What Is Level 3 Credit Card Processing? The level 3 processing benefits for B2B and government payments can lower the interchange costs of accepting certain cards by up to 40%.
These benefits are particularly significant for businesses who are accepting credit cards from other businesses and government.
This specialized payment solution for Commercial & Purchase Cards (P-Cards) can provide significant cost savings on qualifying transactions.
These cards, often issued to federal, state, and local government agencies (such as through the GSA SmartPay program) and large corporations, enable the transmission of detailed data about goods and services purchased.
The Level 3 classification allows businesses to qualify for lower processing fees by providing enhanced transactional data, such as line-item details, purchase orders, and description of the products. This level of detail sets Level 3 processing apart from the standard Level 1 and Level 2 classifications.
The Growth of Purchase Cards
P-Cards have transformed the way payments are processed in both government and business sectors:
- In 2006, the U.S. Federal Government spent over $26 billion using GSA SmartPay purchase cards, with over 3 million cardholders.
- During the same year, businesses spent over $700 billion using P-Cards, growing at a 27% compound annual growth rate (CAGR)—nearly twice the growth rate of regular credit cards.
This rapid adoption is driven by the significant benefits P-Cards offer, including:
- Cost Savings: The U.S. Federal Government saved over $1 billion in 2006 by using P-Cards. Businesses likely realized proportional savings in terms of percentage of spend.
- Streamlined Processes: E-procurement through P-Cards eliminates the inefficiencies of paper-based payments, reducing invoicing and processing costs.
- Enhanced Reporting: Detailed transaction data allows for greater financial oversight and control.
- Preferred Vendor Status: Many government agencies and large corporations prefer vendors that can accept P-Cards and provide Level 3 data.
Why Level 3 Processing Is Critical for Merchants
For businesses that sell to government agencies or large corporations, Level 3 processing benefits are game-changing. It offers numerous advantages, including:
- Significant Cost Savings: Providing Level 3 data can lower processing fees by as much as 1.50%, depending on the card type and transaction size.
- Improved Cash Flow: Faster payments reduce the time it takes to receive funds.
- Enhanced Client Relationships: Accounting departments value the enhanced data reporting, which simplifies reconciliation and auditing.
However, most standard merchant accounts are not equipped for Level 3 processing. Not all payment providers offer Level 3 capabilities, making it essential for businesses to choose a provider with the right expertise and technology.
Key Requirements for Level 3 Processing
To qualify for the best processing rates, merchants must capture and submit specific data fields during transactions. These include:
| Field | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| Merchant Name | ✓ | ✓ | ✓ |
| Transaction Amount (Total) | ✓ | ✓ | ✓ |
| Date | ✓ | ✓ | ✓ |
| Tax Amount | ✓ | ✓ | |
| Customer Code (30 Characters) | ✓ | ✓ | |
| Merchant Postal Code | ✓ | ✓ | |
| Tax Identification | ✓ | ✓ | |
| Ship From Postal Code | ✓ | ||
| Destination Postal Code | ✓ | ||
| Invoice Number | ✓ | ||
| Item Product Code | ✓ | ||
| Item Description | ✓ | ||
| Item Quantity | ✓ | ||
| Freight Amount | ✓ | ||
| Duty Amount | ✓ |
These additional data fields ensure that transactions meet the stringent requirements for Level 3 processing and qualify for the lowest interchange rates.
The Evolution of Level 3 Processing
Level 3 processing was once limited to high-ticket transactions and required costly registration fees. Over the years, it has evolved to include all commercial, fleet, purchase, and government transactions, making it accessible to a wider range of businesses.
Today, advanced technology has made Level 3 processing simpler than ever. Automated solutions offered by a few processors now allow merchants to submit Level 2 and Level 3 data effortlessly, eliminating the need for manual entry while ensuring compliance with the latest interchange requirements.
Why Merchants Should Act Now
Level 3 processing is exclusively used in B2B and B2G environments, making it a critical tool for businesses in these sectors. By adopting Level 3 capabilities, merchants can:
- Reduce Costs: Save up to 1.50% on processing fees.
- Strengthen Relationships: Gain preferred vendor status with government agencies and corporations.
- Simplify Operations: Leverage automated tools to handle complex data requirements with ease.
Choosing the right payment provider ensures your business stays competitive and maximizes its revenue potential.
Call us at 888-790-3450 or email info@ revolution-payments.com to take advantage of our free interchange audit and review. Remember, interchange fees are rarely scrutinized for accuracy and are often overlooked when comparing processing costs. Don’t leave money on the table—ensure your fees are optimized. Contact us today for your free quote!