Credit Card Processing Tips and Tricks

What is Level 3 Credit Card Processing?

Posted by Patty Benitez| on Nov 7, 2018 1:05:51 PM|

How can my business benefit from Level 3 processing?  

What is level 3

One common question that our team at American Payment Solutions (APS) receives from many merchants is, “What is the difference between Level 1, Level 2, and Level 3 processing?”

Selecting the right processing level for your business simply requires understanding how much data you are able to provide about your transactions. The more data provided to Mastercard and Visa, the higher the savings.  Offering more data results in added security and protection from fraud as well as lower credit card transaction fees. As explained below, Level 3 processing provides the best security and requires the most data.

Level 2 and Level 3 are for business to business (B2B), not business to consumer (B2C) transactions.  A qualifying business switching to Level 3 can save thousands of dollars per year! Not all credit card processors and not all cards networks offer Level 3.  To realize these savings, merchants must seek out a Level 3 processor. For example, APS is a Level 3 processor and gateway that seamlessly integrates with multiple ERP systems and ecommerce solutions.  Mastercard and Visa are two card networks that offer Level 3 but not all networks do.

Level 1, Level 2, and Level 3 processing:  the data you collect plus the pros and cons      

Level 1 Processing:  Level 1 is common for business to consumer (B2C) sales where a merchant is selling to a consumer.  With this level, you only process standard credit cards such as personal debit or credit cards. Transactions with these types of cards are usually a “card present” sale in a traditional brick-and-mortar store.  There is only a basic amount of data that is sent via the credit card processor. This does not apply to B2B sales with commercial credit cards.

Level 1 Data Collected:  Level 1 requires the most basic data to be collected and has the highest rate. Level 1 collects the following data:

  • Total sale price
  • Credit Card Number
  • Credit Card Expiration Date

Pros:  Credit card transactions are simple to process and fast.  Also, not very much data needs to be collected.

Cons:  Level 1 processing has the highest rates for B2B cards that could qualify for Level 2 or 3. Businesses are not penalized for not providing data or   The rates are the highest compared to Level 2 and Level 3 processing because there is an increased risk of fraud as there is only a small amount of data to verify.  

Level 2 Processing:  Level 2 is for B2B scenarios where you are using your credit card for purchases as an organizational buyer and where the issuer provides Level 2 discounted interchange rates for additional data.  Credit cards used are business, corporate, and purchasing cards. There are typically two types of uses at Level 2: either employees are using the credit card for travel/entertainment expenses or for purchasing corporate services or supplies.  Slightly more information is required to support Level 2 processing than from Level 1. All of the following additional information below must be provided to the processor in addition to the Level 1 data:

Level 2 Data Collected:  Level 2 includes the same data captured with Level 1 and also:

  • Tax Amount
  • Shipping Amount
  • PO Number/Customer Code

Pros:  The extra data supplied is extra security to protect against fraud.  This extra security also secures lower rates than with just Level 1.    

Cons:  Not all card networks accept Level 2 data.  B2C standard cards are not accepted. Level 2 only accepts B2B transactions with corporate cards.  Additionally, the cards must be processed at a stand-alone terminal or at a gateway like APS provides.  

Level 3 Processing:  Level 3 is ideal for business to business (B2B) and business to government (B2G) transactions.  Standard B2C cards do not qualify for Level 3 discounted rates. Only corporate or purchasing cards (P-Cards) are accepted for Level 3 transactions where the issuer allows. Qualifying for Level 3 has the most comprehensive data requirements, as illustrated below.

Level 3 Data Collected:  Level 3 includes the same data captured with Level 1, Level 2 and more. See the chart below to see the Level 3 processing data requirements.

Pros:  Level 3 offers 8 benefits listed below:

  1. Reduce fees – The average small to mid-sized business (SMB) saves $18,000 per year on merchant account fees  
  2. Get better reporting
  3. Increase your profits
  4. Get more control over employee purchases
  5. Detailed reporting to monitor and track internal spending
  6. Added security from fraud
  7. Companies who accept purchase card and corporate card transaction may already qualify
  8. Integrating to Level 3 can be easy with processors like APS who offer an integrated ERP platform to automatically send the required data to the card networks.

Cons:   Most companies do not take advantage of Level 3 processing even though it has been around since 2012.  Not every card network provides Level 2 or 3 but Visa and Mastercard do. Many credit card processors do not offer an integrated support for Level 2 and Level 3.    

NOTE:  This information is subject to change and may vary between card associations like Visa, Mastercard, etc.

Here is a summary of the data sent with Level 1, Level 2, and Level 3 processing:

How does Level 3 Processing with APS make a difference?

When selecting a credit card processor, there are many details to consider.  Level 3 processing helps your business with lower rates for B2B transactions due to reduce risk of fraud to the card-issuing bank but this level of processing requires a gateway that is designed to handle Level 3.  APS supports Level 3 processing for US accounts. APS automatically passes along all the Level 2 and Level 3 data with the ERP and ecommerce integrations.  There is no time-consuming mapping or manual data entry required. No customer is too big or too small to save money on fees!

APS is also a fully PCI DSS compliant credit card payment processing solution.  PCI DSS compliant processors give you more security against fraud. We integrate with multiple  ecommerce and accounting solutions. Some of our integrations include AccountMate, Acumatica, Adagio, Sage 100, Sage 300, SAP Business One, Magento, WooCommerce, and QuickBooks.  You can trust APS to not only process your credit card payments but also to provide the processing solutions that your business needs. Most integrations have no upfront or software costs to set up.

APS helps you cut costs with the following benefits and features:

  1. Convenient 24-hour access to payment processing and reporting
  2. Automated recurring billing
  3. Improved cash flow
  4. Fraud detection and prevention (CVV and AVS controls for easy management)
  5. Reduce invoicing costs
  6. No added license fees
  7. Credit card tokenization for secure access to future customer transactions
  8. Real-time Payment Gateway
  9. Level 3 supported gateway for US accounts - savings for business to government or business to business transactions.
  10. Free virtual terminal for instant credit card processing
  11. Automatic integration streamlines data entry and savings
  12. Batch processing without the need for real-time approvals
  13. 100% PCI-DSS compliant at no additional cost
  14. Some of the lowest American Express fees in the entire industry
  15. Next Day Funding includes American Express and makes it easy to reconcile later
  16. We help with cancellation fees
  17. Click to Pay for quick and easy repetitive invoice entry

Call today for your FREE merchant statement analysis to see how much you could save with Level 3 processing.  The best way to get a full picture of any organization's current fees is to provide a credit card processor like APS with 2 months of the current merchant statements.  APS will then review the current fees and explain in detail the proposed fees with all expected savings. How much of a difference would it make to your bottom line if you lower your merchant processing fees by as much as 1.50%?  Contact APS for a free evaluation today!  

Credit Card Processing

Topics: Level 3, Credit Card Processing, PCI Compliance