Business Models
Continuity Merchant
Definition
Continuity Merchant a merchant using a business model where customers sign up (often with a trial) and are automatically billed on an ongoing basis until cancellation. Includes subscription boxes, membership services, and auto-replenishment. Higher risk classification due to chargeback patterns from customers forgetting they subscribed. MCC 5968 (Direct Marketing - Continuity/Subscription) commonly applies.
Related Terms
Subscription Billing
A payment model where customers are charged on a recurring schedule (monthly, annually, etc.) for ongoing access to products or services. Requires card-on-file capability and careful attention to authorization rates, dunning, and involuntary churn. Card networks have specific rules for subscription billing including clear disclosure and easy cancellation. Higher risk classification due to chargeback patterns.
Trial Offer
A promotional model offering free or discounted initial access before full-price billing begins. High-risk due to chargeback patterns when customers forget conversion or didn't understand terms. Acquirers scrutinize trial-to-paid conversion rates. Clear disclosure of trial terms, billing dates, and cancellation process essential. Some acquirers prohibit 'negative option' trials entirely.
MCC Code (Merchant Category Code)
A four-digit code assigned by acquirers to classify merchants by business type. MCCs determine interchange rates, acquirer appetite, monitoring thresholds, and rewards eligibility. Some MCCs are restricted (gambling 7995, adult 5967) and require specialized acquirers. Misclassification can result in account termination. MCC assignment happens during underwriting based on business description.
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