How Do Business Categorization, Industry, and Location Impact Merchant Rates?


There are many factors that will determine what kind of fees you are charged by your processor. There are some factors that you can control, such as limiting charge-backs and fraud exposure, and others that you cannot, such as how you accept payments, your industry, and your physical business location.

Business Categorization

Your business categorization is essentially the way you will accept payments. There are several different categorizations of business types and these include:


A retail business is a brick and mortar establishment that conducts business face-to-face with its customers. Any credit or debit card transactions are done with the credit or debit card present and swiped through a point of sale (POS) terminal. With the least restrictive rules and lowest transaction fees, a retail merchant account would be appropriate for restaurants, convenience stores, dry cleaners, grocery stores, and others. Because the credit card is present during the transaction, there is less risk, so merchant fees are generally the lowest for these types of establishments.

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Mail Order/Telephone Order (MOTO)

Businesses that accept orders over the phone and/or via mail or fax are not doing face-to-face transactions where the card is present and swiped. Rather, transactions are manually keyed into a terminal by a sales representative. This is considered a “card not present” (also called CNP) transaction. CNP transactions carry higher fees than retail transactions because they carry a greater risk of fraud, because the customer is not present to conduct the transaction.


Almost any business today can accept payments online through an E-commerce website and by utilizing an encrypted, secure, PCI-compliant payment gateway provided by a merchant processor, such as GoSmallBiz’s payment processing partner, Bluefin. Internet purchases are also considered “card not present” transactions and will garner a higher merchant fee than the retail, or “card present” (face-to-face), classification.


Certain industries may be considered “high-risk” because there is a greater potential for charge-backs and fraudulent purchases. Some of these industries include:

  • Adult products/services
  • Check cashing services
  • Escort services
  • Multi-level marketing products/services

When obtaining a merchant account, the processor will ask you to define the industry that you operate in so that they can match that industry with an internal risk assessment that they employ. Industries are typically defined through the Merchant Category Code, also called MCC, which is a 4-digit number assigned by MasterCard/Visa to the business when it first starts accepting credit cards.

Although a business categorized as high-risk can obtain a merchant account, the merchant can expect to pay higher and additional fees for processing payments.


Where your business is located will affect your merchant fees. In the U.S., if you operate a home-based business or are located in what is considered a high-crime area, you can expect to pay higher processing fees. Outside of the U.S., if you are located in what is considered a heavily targeted country for fraud, such as Pakistan, the Russian Federation, Iran, the Central African Republic, and others, your merchant rates will be higher. Contact your payment processor to find out which countries they define as high-risk.

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Headquartered in Atlanta, Georgia, Bluefin Payment Systems is the leading provider of customized payment services specifically developed for Independent Software Vendors and their clients in the U.S. and Canada. We are focused on offering integrated solutions that generate ISVs new revenue, and increase your client acquisition and retention. Bluefin is led by industry veterans with decades of payment processing experience. We know the importance our ISV partners place on client satisfaction.