What to know about level 3 credit card data

Saturday, January 03, 2015

Most new business owners probably don’t know that there are three different levels of credit card data. Each level requires a different amount (and types) of information in order to qualify the transaction as part of one level or another, and be processed as such. Because each level also comes with different processing costs—the higher the level, the lower the cost—businesses are smart to take advantage of level 3 credit card transactions as often as they can.

It’s helpful to know about level 3 credit card data and processing so that you can make the most of your business costs and transactions, and ultimately save money by processing your transactions this way whenever possible. We’ll walk you through each category of data and what information is necessary for each type of transaction.

What are the levels of credit card data?

Credit card transactions fall into one of three different levels of data. These levels are qualified by the details provided, and the higher the level, the more details necessary, but also fewer fees. Level 3 is the highest (and comes with the fewest processing fees) and level 1 is the lowest. Here is what each level entails and what information is required for them.

Level 1

Level 1 data primarily refers to small business-to-consumer (B2C) transactions. This level only requires the following information for credit card transactions:

  • Merchant name
  • Purchase amount
  • Date
  • Billing zip code

Level 2

Business and government transactions require different payment methods than a typical B2C transaction. These details are also necessary to monitor corporate, employee, and government spending.

Both levels 2 and 3 offer more data to the credit card company that is processing the transactions, and because this data is valuable to both that company and the purchasing party, the minimal fees offer an incentive to the businesses sending their data.

Level 2 refers to transactions that occur primarily between business-to-business (B2B) and require more details.

What level 2 does differently from level 1 is the way that it simplifies the transaction between businesses and provides thorough transaction reports.

Here are the requirements for level 2:

  • All requirements for level 1, plus:
  • Sales tax amount
  • Tax indicator
  • Merchant postal code
  • Merchant tax ID
  • Invoice number
  • Order number
  • Customer code (if purchasing cards)

Level 3

Level 3 credit card data involves large transactions that take place primarily with B2B or business-to-government (B2G). These transactions take place using corporate purchasing cards, which allow the companies or government agencies to monitor purchases and have access to detailed spending reports.

There is more data required for level 3 in addition to those in the first two levels.

Requirements for level 3 include:

  • All requirements from levels 1 and 2, plus:
  • Item commodity code(s)
  • Item description(s) (SKU)
  • Unit price(s)
  • Quantity
  • Unit of measure
  • Extended price
  • Discount per line item and line item total
  • Debit or credit indicator
  • Discount amount
  • Shipping amount
  • Duty amount

What are the components of level 3 data?

There are some necessary components to level 3 data in order to qualify, and having the right card is not the only one.

In order to be able to process level 3 data, you first must have a level 3-compatible payment gateway. If the gateway you use isn’t capable of passing the data necessary to be qualified as level 3, even if you have the data necessary to qualify, that type of transaction won’t be possible. So, if your business accepts many government or corporate purchasing cards, you will want to specifically look into a level 3-capable gateway.

Another important thing to know is that a standard POS won’t support level 3. Instead, even when using a government or corporate card, you’ll be processed as a level 2 at the highest, which won’t charge the lowest fees possible.

Once you find a gateway that can process level 3, ensure with your provider that payments will be processed as level 3.

What are the benefits of level 3 credit card data?

There are many benefits to processing level 3 credit card data, but the biggest benefits are:

  • Lower interchange costs
  • Data organization
  • Payment security
  • Faster processing time

Let’s look at each of these in greater detail.

Lower interchange costs

Each credit card provider offers something slightly different in terms of requirements and benefits, but, generally, either the card provider offers a lower interchange rate or they don’t process level 3 data.

Providers that process level 3 data include:

  • Visa
  • Mastercard

And those that don’t:

  • American Express
  • Discover

Visa offers lower interchange rates in exchange for an annual Attestation of Compliance (AOC) form and a Self-Assessment Questionnaire (SAQ). Mastercard requires a yearly self-assessment, online assessment, and a network scan which is done by an Approved Scan Vendor (ASV). Specific benefits will vary slightly between the two, but lower interchange fees are a constant.

Data organization

Aside from lower interchange costs, level 3 processing also offers a way to organize and control data pertaining to purchases, who in your business is making what purchases and who is and is not allowed to do so, how frequently the card can be used, and more.

Payment security

This organization also offers security, keeping you up to date on any potential fraudulent charges. Not only does level 3 processing keep your payments secure as they happen, but a level 3 processor will notify you immediately if any suspicious charges appear.

Faster processing time

Finally, level 3 data is processed quicker, therefore allowing for less of a delay from transaction to payment. This is especially beneficial for businesses that lack extra revenue.

Overall, level 3 credit card processing allows businesses and government agencies to process large payments more quickly, efficiently, safely, and with lower interchange fees than standard level 1 and level 2 data. Although more data is required on the business or government’s behalf in order to make these payments, a level 3-compliant payment gateway will make the process as easy as possible.


Ready to work with a payment processor who can help your small business?

Heartland is here to help.

Heartland helps nearly 1,000,000 entrepreneurs make and move money, manage employees and engage customers with human-centered technology solutions that allow them to rise above the daily grind and lead their businesses into a brighter future. Learn more at heartland.us.