5993 Cigar stores and stands

Introduction

• What it is: This MCC code includes businesses that primarily sell cigars, tobacco products, and related accessories.
• Risk level: Medium — The tobacco industry is often subject to higher scrutiny and regulatory risks.
• Acceptance difficulty: Medium — Some payment processors may hesitate due to the specific nature of the products sold.
• Typical business models: Cigar shops; tobacco retailers; online cigar stores; specialty tobacco boutiques.
• For merchants: Expect moderate MDR rates; potential for reserves due to industry volatility; ensure compliance with payment processor policies.
• What PSPs expect: Business registration documentation; adherence to age verification practices; a clear outline of product offerings on e-commerce platforms.

Payment Insights & Benchmarks

Merchants in the Cigar Stores and Stands MCC should anticipate higher payment friction and unique acceptance challenges. The nature of the products sold can influence both customer behavior and payment processing dynamics.

Payment methods

Cards: commonly accepted, but may face restrictions based on issuer policies regarding tobacco-related products.

• E-wallets: increasingly popular for their convenience and speed in transactions.
• Cash: remains a significant method for in-store purchases, especially among certain customer demographics.
• Gift cards: typically used for privacy and can help reduce chargeback risks.

Authentication & security

Strong customer authentication measures (like 3DS) may be required, impacting checkout convenience.

• Fraud prevention needs to balance with customer experience to avoid excessive friction at payment.
• Monitoring for patterns of card misuse is essential, particularly for high-value transactions.

Benchmarks (indicative, not guaranteed)

MDR: often higher compared to standard e-commerce due to niche product regulations.

• Rolling reserves: likely to be applicable, potentially in the range of 10-20%.
• Settlement cycles: typically extended, possibly exceeding 7 days for certain transactions.
• Chargeback ratios: may be elevated, especially for online sales.
• Approval rates: potentially lower for card transactions, with better performance noted for local wallets.

Key metrics to monitor

Authorization rates segmented by payment method and issuing bank.

• Chargeback reasons, particularly focusing on fraud versus service-related disputes.
• Daily and monthly sales trends to identify payment method preferences.
• Customer return rates and their correlation to payment method usage.

Risk & Compliance

Merchants under this MCC are closely scrutinized due to elevated financial and reputational risks. PSPs and acquirers typically apply stricter controls, expecting merchants to proactively address fraud, chargebacks, and AML/KYC compliance.

Chargebacks & fraud

Commonly experience friendly fraud disputes where customers claim unauthorized purchases of cigars or products.

• Use of stolen cards and chargebacks due to customer dissatisfaction with product quality are prevalent.
• Mitigation tools include velocity checks to limit the frequency of purchases from the same card and device fingerprinting to detect fraudulent activities.

AML/KYC expectations

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

• Source-of-funds checks are expected for high-value transactions or unusual buying patterns.
• Manual review triggers may include multiple purchases made in a short timeframe, use of prepaid or anonymous credit cards, or purchases from flagged IP addresses.

Operational red flags

Lack of transparency regarding ownership and terms of service; merchants must clearly communicate policies related to product returns and refunds.

• Sales concentrated in certain geographic areas that may suggest illicit activity or gray market dealings.
• Unclear sourcing of products, raising concerns about legality and compliance with local regulations.
• Absence of responsible marketing practices and promotions, which could attract underage consumers or encourage excessive spending.

Onboarding Checklist

Merchants under the Cigar Stores and Stands MCC should prepare a complete onboarding package before approaching PSPs or acquirers. A well-structured submission improves approval chances and shortens review times.

Legal & corporate documents

company registration and incorporation documents

• disclosure of beneficial owners (UBO) and corporate structure
• valid licenses for selling tobacco products
• 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, SEO, PPC)
• geographic targeting information
• product offerings and pricing strategy

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
• inventory management process and compliance checks
• internal process for chargeback investigation and documentation

Regulation & Licensing

Licensing and certification are important for merchants in the Cigar Stores and Stands MCC, as they help ensure compliance with local regulations and enhance trust with payment service providers (PSPs). Recognition of licenses can vary significantly depending on the merchant’s jurisdiction and the markets they target.

Operator licenses

Tobacco retail license — typically required in most jurisdictions for selling tobacco products, including cigars.

• Health department permits — often necessary to ensure compliance with local health regulations.
• Local business licenses — required for all businesses to operate legally in a specific municipality.
• Federal Tobacco Tax License (FP&T) — required in the U.S. for manufacturers and distributors of tobacco products.
• Some regions may have additional requirements or bans on specific types of tobacco products.

Geo-restrictions

Various countries have strict bans on tobacco sales, leading to transaction blocks or rejection by PSPs.

• In the United States, regulations can differ by state, affecting what products can be sold and to whom.
• Regulations in the EU mandate stringent packaging and advertising laws on tobacco, impacting operations across member states.

Certifications & audits

Compliance with local health and safety regulations related to tobacco sales.

• Federal and state-level tax compliance audits for tobacco products.
• Age verification systems audits to ensure compliance with legal age restrictions for tobacco sales.

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 are broadly similar across networks, variances in terms like "retail sale" vs "tobacco retail" can affect compliance requirements. Additionally, issues like age verification for tobacco products and state-specific licenses can lead to different onboarding experiences. Common reasons for denial may include non-compliance with local health laws, lack of necessary licenses, or concerns over the merchant's sales practices.

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:

If your business is primarily focused on selling cigars and related tobacco products, ensure you're categorized under MCC 5993. Misclassifying as other types of retail not focused on tobacco can lead to significant compliance risks and potential penalties.

Best Practices for Merchants

Merchants operating under the MCC for Cigar Stores and Stands must navigate specific challenges related to payment and compliance. The following best practices are essential for enhancing operational efficiency, reducing risks, and fostering positive relationships with payment service providers (PSPs).

Classification & transparency

always use the correct MCC; misclassification can lead to unexpected issues with processing

• clearly display product descriptions and compliance with age verification regulations on your website
• maintain transparent business practices and provide clear purchasing terms to customers

Fraud & chargeback reduction

implement 3DS (Three-Domain Secure) for transactions that exhibit higher risk signals (e.g., large orders, unusual locations)

• ensure billing descriptors are clear and recognizable to minimize confusion for customers
• keep detailed logs of transactions and customer inquiries to support dispute resolutions and representments

Payment acceptance optimization

offer multiple payment methods, including credit cards and digital wallets, to meet customer preferences and reduce declines

• analyze transaction data to optimize routing based on customer location and payment method preferences
• consider using separate merchant identifiers (MIDs) for different product categories to effectively manage risk

Operational discipline

establish KPIs to monitor key metrics such as transaction approval rates, chargeback ratios, and customer satisfaction scores

• conduct regular compliance audits to ensure adherence to industry regulations and internal policies
• designate a team member responsible for handling disputes, ensuring timely and effective resolutions

Payouts & liquidity

prepare for potential rolling reserves by maintaining adequate liquidity to support operational needs and ensure timely payouts

• automate anti-money laundering (AML) checks for withdrawals, particularly for larger amounts to minimize risk
• keep a close eye on payout timelines and any unusual patterns in transaction velocities to detect potential issues early

Business Scope & Examples

This MCC encompasses businesses that primarily deal with the sale of cigars, tobacco products, and smoking accessories. Merchants classified under this category typically operate physical stores or stands where customers purchase these products for personal use.

Models

retail cigar shops

• tobacco stores offering a variety of smoking products
• convenience stores with dedicated tobacco sections
• specialty shops for smoking accessories (e.g., pipes, lighters)
• online retailers specializing in cigars and tobacco

Borderline cases

Vape shops — while they sell smoking-related products, they often focus more on vaping than traditional tobacco; classification may vary based on product mix.

• Gift shops — these may sell cigars as part of a broader offering; if the primary focus is on gifts, they might not fit this MCC.
• Convenience stores — if tobacco products comprise a minority of sales; further assessment may be needed to establish classification.

Signals for correct classification

store primarily dedicated to the sale of cigars and tobacco products

• inventory includes a wide range of smoking accessories
• business generates significant revenue from tobacco-related sales