5931 Used merchandise and secondhand stores

Introduction

• What it is: This MCC covers businesses that sell secondhand goods, including clothing, furniture, and collectibles.
• Risk level: Medium — The resale nature can introduce variability in product quality and source.
• Acceptance difficulty: Medium — While generally accepted, some providers may scrutinize inventory sources more closely.
• Typical business models: thrift stores; consignment shops; used bookstores; vintage clothing retailers.
• For merchants: Expect moderate MDR rates; may face occasional reserve requirements; quick onboarding processes with some providers.
• What PSPs expect: Documentation of inventory sources; clear business structure; compliance with resale regulations.

Payment Insights & Benchmarks

Merchants in this MCC should plan for unique payment characteristics due to the nature of used goods sales. Acceptance can vary based on payment method, customer trust, and the potential for fraudulent transactions.

Payment methods

Cards: widely accepted; however, they may face scrutiny regarding chargebacks due to the nature of used merchandise.

• E-wallets: popular among customers seeking fast transactions; however, some wallet providers might impose limitations on secondhand goods.
• Cash: still a preferred method in physical stores, offering anonymity and eliminating processing fees.
• Layaway: appealing for higher-ticket items, allowing customers to make payments over time before taking possession.

Authentication & security

Strong customer authentication (SCA) is increasingly implemented to protect against fraud.

• Chargebacks in this sector can be frequent due to misunderstanding around product conditions.
• Regular monitoring for unusual transaction patterns can mitigate risks associated with reselling.

Benchmarks (indicative, not guaranteed)

MDR: typically higher than standard retail due to increased chargeback risks.

• Rolling reserves: may be required, particularly if selling high-value secondhand items.
• Settlement cycles: generally longer, possibly exceeding 7 days, due to the nature of resale transactions.
• Chargeback ratios: commonly above average, necessitating robust dispute management.
• Approval rates: can be lower than standard retail based on risk assessments by payment processors.

Key metrics to monitor

Authorization and chargeback rates segmented by payment method.

• Customer feedback and complaint trends to address potential service issues.
• Inventory turnover rates to ensure efficient sales cycles.
• Average transaction value and frequency of repeat purchases for strategic planning.

Risk & Compliance

Merchants operating under this MCC face significant scrutiny due to the potential for fraud and the complexity of inventory provenance. PSPs and acquirers implement strict risk management practices, expecting merchants to proactively address issues related to chargebacks, fraud, and compliance with AML/KYC regulations.

Chargebacks & fraud

Common types of fraud include the return of stolen goods, usage of counterfeit payment methods, and friendly fraud (“I didn’t authorize this transaction”).

• High risk of returns and disputes due to unclear product conditions or misleading descriptions, leading to customer dissatisfaction.
• Mitigation tools such as device fingerprinting, velocity checks, and thorough product documentation can help reduce chargeback rates.

AML/KYC expectations

Strong customer identity verification (IDV) processes, including checks against sanctions lists and politically exposed persons (PEP).

• Enhanced source-of-funds verification, especially for high-value transactions or unusual purchasing behavior.
• Triggers for manual review may include large purchases of secondhand items, patterns suggesting resale intentions, or discrepancies in customer information.

Operational red flags

Unclear ownership or operational transparency in the business model, especially in secondhand transactions.

• Selling high-risk secondhand goods (e.g., electronics, luxury items) without adequate authenticity checks.
• Incomplete or missing return and refund policies, leading to customer confusion and potential disputes.
• Lack of proper inventory documentation, which can create compliance challenges and raise concerns for PSPs.

Onboarding Checklist

Merchants operating in the Used Merchandise and Secondhand Stores MCC should prepare a comprehensive onboarding package before approaching PSPs or acquirers. A well-crafted submission enhances the likelihood of approval and accelerates the review process.

Legal & corporate documents

company registration and incorporation documents

• disclosure of beneficial owners (UBO) and corporate structure
• valid licenses for the relevant business activities
• policies: Terms of Service, Privacy, AML/KYC, Refund Policy

Financials & risk management

recent financial statements and cashflow forecasts

• liquidity or reserve model for payouts
• description of antifraud setup and monitoring tools

Product & marketing

demo access or screenshots of the live platform

• marketing plan and traffic source overview (affiliates, local outreach)
• geographic targeting information
• KYC flow details, including IDV providers and thresholds

Technical integration & security

payment architecture overview with supported methods/providers

• description of SCA/3DS flows, retry logic, and tokenization
• PCI DSS compliance status and data storage policy

Operations

customer support coverage (languages, 24/7 if available)

• SLA for dispute handling and chargeback response
• deposit and payout limits; self-exclusion mechanisms if relevant
• internal process for chargeback investigation and documentation

Regulation & Licensing

Licensing and certification are crucial for merchants in the used merchandise and secondhand stores MCC, as they help ensure compliance with local laws and regulations. Recognition of these licenses by payment service providers (PSPs) varies based on the merchant's jurisdiction and their target markets.

Operator licenses

Local business licenses — required in most jurisdictions to legally operate a retail store.

• Resale certificates — necessary for selling secondhand goods, permitting tax exemption on purchased items.
• Environmental permits — may be needed for stores dealing with specific types of used goods, such as electronics.
• Some jurisdictions may require special licenses for the resale of specific categories, like used vehicles or firearms.

Geo-restrictions

Some states or countries may have specific regulations that limit the resale of certain types of items (e.g., antiques, firearms).

• Regions with stricter consumer protection laws may mandate additional disclosures for secondhand goods.
• Certain markets may impose bans on imported secondhand goods, affecting regional sales.

Certifications & audits

Compliance audits for local business regulations may be required.

• Environmental compliance audits if dealing with electronics or hazardous materials.
• Retail trade association certifications may enhance legitimacy and consumer trust.
• Some merchants may also need to follow fair trade certifications, depending on the types of goods they sell.

Official Definitions & Network Comparisons

This section shows how major card networks define this MCC and highlights practical differences that affect merchant onboarding.

Explanation:

While the definitions across networks are similar, differences in terms like “used merchandise” vs. “secondhand goods” may lead to variances in classification. Additionally, some networks may have specific regulations based on local laws affecting resale businesses. Common denial reasons often include failure to provide proof of lawful sourcing and potential risk due to product categories sold.

Alternative MCC Codes

Merchants often confuse this MCC with other categories. The table below shows which codes are related, why they are confused, and what risks misclassification brings.

Rule of thumb for merchants:

Ensure that your business primarily engages in selling used or secondhand items to qualify for MCC 5931. Using an alternative MCC code improperly can lead to compliance issues, including account closure and potential inquiries. Always choose the MCC that best reflects your main business activity.

Best Practices for Merchants

Merchants operating under the MCC code 5931, which covers used merchandise and secondhand stores, must be particularly diligent in managing transactions, customer expectations, and operational risk. By following best practices, merchants can improve acceptance rates, reduce disputes, and foster strong relationships with payment service providers (PSPs).

Classification & transparency

always use the correct MCC; incorrect classification can lead to payment processing disruptions or account closure

• provide clear information about the nature of your products, return policies, and any guarantees on your website
• maintain transparency regarding any sourcing processes for secondhand items to build customer trust

Fraud & chargeback reduction

implement 3DS or step-up authentication for high-value transactions or those with red flags (e.g., unusual shipping addresses)

• ensure billing descriptors reflect your business name and operation to prevent confusion during customer statement reviews
• log customer inquiries and disputes meticulously to support your case in chargeback representments

Payment acceptance optimization

offer multiple payment methods (cards, online wallets, etc.) to cater to varied customer preferences and reduce transaction friction

• regularly assess and optimize which payment service providers yield the best transaction success rates for your demographic and item categories
• consider setting up separate merchant IDs (MIDs) for different product categories or sales channels to better manage risk

Operational discipline

monitor key performance indicators (KPIs) such as sales volume, chargeback ratios, and customer satisfaction ratings to maintain operational health

• conduct regular compliance checks and update your internal policies as necessary to reflect changes in industry standards or best practices
• designate a specific team or individual to handle disputes, ensuring timely and efficient resolutions

Payouts & liquidity

keep sufficient liquidity buffers to manage rolling reserves required by payment processors and to handle unexpected returns

• automate anti-money laundering (AML) checks for withdrawals, especially for higher transaction values to minimize risk
• regularly review and adjust your payout processes to ensure timely cash flow and identify any unusual withdrawal patterns

Business Scope & Examples

This MCC encompasses businesses that primarily deal in the sale of used or secondhand goods. Merchants classified under this category typically operate stores or platforms focused on reselling items that have previously been owned by others, promoting sustainability and offering customers unique finds at lower prices. The scope is specifically tailored to those selling pre-owned merchandise across a variety of product categories.

Models

thrift shops and secondhand clothing stores

• used furniture stores
• consignment shops
• online marketplaces for secondhand goods (e.g., clothing, electronics)
• antique shops

Borderline cases

Pawnshops — while they sell used items, they primarily function as lending services against collateral and may not fit under this MCC.

• Refurbished goods sellers — businesses that sell refurbished electronics may be considered under separate categories focused on electronics rather than used merchandise.

Signals for correct classification

business primarily sells products that are pre-owned or used

• merchandise typically sourced from individual sellers or donations
• not primarily focused on new goods or mainstream retail sales