An advantage being in business for a few years is that you get clued into ways to save money that you had no way of knowing about when you first got started. Level 3 credit card processing is one of those under-the-radar money savers, but there’s no reason to wait until you’re an industry veteran to start saving money with Level 3 processing.
At this point, you’re probably wondering what level 3 credit card processing actually is and whether it’s as complicated as it sounds, so let’s define the term before we go into further detail.
What is Level 3 data?
Level 3 credit card processing enables business to business (B2B) and business to government (B2G) companies to save a substantial amount of money on credit card processing by giving their credit card companies – like Visa or Mastercard – additional information than they would give these companies to process traditional (level 1 or 2) transactions. Credit card transactions can fall into 3 different data levels (Level 1, Level 2, and Level 3) and each level requires a certain amount of information to qualify its transactions. The higher the level is, the more details it requires. However, the higher the data level, the less it costs merchants to process transactions.
So, if you do business with large companies or government agencies, it may be worth it to do the research to find out if level 3 data processing is an option for you. And if it is, you need to understand the steps you should take to qualify for level 3 processing rates.
Level 3 processing rates: how much can you actually save?
The short answer: you can lower your interchange by a little over 1% on corporate cards and commercial credit card transactions.
However, like with all things payment processing, the amount you ultimately save will depend on several factors including the credit card network, the level of data processing you qualify for, the technology you use to facilitate transactions, and more.
But the 1% figure should be a good ballpark to aim for.
Data Processing Levels
If terminology like “data processing levels” sounds like a foreign language to you, know that you’re not alone. Here’s a quick breakdown of each data level, as well as what the data you need to provide for your credit card company to qualify for each tier.
Level 1: All B2B transactions must qualify for a minimum of Level 1 data processing. Luckily, the data you need to provide to qualify for Level 1 processing is limited to:
- the merchant’s name
- the transaction amount
- the date on which the transaction took place.
Level 2: This level is perfect if you deal with small to mid-sized businesses. The data fields you need to fill out to qualify for Level 2 processing is a bit more extensive. You will need to provide your credit card company with:
- all level 1 data requirements
- the customer code
- the total tax amount.
Level 3: Level 3 data processing is ideal for companies that do business with large corporations or government entities––in fact, this tier of payment processing was originally created to prevent branches of the government from overspending.
To qualify for Level 3 you need to provide:
- all of the data necessary for Level 1 and Level 2
- the postal code your company is shipping from
- the postal code your company is shipping to
- the invoice number
- the order number
- the freight amount
- product code
- item description
- the line item details of the purchase.
To achieve level 3 data processing, you need to access and report a lot more data than when processing Level 1 or Level 2 transactions. Yet since higher data levels have lower interchange rates, it is worth your time to learn to qualify for Level 3 processing–– especially if your company does a lot of B2B transactions with large syndicates, or if you aspire to start doing business with the big guys, many of which only use Level 3 cards for major purchases.
Top Providers’ Level 3 Offerings
All credit card providers are not created equally, and each provider has a unique cost/benefit value proposition. Let’s take a look at what 4 of the top credit cards companies – Visa, Mastercard, American Express, and Discover – require from merchants to process Level 3 transactions.
Visa Level 3 Data
To qualify for Level 3 processing with Visa, your business needs to process 20,000 to 1 million e-commerce transactions with Visa annually. Visa requires that you submit an Attestation of Compliance (AOC) form and a Self-Assessment Questionnaire (SAQ) annually, as well as a quarterly network scan by an Approved Scan Vendor (ASV). Visa has lower interchange rates for Level 3 data. Find out more.
Mastercard Level 3 Data
Mastercard requires businesses to have between 20,000 and 1 million combined Mastercard/Maestro transactions annually, or to meet Level 3 qualifications for Visa. Mastercard also requires an annual self-assessment, an online assessment, and a quarterly network scan conducted by an Approved Scan Vendor (ASV). Mastercard provides lower interchange rates for Level 3 data. Find out more.
American Express Level 3 Data: American Express does not offer Level 3 data processing.
Discover Level 3 Data: Discover does not offer Level 3 data processing.
Preparing Your Business for Level 3 Processing
Lower interchange costs are the most obvious reason to strive to qualify for Level 3 processing, but they aren’t the only benefit. Level 3 processing can give you more control over your business by tracking things like the size of each purchase, who is allowed to process transactions and how often your card can be used, as well as notifying you of any changes or suspicious-looking transactions.
Level 3 transactions are also processed faster, meaning there’s less of a time delay between when you make a sale and when you get paid–– this can be a major incentive for businesses that don’t have a lot of excess revenue floating around.
How to Access Level 3 Processing Rates
Extra data isn’t the only thing you need in order to qualify your businesses for Level 3 processing. You also need a payment gateway to authorize online transactions, as well as a card that’s actually eligible for Level 3 data processing.
If you need to acquire a payment gateway, the cool thing is that payment gateways like Payment Depot partner PayTrace actually fill in the data that’s necessary for you to get Level 2 and Level 3 processing rates on business cards, so you can get all of the savings of high-level processing without having to engage in the tedium of manually filling in data.
If you still aren’t sure if your transactions would qualify for Level 3 processing rates, or you want to learn additional ways your business can save money on payment processing fees, sign up for a free analysis from Payment Depot to learn how you can start saving money on interchange fees today!
Pro tip: even if you don’t end up qualifying your level 3 data processing rates, we can still help you find ways to save on merchant services and payment processing.2b
Quick FAQs about Level 3 Card Processing
Q: What is Level 3 credit card processing?
Level 3 credit card processing involves providing detailed transaction data to qualify for reduced interchange fees. It is primarily used in B2B (business-to-business) and B2G (business-to-government) transactions, allowing businesses to save money by submitting more comprehensive data, such as line-item details, to card issuers like Visa and Mastercard.
Q: How does Level 3 data processing differ from Levels 1 and 2?
Level 3 data processing requires the submission of more detailed information than Levels 1 and 2. While Level 1 requires basic transaction details, and Level 2 requires additional data such as a customer code and tax amount, Level 3 demands comprehensive information, including shipping details, invoice numbers, and product descriptions.
Q: What are the benefits of qualifying for Level 3 credit card processing rates?
The primary benefit of qualifying for Level 3 processing rates is the potential to lower interchange fees by up to 1%. Additionally, Level 3 processing offers improved transaction tracking and faster payment processing, which can enhance cash flow for businesses dealing with large corporations or government agencies.
Q: What data is required to qualify for Level 3 processing rates?
To qualify for Level 3 processing rates, businesses must provide all Level 1 and Level 2 data, plus additional details such as the shipping postal codes, invoice and order numbers, freight amount, product codes, and line-item details of the purchase.
Q: Which businesses typically benefit from Level 3 credit card processing?
Businesses that frequently engage in transactions with large corporations or government entities benefit the most from Level 3 processing. This includes companies involved in high-value B2B and B2G transactions, where the savings on processing fees can be substantial.
Q: How can a business qualify for Level 3 processing with major credit card companies?
To qualify for Level 3 processing with companies like Visa and Mastercard, businesses need to process a significant number of e-commerce transactions annually and meet specific data submission requirements. Visa and Mastercard also require businesses to complete annual assessments and network scans.
Q: Why don’t American Express and Discover offer Level 3 data processing?
Currently, American Express and Discover do not offer Level 3 data processing. These networks have different fee structures and data requirements that do not align with the Level 3 processing tier used by Visa and Mastercard.
Q: What tools or services can assist in achieving Level 3 processing qualification?
Businesses can use payment gateways like PayTrace, which automate data submission for Level 2 and Level 3 processing rates, helping companies qualify for reduced fees without manually entering extensive data for each transaction.
Q: Is Level 3 processing suitable for small businesses?
While Level 3 processing is primarily beneficial for transactions involving large entities, small businesses that frequently deal with corporate clients or aim to expand into larger markets may still find value in qualifying for Level 3 processing to reduce their operational costs.
