Many businesses accept the credit card fees as a necessary expense, but what if there was a way to reduce these costs?
Enter Level 3 Credit Card Processing — a lesser-known, but powerful solution that enables B2B businesses to qualify for the lowest interchange rates available.
Let’s explore how Level 3 processing works, why it reduces fees, and how automation makes it easier than ever to take advantage of these savings.
Understanding Level 2 and Level 3 Credit Card Processing
Every time a business processes a credit card payment, they incur interchange fees set by card networks (Visa, Mastercard, etc.). Processing levels are categorized into three tiers — based on what data is provided:
- Level 1: Basic transaction details
- Level 2: Additional data
- Level 3: The most detailed data — qualifying for the lowest interchange rates.
Card networks offer lower interchange rates for Level 3 transactions because they are considered lower risk compared to standard transactions. The additional data provided — such as itemized details, tax amounts, and shipping costs — helps card issuers verify the legitimacy of a transaction, reducing the likelihood of fraud or chargebacks. Since banks and card networks have greater confidence in the accuracy of Level 3 transactions, they reward businesses by offering reduced interchange fees.
What are Level 3 Data Requirements?
Level 3 processing requires detailed transaction data, including:
- Item descriptions
- Quantities
- Unit pricing
- Tax rates
- Freight costs
- Supplier and customer information
This extra data allows card networks to categorize transactions as lower-risk, leading to reduced interchange fees. While primarily intended for government and corporate cards, any business processing B2B payments can benefit from these lower rates.
The Cost-Saving Impact of Level 3 Processing
The savings from Level 3 processing can be substantial. For example, a standard corporate credit card transaction might have an interchange fee of 2.65%, while a Level 3 qualified transaction could lower it to 2.05% or less. Over thousands of transactions, these savings add up quickly, improving profit margins and reducing operational costs.
Consider this comparison:
| Transaction Volume |
Average Standard Rate (2.65%) |
Average Level 3 Rate (1.85%) |
Annual Savings |
| $250,000 | $6,625 | $4,625 | $2,000 |
| $500,000 | $13,250 | $9,250 | $4,000 |
| $1,000,000 | $26,500 | $18,500 | $8,000 |
| $2,000,000 | $53,000 | $37,000 | $16,000 |
For businesses processing millions in transactions annually, these reductions can be game-changing.
Challenges of Manual Level 3 Processing
While Level 3 processing offers undeniable savings, manually inputting the required data poses challenges:
- Time-Consuming: Employees must enter extensive transaction details, increasing workload.
- Prone to Errors: Incorrect or incomplete data can disqualify transactions from Level 3 rates.
- Operational Bottlenecks: Manual entry slows down processing, reducing efficiency.
Given these obstacles, businesses often bypass Level 3 processing, leaving money on the table. Fortunately, automation eliminates these challenges.
Get Level 3 Processing with Skyline Payments
While other solutions require merchants to manually enter all the level 3 data requirements, Skyline Payment’s automated Level 3 processing ensures that all required transaction data is included without manual intervention. Here’s how it works:
- Seamless Data Capture: Payment gateways automatically pull itemized data from invoices.
- System Integration: Level 3 processing integrates with ERP and accounting software for real-time data entry.
- Error Reduction: Built-in compliance checks ensure transactions qualify for the lowest rates.
With automation, businesses can scale their operations without worrying about processing inefficiencies or lost savings.
Next Steps
Want to see how much you could save with Level 3 processing? Contact our team today for a free cost-savings analysis!
