Everything You Need to Know About B2B Credit Card Processing — and How to Lower Your Rates

If you run a B2B company — that is, if you do business with other business, then it’s worth exploring the ins and outs of B2B credit card processing. While traditional transaction methods such as ACH and checks still exist, credit cards are increasingly being used by companies to charge expenses.

Industry data shows that “small-business credit card purchase volume is set to balloon from $493 billion in 2017 to $686 billion in 2022.” And that’s not even counting credit card use in larger corporations. Accepting credit cards could also help your sales, as cardholders tend to spend 12 to 18% more when using credit cards instead of cash.

And here’s the kicker: if you set up your credit card systems correctly, you could qualify for lower interchange rates when you process business credit cards.

This post will shed light on the factors surrounding B2B credit card processing. We’ll also talk about the steps you can take to qualify for those lower rates we just mentioned.

Understanding the different data levels of credit card processing

One of the first things you need to understand is that credit card transactions can fall into 3 different data levels (i.e., Level I, Level II, and Level III). Each level requires a certain amount of information to qualify transactions, and the higher the level is, the more details it requires. As such, higher data levels have lower interchange rates.

The specifics of these data levels vary depending on the credit card issuer. Visa and Mastercard have different requirements for Level II data processing, and Discover doesn’t offer lower rates for Level II and above. Meanwhile, American Express supports Levels I and II, but not Level III.

It’s also important to note that the terminology for “data levels” can vary. Visa uses the term “data level,” while Mastercard uses the term “data rate.” For simplicity’s sake, we’ll use “data levels” throughout this article.

Here’s a rundown of what these levels mean and the information they require:

Level I – All transactions, whether B2B or B2C, would need to pass at least Level I processing, and it requires the following information:

  • Merchant name
  • Purchase amount
  • Date
  • Billing zip code

Level II – Level II requires all the details for Level I, plus additional details which may include:

  • Sales tax amount
  • Tax indicator
  • Customer code (for purchasing cards only)
  • Merchant postal code
  • Merchant tax ID
  • Invoice number
  • Order number

Level III – Level III requires all the details for Levels I and II, plus additional details which may include:

  • Item commodity code
  • Product/SKU description
  • Product code
  • Unit price
  • Quantity
  • Unit of measure (each)
  • Extended price
  • Discount per line item and line item total
  • Debit or credit indicator
  • Discount amount  
  • Freight/shipping amount  
  • Duty amount  

Note: As mentioned earlier, data level requirements may vary from one issuer to the next. Also, note that these requirements are subject to change, so always check with your card issuers to ensure that you’re complying with their specific requirements.

What B2B interchange rates can you expect?

Now that you have an overview of the different data levels in credit card processing, let’s look at the processing rates you can expect from each level.

Processing costs for Mastercard:

Processing costs for Visa:

All about Merchant Category Codes (MCC)

The Merchant Category Code or MCC for short is a 4-digit code assigned to your business by credit card issuers (Visa, MC, Discover, Amex). Credit card networks use MCC codes to categorize your business, as well as to track or even restrict transactions.

As journalist Elaine Pofeldt explains:

Credit card networks use MCCs to categorize and track purchases. When a purchase is added to your statement, the category assigned to it, such as “grocery stores, supermarkets,” is tied to the MCC code.

Why should you care about MCC codes? Simple: in order to qualify for lower B2B interchange rates, your business needs to be assigned the right MCC code. And just like with data levels, each credit card issuer has its own set of codes and certain rules around them.

Each card network has a lengthy list of MCC codes and the corresponding businesses assigned to each one. For example, here is a snapshot of Visa’s MCC code directory:

Remember that MCC codes and policies vary, depending on the credit card company, so be sure to check with each network and see to it that they assign the right code to your business.

Choosing the best pricing model

The pricing method of your credit card processor can also determine whether or not you can take advantage of lower B2B interchange rates. Why? Because you’ll only be able to save on interchange rates if your payment processor is using either interchange-plus pricing or membership pricing.

Here’s why: payment processors that use interchange-plus pricing charge you based on two components: the interchange rate of different card networks PLUS their markup. Membership-based processors operate using a similar model, but instead of a markup on every transaction, they charge a monthly membership fee.

In both cases, the interchange is isolated from the processor’s markup or membership fee. Because of that, the savings that you get for lowering your interchange rates are passed on to your business.

Other pricing models, specifically, blended pricing (such as the one offered by Square) and tiered pricing (such as Costco’s / Elavon’s model) bundle up their fees into fixed rates, so you won’t benefit from a lower interchange.

Having B2B processing technology

It’s important to note that processing B2B transactions requires the right payment platform. A typical merchant account may work for B2C (i.e., business to consumer transactions) but it won’t work for B2B payments.

There are a couple of ways to work around this issue. One option is to install a special software load on your payment terminal so it can process B2B transactions.

Another option is to work with a credit card processor that supports B2B payments. Payment Depot, for example, uses a gateway called PayTrace that can get the level II and level III rates on business cards. PayTrace automatically fills the data fields required to process level 2 and level 3 transactions, so merchants can enjoy the lower rates that come with these data levels.

Bottom line: If you want to lower your B2B interchange rates, start with choosing the right processor

Before you go through all the trouble of complying with higher data levels and getting card networks to assign you the right MCC code, make sure that your payment processor uses interchange-plus, or even better, membership pricing.

And see to it that your merchant services provider has the capability to actually process business-to-business transactions.

Doing so will allow you to not only save in overall processing fees, but you’ll reap the benefits of having lower interchange rates.

If you need help figuring out how you can you optimize payment processing in your business, get in touch with the Payment Depot team. We’d be happy to review your statement or proposal for free and we can discuss how you can take advantage of lower B2B rates.