Level III processing helps lower your interchange rates and reduce overall processing fees. If your business accepts corporate cards, purchasing cards, or government spending accounts (GSA) issued by Visa or MasterCard, you can qualify for Level III processing rates.
Every time you process a credit card payment, your business is charged an interchange fee. The interchange fee is what credit card issuers (like Visa and MasterCard) charge for processing credit cards, and the fee varies depending on card type. Interchange fees make up between 70 and 90% of total fees paid by merchants to process credit cards. (Source)
When you process a credit card, you’re then placed into one of three processing categories: Level I, Level II, and Level III. Level I has the highest rates and Level III has the lowest. As you move up levels, there are more line-item details that must be sent with each transaction.
If a merchant wants to accept GSA cards, they must achieve Level III processing, since government entities, as well as some companies, require line-item details to appear on their bank statements.
Since corporate and government purchasing cards are priced differently than standard consumer credit card transactions, it’s important for your business to receive the best possible rate for these types of purchases.
Will Level III lower my processing rates?
Level III processing may seem like a lot of additional work, but your bank account will thank you for the extra effort.
Level III processing lowers costs for businesses that accept corporate cards, purchasing cards, or government spending accounts.
Since you’re providing so many line-item details at the point of sale, Visa and MasterCard view the transaction as less fraudulent, giving you accept to exclusive Level III processing rates.
In fact, Level III provides the lowest payment processing fees and can save your business as much as 1.5% per transaction and up to 43% on your overall credit card processing fees.
Is Level III processing secure?
A PCI-compliant payment gateway, such as EBizCharge, provides the most secure method for processing Level III transactions. EBizCharge uses data encryption and tokenization technology to lower your risk and make sure sensitive credit card data is always safe.
With a PCI-compliant payment gateway, Level III is typically more secure than other processing methods because it requires extra information in order to process the transactions. This additional level of security reduces potential fraud and chargebacks to your business.
Being PCI compliant is not legally required, but there are penalties for not following the standards. If your business is not PCI compliant and your site is compromised, you can face a hailstorm of penalties, fines, and costs ranging from a few thousand to a few hundred thousand dollars, including the loss of sales or customers, a damaged reputation, legal or regulatory fees, class action lawsuits, and more. In addition, your bank may end your relationship or raise the cost of transaction fees. The penalties incurred may vary and can be devastating for small businesses. It’s always best to maintain PCI compliance when processing Level III transactions to avoid expensive fines.
How to get Level III processing rates
Level III processing is achieved through the technology used to process a transaction. To qualify for Level III processing rates, a transaction must be passed through a PCI-compliant payment gateway, which passes through all the necessary data points to qualify a transaction at the lowest possible cost. A transaction that is qualified with these data points give the bank more security against fraud and rewards the merchant with a lower cost.
With a PCI-compliant payment gateway, like EBizCharge, your business can get Level III processing rates without having to do any additional work.