Understanding Level I, Level II, and Level III Credit Card Processing

Understanding your processing fees

Understanding Level I, Level II, and Level III Credit Card Processing along with the rates and fees that impact your bottom line can have a huge impact on bottom line revenues.

I, Level II, and Level III credit card processing delineate the different interchange categories and qualifications for business-to-business (B2B) and business-to-government (B2G) credit card transactions.

Level 3 Credit Card Processing

Level 3 credit card processing represents a distinct approach to handling credit cards accepted from other businesses and government entities. When correctly implemented, level 3 credit card processing can substantially reduce the costs associated with accepting B2B and B2G credit card transactions, potentially by up to 40% before your processor adds their fee.

Key Points to Remember

When it comes to commercial, business, fleet, purchase, and government cards, interchange rates can fall into one of four different buckets:

Level 1
Level 2
Level 3
Large Ticket

The differentiating factor among levels 1 to 3 is the additional payment detail included with a transaction. When level 3 detail is provided, and the transaction surpasses a certain amount (Large Ticket), it becomes eligible for additional interchange savings.

Level I Credit Card Processing

Level I processing typically applies to transactions conducted between businesses and consumers. It includes basic payment details with minimal information:

Merchant Name
Transaction Amount
Transaction Date
Level II Credit Card Processing

Level II processing encompasses information similar to level I but with additional details. This processing level can help businesses reduce interchange costs by approximately 0.50% on certain card types. Tax-exempt transactions are not eligible for level II savings. Specific criteria must be met regarding tax amounts for MasterCard and Visa.

Merchant Name
Transaction Amount
Tax Amount (within specified ranges for MasterCard and Visa)
Customer Code or PO number
Transaction Date
Merchant Zip Code
Level III Credit Card Processing

To qualify for Level III interchange rates, the information included for levels I and II must be supplemented with additional fields:

Merchant Name
Transaction Amount
Transaction Date
Customer Code
Ship From Postal Code
Destination Postal Code
Invoice Number
Order Number
Freight Amount
Line Item Detail of Purchase

Qualifying for level III interchange rates necessitates sophisticated technology capable of capturing the detailed information required by Visa and MasterCard, often found on invoices. A cost-plus merchant account and virtual terminal capable of accommodating this detail are essential.

It’s important to note that if you process authorizations, transactions must be settled within two days to qualify for level III interchange.

Large Ticket Processing

Large ticket processing provides an additional avenue for lowering interchange costs for B2B and B2G credit cards. However, only transactions including level 3 detail are eligible. Otherwise, you may end up paying higher rates for the same transaction.

Visa Commercial Product Large Ticket

Visa Purchasing Card-Non GSA / Corporate: Transaction ≥ $7,755.56
Visa Purchasing Card-Non GSA Prepaid: Transaction ≥ $2,908.00
Visa GSA Purchase Card: Transaction ≥ $5,557.14

MasterCard

Transaction Amount: ≥ $10,000.00
Certain categories are not eligible for large ticket processing, including various travel and entertainment sectors, car rentals, hotels/lodging, restaurants, and others.

Conclusion

Understanding Level I, Level II, and Level III Credit Card Processing can be very confusing and intimidating,  If you have questions or would like a no-obligation level 3 analysis and audit, feel free to contact Revolution Payments at 888-790-3450 or email [email protected]. With over 20 years of expertise in level III processing, we specialize in providing these savings to our clients.

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