How much can you save with level 2 credit card processing?

Level 2 credit card processing offers businesses the opportunity to reduce their credit card transaction fees. In this article, we'll explore what Level 2 credit card processing is, its benefits, the data required, and how to enable it to start saving on fees.

What is level 2 credit card processing?

Whenever a consumer uses a credit card, the issuing bank takes on the risk by covering the payment upfront. This exposes both the bank and card brands to potential defaults or fraud.

To manage this risk, credit card processing is divided into three levels: Level 1, Level 2, and Level 3. Each level requires more transaction data, helping card brands verify the legitimacy of the purchase.

With Level 2 credit card processing, businesses provide more detailed information than in Level 1, such as customer codes and sales tax. This additional data not only reduces risk but also qualifies businesses for lower credit card transaction costs.

What are the requirements for Level 2 processing?

To qualify for Level 2 credit card processing, businesses need to provide more detailed transaction data than what is required for basic Level 1 processing. 

Here’s a breakdown of the Level 2 credit card data requirements:

• Sales tax amount
• Customer code/reference number
• Merchant zip code (postal code)
• Tax ID Merchant minority code
• Merchant state code

What are the benefits of level 2 credit card processing?

Level 2 credit card processing offers many advantages for businesses and card brands:

• Lower credit card processing fees: By providing Level 2 credit card data, businesses can qualify for lower interchange fees (a primary component of credit card processing fees). This can add up to significant savings over time, especially for companies handling high credit card transaction volumes.

• Increased transaction transparency: Level 2 processing requires more detailed information, which helps card networks reduce the chances of disputes or chargebacks. As a result, both merchants and card networks have a better understanding of the transaction.

• Enhanced security: The additional level 2 data requirements help card networks and issuers verify the legitimacy of each transaction, lowering the risk of fraud.

Overall, Level 2 credit card processing doesn’t just save businesses money on credit card transaction costs—it also boosts transparency and makes transactions more secure.

How much can you save with level 2 credit card processing?

You can save up to 17% on credit card processing costs. The actual saving amount varies based on your industry and the credit card networks you work with. Below is a snapshot of the typical savings across different industries when using Helcim’s Level 2 credit card optimization:

• Contractors/Home Services: 17%
• Platforms/Apps and SaaS: 17%
• Utilities, Gas Stations & Government: 17%
• Wholesale: 16%
• Professional Services: 16%
• Automotive: 16%
• Education: 16%
• Retail Goods: 15%
• Restaurant: 15%
• Transportation: 15%
• Recreation: 15%
• Charity/NonProfit: 14%
• Organizations and Associations: 14%
• Health Beauty and Wellness: 14%
• Hotels/Lodging: 14%
• Financial Institution: 14%
• Online Sales: 14%
• Healthy, Beauty & Wellness: 13%
• Healthcare: 12%

How do you qualify for Level 2 credit card processing?

Aside from submitting the level 2 credit card data, to qualify for Level 2 credit card processing you need to meet specific requirements of each card brand.

• MasterCard: To qualify for Level 2 with MasterCard, businesses need to process between 1 and 6 million MasterCard or Maestro transactions annually.
• Visa: For Visa Level 2 processing, businesses must handle 1 to 6 million Visa transactions annually.
• Discover: Discover offers Level 2 processing to businesses that process between 1 and 6 million transactions annually.
• American Express: Businesses that want to qualify for Level 2 processing with American Express must apply for pre-approval. This involves submitting a validation document that includes a PCI Self-Assessment Questionnaire and a quarterly network scan.

By meeting these requirements for each card brand, your business can qualify for Level 2 processing.

How do you enable Level 2 credit card processing?

1. Manually submit data for Level 2 processing

To enable Level 2 credit card processing, first ensure that your payment processor supports this level and can transmit the required data to card networks, as not all credit card companies offer Level 2 processing.

Next, you’ll need to meet the minimum transaction volume required by the card network. Once approved, Level 2 credit card data must be submitted with each transaction.

It's also essential to confirm that your payment gateway, point-of-sale (POS) system, or eCommerce platform is set up to collect and transmit the necessary Level 2 data. Lastly, make sure your staff is properly trained to enter and manage this data accurately for every transaction.

2. Automatically enable Level 2 processing with Helcim

Instead of manually managing Level 2 transactions, Helcim does the heavy lifting for you.

With Helcim, you don’t need to worry about gathering and submitting the extra data required for Level 2 credit card processing. Helcim automatically retrieves and submits that data, allowing you to save more on your processing costs.

Want to learn more about Helcim’s Level 2/3 Interchange Optimization? Give us a call—we will answer any questions you have and help you save on processing fees.

FAQ

Are transactions secure when using level 2/3 credit card data?

Yes, transactions are secure when using Level 2/3 credit card data. In fact, Level 2 and 3 processing requires additional data, such as customer codes, the billing ZIP code of the purchase, and sales tax. This information helps card networks and issuers verify the legitimacy of the transaction, reducing the risk of fraud.

What is the difference between level 1, level 2, and level 3 processing?

The main difference between Level 1, Level 2, and Level 3 processing is the amount of transaction data required. Level 1 is the most basic, with minimal data like the card number and transaction amount. Level 2 requires additional details, such as sales tax, and customer codes. Level 3 is the most detailed, requiring line-item data like billing ZIP code purchase and measure unit quantities, typically used for large corporate or government transactions, offering the lowest interchange fees.

What are the technologies required to process level 2 and 3 transactions?

To process Level 2 and 3 transactions, you’ll need a credit card processor that supports Level 2 processing, as well as a payment gateway or point-of-sale (POS) system capable of collecting and transmitting the additional data required, such as the destination ZIP code. With Helcim’s Level 2/3 Interchange Optimization, you can enable Level 2 and 3 credit card processing effortlessly—no need to manually gather or submit the extra data yourself.

What role does a payment processor play in enabling Level 2 processing?

A payment processor helps merchants transmit Level 2 credit card data to card networks. Your payment processor must support Level 2 data processing, including gathering and submitting customer code, sales tax, and other additional reporting data to qualify your business for lower interchange rates and transaction fees.

How do interchange rates affect payment processing costs?

Interchange rates are a major component of payment processing costs. They are the fees charged by card networks for each transaction. By using Level 2 or Level 3 data processing, businesses can qualify for lower interchange rates, which helps reduce overall payment processing fees.

Why is additional reporting data important for Level 2 processing?

Additional reporting data, such as customer codes, sales tax, and merchant ZIP codes, is required for Level 2 credit card processing. This extra data processing helps card networks verify the legitimacy of card transactions, making them more secure and qualifying your business for lower interchange costs.