Category Codes Carry Clues to Kids' Transactions

Where did that transaction come from?

Between kids just learning the financial ropes, teens pushing boundaries, merchants deploying dark patterns, and fraudsters pouncing on vulnerabilities, parents routinely have to don their detective hats to track down the source of “mystery” charges. Occasionally it’s fraud. Most times it isn’t (see Five Flavors of Faux Fraud).

This month, we added a new tool to the FamZoo transaction tracking toolbox: merchant category codes, or MCCs for short. MCCs are defined by the International Organization for Standardization (ISO) and used to classify merchants by the type of goods or services provided. When the transaction description fails to unlock the mystery of a purchase’s origin, the MCC description just might do the trick.

ISO currently defines 898 MCCs. For example, a classic category loved by teens everywhere is: "Fast food restaurants."

MCCs are grouped into 15 supercategories known as ranges. Examples of supercategories include: Miscellaneous outlets, Amusement and entertainment, and Transportation.

In FamZoo, we show the supercategory name followed by the category name. For example, each Chipotle purchase has the following MCC description:

Miscellaneous outlets > Fast food restaurants

You’ll find the MCC description in the Transaction Detail screen for a purchase transaction as follows:

1. Visit the Transactions screen for one of your cards by selecting its balance.
2. Scroll through the transaction history to locate the desired purchase.
3. Select the little status lozenge (PENDING, SETTLED, DECLINED, etc) just beneath the date to reveal the transaction’s detailed information — which includes the MCC description.

So, what did I discover when analyzing the aggregate anonymous MCC data for our child cardholders over the past 7 days?

Kids eat a lot! 4 of the top 10 categories are food related and make up a combined 63.1% of purchases in the top 10 MCCs. Kids also play a lot of online games (shocker!) and fill up the gas tank. Here are the top ten most popular merchant categories from last week:

1. Fast food restaurants: 29.5% of the purchases from the top 10 MCCs.
2. Eating places and restaurants: 15.5%.
3. Groceries and supermarkets: 14.8%.
4. Service stations (with or without ancillary services): 9.6%.
5. Digital Goods — Games: 7.5%.
6. Digital Goods — Large Digital Goods Merchant: 6.2%.
7. Wire transfers and money orders: 5.3%.
8. Automated fuel dispensers: 4.3%.
9. Bookshops: 4.1%.
10. Miscellaneous food shops — convenience and speciality retail outlets: 3.3%.

Ummm... what’s with the wire transfers and money orders? Seems sketchy. Fortunately, not. It turns out that’s mostly peer-to-peer payments through Venmo, Cash App, and Apple Pay. Very popular among teens!

And what’s with bookshops in the top 10? So retro! Nope. It turns out it’s all pretty much one massive “Bookshop”. Anyone? Beuller? Beuller? That’s right. Amazon. Anyone else remember when they were just books? OK, Boomer.

As you can see, MCC descriptions aren’t just handy tools for inspectors, they’re also trivia fodder for anyone who’s just plain curious.

In fact, MCCs are a very simple way to share some breezy spending banter with your child. “I wonder what the merchant category for Spotify is? Let’s check it out.”

But there is something deeper going on here: seemingly mindless MCC conversations with your child can lead to more mindful spending. Those sessions also set the table for more transparent money management dialog going forward.

And that’s what we’re all about.