Level 3 and level 2 credit card processing: How much can you save?

There are three levels of credit card transactions. To qualify for each level, the business needs to provide different amounts of transaction data to the card brands.

For businesses looking to save on processing costs, understanding these levels can make a big difference. In this guide, we’ll explain each processing level, the data required for qualification, and how you can easily enable Level 2 and Level 3 processing to maximize your savings.

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Why are there three levels of credit card processing?

Every time a consumer uses a credit card, their issuing bank lends out the money for the purchase. This exposes the bank and card brands to the risk of defaults or fraudulent transactions.

To minimize this risk, credit card processing is divided into three levels, with each level requiring more transaction data than the one before. The more detailed data you provide, the easier it is for card brands to verify the legitimacy of the transaction, and in turn, the more you can save on processing fees.

These data requirements are structured into three levels: Level 1, level 2, and level 3 credit card processing.

What is level 1 credit card processing?

Level 1 credit card processing is the most basic type of payment processing. Level 1 credit card data includes:

Merchant DBA (doing business as) name
Billing ZIP/postal code
Transaction amount

What is level 2 credit card processing?

Level 2 credit card processing is a step up from Level 1. What makes Level 2 different is the extra transaction data required with each transaction. By providing more detailed information about the transaction to the card brands, businesses can benefit from lower processing fees compared to Level 1.

The level 2 credit card data includes:

Sales tax amount
Customer code/reference number
Merchant ZIP/postal code
Tax ID Merchant minority code
Merchant state code

What is level 3 credit card processing?

Level 3 credit card processing is the most detailed and specialized type of processing. This level provides the most valuable data to the card brand, making it easier for them to verify the legitimacy of each transaction. In return, you benefit from the lowest possible interchange fees.

The level 3 credit card data includes:

Ship-from ZIP/postal code
Ship-to ZIP/postal code
Invoice number
Order number
Item product code
Item commodity code
Item description
Item quantity
Item unit of measure
Item extended amount
Freight amount
Duty amount

How much can you save with level 3 and level 2 processing?

The savings you can achieve with level 3 and level 2 processing depend on your industry and the credit card networks you use. Below is a breakdown of the average savings for each industry using Helcim level 2 and 3 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%

Since Helcim’s rates are already 25% lower than the industry average, processing with Helcim means you can save more on credit card transaction fees. Want to see how much you could save? Compare your current rate with Helcim and get a savings estimate today!

What are the card brand requirements for Level 2 and Level 3 credit card processing?

Each major credit card brand—Visa, MasterCard, Discover, and American Express—has its own requirement for credit card processing levels.

MasterCard requirements

To qualify for Level 2, businesses must process 1 to 6 million MasterCard or Maestro transactions annually. For Level 3, this range is $20,000 to 1 million in transactions per year.

Visa requirements

For Level 2, businesses must process between 1 and 6 million Visa transactions annually. Level 3 requires $20,000 to 1 million in eCommerce transactions per year. Businesses must complete an Annual Self-Assessment Questionnaire, Attestation of Compliance, and quarterly network scans.

Discover requirements

Discover qualifies businesses for Level 2 processing if they handle 1 to 6 million transactions annually. However, Discover only supports Level 1 data and doesn’t offer Level 3 processing or discounts for Level 2 data.

American Express requirements

Businesses seeking Level 2 processing with American Express must apply for pre-approval by submitting a validation document, including a PCI Self-Assessment Questionnaire and network scan. American Express supports Level 1 and Level 2 data but does not offer Level 3 processing.

How to enable Level 2 and Level 3 processing?

1. Manually submit data for Level 2 and 3 processing

To move beyond Level 1 processing, a proper back-end setup is essential. You’ll need to work with your credit card processor to ensure your equipment and payment gateway can handle the additional data required for Level 2 and 3 transactions. Not all processors are equipped to transmit Level 3 data to the card brands, even if they can configure your devices to collect it.

Once the back-end is configured, it’s important to train your staff how to submit the extra data to the credit card processors so it can be transmitted to the card brands.

2. Automatically enable Level 2 and 3 processing with Helcim

Instead of manually managing Level 2 and 3 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 and 3 credit card processing. Helcim automatically retrieves and submits that data, allowing you to save more on your processing fees.

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

How does the customer code help in Level 2 and Level 3 credit card processing?

In Level 2 and Level 3 credit card processing, a customer code is valuable data that helps credit card brands track transactions more effectively. By including the customer code along with other transaction details, like the billing address, businesses can reduce processing fees.

Do all credit card companies require customer codes for Level 2 and Level 3 processing?

Visa and MasterCard require customer codes for Level 2 and Level 3 processing.

Why is the billing address required for Level 2 and Level 3 credit card processing?

The billing address adds an extra layer of security and validation. Card networks and credit card companies use this information to verify that the transaction is legitimate.

How does a payment provider help a merchant qualify for Level 2 and Level 3 optimization?

A payment provider helps businesses process transactions at Level 2 and Level 3 by collecting and securely transmitting detailed data to the card networks to qualify for lower rates. A payment gateway ensures that both personal credit cards and corporate transactions are handled efficiently.