Level 3 credit card processing explained

In the ever-evolving landscape of commerce, businesses constantly seek innovative ways to boost profitability, streamline operations, and enhance their competitive edge. One such avenue to achieving these objectives is the world of Level 3 interchange rates in payment processing. If you're a merchant or business owner, understanding and harnessing the power of Level 3 interchange rates can be a game-changing strategy that not only reduces transaction costs but also catapults your business into the realm of high-value B2B (business-to-business) and B2G (business-to-government) transactions.

In this article, we will review the intricacies of Level 3 interchange rates, and share how Helcim’s Level 2/3 Interchange Optimization can help your business save on its processing fees.

Level 3 processing - Why bother

The first question to answer is, "Why even bother with level 3 credit card processing, anyway?"

To lower expenses - Your company could save about 1% of the face value of the transaction by processing it as a Level 3 transaction. The lower rates for Level 3 transactions are due to the value provided to the card-issuing banks through the inclusion of the detailed data. Of course, it all depends on how you facilitate the transactions, the data processing level your company qualifies for, and the credit card network.

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What is level 3 Data?

Level 3 data, also known as enhanced data, refers to the additional information included with a credit card transaction beyond the basic transaction details. This extra information is valuable for businesses that engage in B2B (business-to-business) or B2G (business-to-government) transactions. It typically includes:

1. Detailed line-item information about the products or services being purchased.
2. Customer-specific data, such as tax ID or customer code.
3. Transaction-specific data, like order number, invoice number, and ship-to and bill-to addresses.

Level 1 transactions

Level 1 transactions are how you use your regular credit card to buy consumer products online or in-person. The merchant inputs their DBA name and zip code, and the purchase amount. The bank adds the date, time and additional cardholder details.

Level 2 transactions

Level 2 transactions have all the same information as Level 1 transactions, but add the sales tax and merchant tax ID, merchant state, minority, and zip codes, and a customer reference number. Any advanced point of payment system can add these automatically.

Level 3 transactions

A level 3 transaction requires the most information. Taking all the information for Levels 1 and 2, add the invoice and order numbers, product and commodity codes, item description and quantity with the unit of measure, the extended amount, and both freight and duty.

To make a Level 3 purchase, more data changes hands than at the lower levels. The same initial information as Level 1 and 2 transactions starts the process. Then, the credit card network requests the rest of the data at the time of purchase. The best way to manage this additional data is by having your payment processor do it automatically.

Payment processors integrate advanced technology into their systems to automatically capture and aggregate the necessary transaction data.When eligible transactions are identified, payment processors automatically upgrade them to Level 3 interchange rates. This involves optimizing the transaction by including the required data and submitting it to the credit card networks in a manner that qualifies for the reduced interchange fees. Helcim’s Level 2/3 Interchange Optimization helps populate the data you need for a transaction to qualify for Level 3 rates. So, with no additional work from your end, the transaction is upgraded to Level 3 and you get to benefit from lower interchange rates.

What do you need to do to get level 3 interchange rates?

So, you've accepted the fact that the credit card company and the purchaser want the valuable data in the Level 3 transactions. Plus, you're happy the credit card company will reduce your interchange and processing rates on the transaction. So, what do you need to do to get Level 3 rates? Nothing at all, except to keep being your awesome small business self and let Helcim handle the interchange optimization for your eligible transactions.

In conclusion

In conclusion, utilizing Helcim Level 2/3 Interchange Optimization could be a game-changer for businesses seeking to maximize savings and streamline their payment processing. By harnessing the power of this technology, merchants can enjoy several compelling benefits.

For Mastercard transactions, qualified transaction data provides merchants with immediate reduced processing fees. For Visa transactions, the recent stricter rules under the Visa Commercial Enhanced Data Program (CEDP) require Helcim to validate and enhance the data being passed for these transactions. If your transaction data qualifies, the savings will appear as a retroactive adjustment up to 45 days after the original transaction. These credits will then be reflected on the following month’s statement.

Overall, Helcim Level 2/3 Interchange Optimization simplifies the process, saving you time and resources that would otherwise be spent on manually identifying and processing Level 3 transactions. As a result, you can focus on what matters most – growing your business and delivering exceptional products or services to your customers.