Credit Cards Implement Category Code For Firearm Sales

As of April 1, cash might be king again at FFLs across the country. The International Organization for Standardization (ISO)—a federation headquartered in Geneva, Switzerland, with members across the globe who develop and publish standards—adopted a merchant category code (MCC) on Sept. 9, 2022, specifically for firearm and ammunition retailer use when processing a credit-card purchase. NRA-ILA explained on Sept. 13 that, “…the hope of gun control groups for this new MCC is that it would create a registry of gun owners that they have long sought and provide them with another tool to attack lawful industry when firearms are used in crime.”

According to Reuters news service, Discover card will begin using the code in April. Visa, MasterCard and American Express did not disclose when it launches in their respective financial networks, although they did confirm it was coming. “The new code will allow us to fully comply with our duty to report suspicious activity and illegal gun sales to authorities without blocking or impeding legal gun sales,” said Priscilla Sims Brown, president and CEO of Amalgamated Bank and chief proponent for the change.

The definition and threshold of “suspicious activity” that prompts a bank to hand private information over to law enforcement remains unknown. As a result, some predict FFLs will experience a significant increase in cash payments this year.

There’s a monetary benefit for retailers if that trend were to build, one that addresses an under-reported risk in this change. MCCs are issued to retailers, and each financial institution imposes proprietary rules and restrictions on its credit card use and acceptance. Some of those codes fall into an agreement’s “high risk” category and can result in an FFL paying higher processing fees, reduced charge-back protection and more.

Those increased fees are incurred by the retailer and invisible on a sales receipt. Enthusiasts paying cash instead of using plastic effectively bolster an FFL’s bottom line when there are no Visa, Discover, MasterCard or American Express charges involved.

The financial industry subscribes universally to the ISO-published list of MCC codes. Sporting-goods retailers have traditionally been assigned 5941. It is unclear precisely how the numbers will be reassigned, particularly at big-box stores that have a gun counter next to tennis, golf, baseball and other departments.

Credit card users—even those who don’t own firearms—accustomed to accumulating rewards through their use may also be affected by this change. Purchases at stores with certain MCCs often do not qualify, or the incentives can decrease significantly.