// TECHNOLOGY
MCC limits at car dealerships: why the bank cuts instalments
6 min readnijitech
When a dealership cannot offer instalments, the cause is usually not the customer’s limit but the merchant category code. What the code does, and how to work around it.
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Here is the scene every dealership owner knows: the customer likes the car, wants to pay in instalments, and the card limit is sufficient. But the terminal refuses instalments, or allows no more than three. The first explanation that comes to mind is the customer’s bank. It is usually the wrong explanation.
What sets the limit is generally not the card but the category the merchant is classified under. Card schemes assign every merchant a four-digit code according to the business it does, and the bank assesses risk by that code.
What the MCC does
The MCC — merchant category code — tells the bank what this merchant sells. Supermarket, restaurant, fuel, jewellery, car dealership: each has its own code. Seeing that code, the bank decides two things: the commission rate and the instalment cap.
The cap is not arbitrary. In categories with high-value, non-face-to-face sales the chargeback rate is high, and the bank manages that risk by shortening the instalment count or switching it off entirely. Car dealerships, jewellery and fuel sit at the top of that list.
Typical limits caused by the code
- Instalments capped at three or six
- Exclusion from certain campaign instalment schemes
- No authorisation for a high-value single transaction
- A commission rate higher than in other categories
Changing the code is not the answer
The first idea is usually to have the code changed. That is neither straightforward nor a fix: the code describes what the business actually is. A merchant operating under the wrong code faces a breach of the acquiring agreement at the first dispute.
The real question is different: what exactly is the risk the bank is guarding against, and can that risk be removed by a different structure?
What the bank is guarding against: the chargeback
A cardholder can ask their bank to reverse a payment that has already been made. If the bank upholds the claim, the amount is pulled back from the merchant — even if the car was delivered. On a high-value sale this is the dealership’s single biggest collection risk.
Escrow closes that gap
In an escrow structure the amount the customer pays does not go straight to the dealership; it is held by a licensed third party and released once the conditions of the transaction are met. The situation of "paid but not delivered" is removed structurally.
That is what makes instalments possible. The party collecting is no longer the dealership but the payment institution, and the category risk is assessed against that licensed institution’s structure rather than the dealership’s MCC.
What the structure changes for the dealership
- The instalment count depends on the payment institution’s structure, not the category code
- The chargeback risk does not stay with the dealership
- Payment with a third party’s card can be accepted
- The transaction record sits in a legal archive, so a dispute has something to rest on
Why the licence matters
Running an escrow structure means holding someone else’s money for a period. In Türkiye that is a regulated activity and requires a licence from the central bank. Working with an unlicensed intermediary creates a bigger risk than the one it solves: where the money sits and who is answerable for it both stay unclear.
So the question a dealership should ask is not "how many instalments can you do" but "who holds the money, and under which licence".
Summary
Four points
- What cuts instalments is usually not the customer’s limit but the merchant’s MCC
- Changing the code is not a fix — the code describes what the business is
- The risk the bank guards against is the chargeback; escrow removes it structurally
- Escrow is a regulated activity: never work without asking about the licence
Products mentioned in this post
From the glossary: MCC (merchant category code) · Escrow · Chargeback