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Level 3 Processing

If you receive credit-card payments from other businesses, you need to investigate the potential benefits of Level 3 processing.

What is Level 3 processing?

In simple terms, Level 3 processing is a set of specific additional line-item detail data (item descriptions, quantities, tax detail, etc.) that both VISA and MasterCard like to receive on business type transactions along with the required standard transaction info (account #, exp. date, etc.). In return for receiving this additional transaction detail, both card brands will provide significantly lower (.50% to 1.00% lower) interchange rates on the eligible B2B transactions.

Why do VISA & MasterCard have lower interchange rates for Level 3 transactions?

The additional Level 3 data detail received by VISA & MasterCard has value for certain larger business card holders. This additional transaction detail when reported back to card holding company allows businesses to closely monitor, track, receive applicable sales tax detail and even set restrictions on purchases made with the company business credit-card. The specific Level 3 data helps businesses that receive this transaction detail to minimize inappropriate spending and allows businesses to see where their money is going, what it is being spent on how much was spent and why it was spent. This greater control of the companies’ spending allows the business to reduce costs and improve business operations.

Visa & MasterCard can then provide this valuable spending detail to businesses and charge those businesses higher than normal credit card account rates in the form of special business, commercial and purchasing cards. Participating businesses are willing to pay the higher interest rates on their credit cards because of the valuable detail they receive in return.

I want to receive lower interchange rates on my credit-card transactions. Are my transactions eligible and what do I need to do?

Only business card types are eligible for Level 3. So if you sell mostly to consumers (as opposed to businesses) you are not going to be able to receive the more favourable Level 3 rates. Most MasterCard Business, Commercial & Purchasing card-types are eligible for Level 3. Only VISA Purchasing card-types are eligible for Level 3 rates.

Eligibility does not necessarily mean you will receive these lower rates. You must also submit your transaction and Level 3 detail via a Level 3 supported gateway or Level 3 supported software. (You cannot qualify for Level 3 when using a standard credit card terminal).

Visa & MasterCard are also very, very particular regarding the way the Level 3 data is passed to them. In some cases the data must fall within a particular range, quantity or format. So you will need to have a merchant account provider (such as AGP) that understands exactly what is required in order for eligible transactions to qualify for Level 3 rates. AGP has in-house staff members that have spent a lot of time training to understand the Level 3 ins and outs and therefore have the expertise necessary to get your eligible Level 3 transactions to qualify for the best possible interchange rate.

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