Level 3 Data: A Guide to Level 3 Credit Card Processing

Level 3 credit card processing is one of those industry secrets that are pretty much kept under wraps. To put it simply, it’s a way of saving on credit card processing fees. But, that’s where the simplicity stops. Figuring out Level 3 on your own can be complicated and involved if you’re not an expert.

If your business uses level 3 competent payment integrations in your accounting or payment solutions, you could potentially save a lot on your business-to-business (B2B) and business-to-government (B2G) transactions.

Saving on credit card processing can potentially bring in thousands of dollars per month for your business — yes, you read that right. These aren’t savings to sleep on. Let’s discover more about level 3 data and how it can help you save money in your business.

What Is Level 3 Data?

Level 3 (sometimes called level III) data occurs when companies specify line item details at the time of purchasing an item or service beyond that required for traditional credit card transactions. It can save these companies a substantial amount of money.

All credit card transactions fall into 3 different types of data levels, ranging from 1 to 3. Credit card companies require a specific amount of information to qualify their transactions and thus assign them levels. Traditional transactions typically fall under level 1 or 2.

The higher the level, the more details are necessary. That said, the higher the data level, the less it costs the merchants to process.

Benefits of Level 3 Credit Card Processing

If your business can qualify for it, level 3 credit card processing can help to ensure that you pay the lowest possible processing fees on your credit card transactions. It’s not only good for your business but it’s also helpful for your customers.

This is especially true for government agencies and large corporations. They will be able to better track their spending and it allows their financial reports to be much more granular. It also enables them to place certain restrictions on employees or team members who have company credit cards. It makes abusing access to company funds much more difficult.

As a business, there are three main benefits to using level 3 data:

  • Lower processing fees: This is because there is typically a lot less fraud in level 3 transactions compared to levels 1 and 2. Because of this, credit card providers offer lower processing rates.
  • Get paid faster: Level 3 data is typically processed much more quickly than level 1 or 2 transactions. This is a major plus if your business has cash flow concerns.
  • Access to more customers and sales: Several government agencies and corporations only buy with level 3. When you can guarantee that infrastructure, you’ll have access to a larger pool of potential customers. And that means more profits coming in.

Credit Card Processing Levels

Now that you understand what level 3 data is and the benefits of using it, you’re probably wondering about the requirements. It’s helpful to also consider the requirements for level 1 and 2 transactions to give you a better idea of the difference between the three.

Level 1

If you want to accept credit cards as payment at your B2B company, you must qualify for level 1 processing. As you might guess, level 1 processing doesn’t involve giving the credit card company a lot of details. All that’s needed is:

  • Merchant name
  • Transaction amount
  • Transaction date

Level 2

If you do business with small or medium-sized businesses, level 2 processing is the way to go. It asks for slightly more information:

  • Everything required in level 1
  • Customer code
  • Total tax amount

Level 3

Level 3 processing is best for companies that work with large corporations and government agencies. The list of level 3 credit card processing requirements is quite extensive:

  • Everything required in levels 1 and 2
  • The ship-from postal code
  • The ship-to postal code
  • Order number
  • Invoice number
  • Freight amount
  • Product code
  • Description of item
  • Line item details of the purchase

The trade-off for using level 3 data processing is that you have to report much more data than is required for levels 1 and 2. Because higher data levels are worth more to credit card processing companies, they automatically charge you less.

Top Credit Card Providers’ Level 3 Requirements

There are so many different credit card providers out there and, as of writing, the only companies that offer level 3 processing rates are Visa and Mastercard.

  • Visa: You must have between 20,000 and one million Visa e-commerce transactions per year to qualify. You also need to submit two forms each year: an Attestation of Compliance (AOC) and a Self-Assessment Questionnaire (SAQ). You need to go through a network scan once a quarter by an Approved Scan Vendor (ASV).
  • Mastercard: You must have between 20,000 and one million Mastercard and/or Maestro transactions per year to qualify. You’re also required to submit an annual self-assessment, another online assessment, and the same network scan required by Visa.

How to Access Level 3 Transactions

The requirements for level 3 transactions are just one piece of the puzzle. For the transactions to work, they need to be made with a level 3 credit card. This is another nod to the reason why many corporations and agencies like level 3 transactions. Their employees with level 3 cards can only make purchases at places that accept these types of transactions. It makes giving team members company cards a whole lot safer.

Gateways play another big role in level 3 credit card processing. If your credit card gateway isn’t level 3 capable, it doesn’t matter if you can provide all of the required data. The transactions won’t qualify for level 3 pricing as the required data won’t reach the credit card processor at the same time as the transaction.

You need to specifically seek out a level 3-capable gateway if you hope to reap the money-saving benefits of level 3 data. Be aware that most countertop POS systems don’t support level 3. Proprietary gateways like Stripe and PayPal also don’t support these types of transactions.

Best Gateways for Level 3 Processing

There are many gateway solutions out there for level 3 processing. One thing to look out for, no matter which service you go with, is auto-fill capabilities.

A few of the best gateways for level 3 processing are:

  • PayTrace: A universal gateway, meaning that several processing companies support it. This gateway lets you know in real-time whether or not the card you’re attempting to process is a level 3 card. You can use the auto-fill option with PayTrace or you can enter level 3 data manually.
  • MX Merchant B2B app: Another gateway that is widely accepted by processing companies. It works alongside the MX Merchant virtual terminal, so be aware that you’ll need that as well for the app to work. You simply use the virtual terminal to process your payments and the app runs (and auto-fills) in the background on its own.
  • CardPointe: Offered by CardConnect, this gateway solution works with processing companies that already have an existing relationship with the company. You can adjust the settings of the gateway so that it auto-fills level 3 data for you.

How P3 Can Reduce Your Merchant Processing Costs

At P3 Cost Analysts, our merchant processing audit service is aimed at businesses that accept credit cards as payment. Not only can we help you negotiate a fair base fee for all of your transactions but we can also assist in looking into level 3 processing for you.

As a business owner, you know that there are so many fees involved in credit card processing. Even if you’ve looked through your statements and bills thoroughly, you may not realize what they all mean or if you’re really required to pay them.

How these fees are calculated is often a mystery and can be tough to understand. What’s more, these fees can often contain errors and overcharges that you shouldn’t be responsible for paying. This is why it’s essential to consult with an expert before you try to figure out level 3 data on your own.

Level 3 Processing Case Study

We recently worked with an information services company in New York that was interested in taking advantage of level 3 credit card processing.

During our risk-free audit, we realized that they would easily qualify for these types of transactions. With an investment of $0 and without changing processors, we helped the company save 15%–20% on merchant processing costs.

What did those savings mean for this company? A whopping $40,000 increase in their cash flow per month. Think about how much you could do for your business with tens of thousands of dollars more per month — the possibilities are endless.

Summing Things Up

Level 3 data requires companies that use it to provide many more details about their transactions when compared to the more standard level 1 and 2 processing. Level 3 credit cards are most often used by government agencies and large corporations that want to keep better track of their spending. It features lower processing fees, your business will often get paid faster, and you’ll have access to a larger pool of customers. There are many businesses out there that only use level 3 credit cards.

Now that you know a little bit more about what goes into using level 3 credit card processing in your business, you likely have a lot more questions and concerns. That’s normal — and where we can help. And if this article about level 3 processing rates has made you curious about whether or not you qualify, we can help you there, as well.

If you’re interested in having P3 Cost Analysts take a look at your merchant processing to see what options could work for you, feel free to reach out today for a free Merchant Processing audit.

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