, as far as we can tell? I can see where there could be room for more than one opinion on what was the primary business of a company.
Or ARE they all the same? This is the question.

More importantly, perhaps, for those who hold the new Costco mastercards which give 3% return for "restaurants", would 5812 and 5814 both qualify? How about the restaurants that are located inside other stores such as Ikea, The Bay, Holt Renfrew, T&T, hotels, etc.?
Why do they have to make this so difficult to understand?

I believe the MCC is also used for some level of fraud detection. I bought a furnace from a heating contractor who was associated with a gas station. I was able to use my MasterCard to pay for the installation -- and the card was declined. I called the bank as I had lots of credit room available and they looked at it and said it was declined as it was a transaction over $1000 and that didn't make sense for a gas station.

They told me to have the merchant call and give some code which would allow that transaction to go through.

So, 5812 (restaurant) would likely have a different level thresholds for transaction values than 5814 (fast food restaurant).

GS

Glad to hear that everything is clear now!

JustMe said
..
Same banker advised to switch my Esso Visa to cash-back Visa which I did. 2% cash back from grocery stores is good. As Walmart Superstore is defined as 'grocery store' you can buy ANYTHING there and still get 2% cash back. Not that bad as I do not know any other CC giving 2% money back. So far my favorite was Walmart master card...

The Royal Bank Cash Back MasterCard works out to be better only for those who have significantly more than 1/3 of their usage at MCC 5411 (Grocery Stores, Supermarkets) merchants that qualify for the 2% cash back rate. For everything else, the cash back rate is just ½%:

You will earn
i) $2.00 back for every $100.00 (2% Cash Back Credit) in Grocery Store Purchases you make, up to a maximum of $6,000 per Annual Period,
ii) $1.00 back for every $100.00 (1% Cash Back Credit) in Grocery Store Purchases you make in excess of $6,000 during an Annual Period, unlimited,
iii) $0.50 back for every $100.00 (0.5% Cash Back Credit) in Net Purchases you make (including pre-authorized bill payments), other than Grocery Store Purchases, up to a maximum of $6,000 per Annual Period, and
iv) $1.00 back for every $100.00 (1% Cash Back Credit) in Net Purchases you make (including pre-authorized bill payments), other than Grocery Store Purchases, in excess of $6,000 during an Annual Period, unlimited. Grocery Store Purchases are purchases made at merchants classified by MasterCard's "Merchant Category Code" as "grocery stores and supermarkets" (MCC 5411).

Otherwise, one is better using a card that gives 1% cash back for everything.

The RBC MC Cash back card is better than the Esso Visa card though, as the latter gives significantly less than 1%, percentage - approx 0.6%, depending on how much you cash in at a time.

Also, although you can shop your heart out at WalMart Superstores, only the first $6,000/yr gives the 2% return; above that, it's only 1%.