What are the levels?
Credit card processing is done in one of three levels: Level I, Level II, and Level III. Each level increase requires more customer and merchant data to be entered with transactions. The additional data reported lowers both risk and interchange rates for the merchant.
Level I Processing
Level I is most common for traditional credit card processing. The processor only needs the card number, expiration date, merchant name, transaction amount, and date to authorize. Transactions at this level are often day-to-day activities of a traditional consumer.
Level II Processing
Level II processing is for merchants who deal with business-to-business processing and higher ticket amounts. This level supports business-to-business processing with less risk and more benefits. It requires more data to help eliminate risk, and the processor is rewarded for this. Merchants who utilize Level II processing will see lower interchange rates, simplified transactions, and improved customer service.
Level II processors must collect the following data, on top of Level I information, with each transaction to reap the total benefits:
- Merchant name
- Transaction amount
- Date
- Tax Amount
- Customer Code
- Merchant Postal Code
- Tax Identification Number
- Merchant Minority Code
- Merchant State Code
Level III Processing
Level III processing provides additional discounts to business–to–business or business-to-government processors beyond Level II rates. With these benefits comes the need for even more information collected at the time of authorization. Interchange discounts at Level III are the most competitive. We typically see a 35 basis point decrease from traditional Level I processing.
Level III processors must also collect the following data, on top of Level I and II information, with each transaction to reap the total benefits:
- Item product codes
- Item descriptions
- Item quantities
- Item tax rates
- Ship from postal code
- Freight amount
- Duty amount
- Destination Postal code
- Destination country code
Large Ticket Processing
While Level II or Level III processing is deemed an option based on the types of transactions a business is processing, there is a final option to help businesses reach lower interchange rates: large ticket processing. This processing type has the same data requirements as Level III processing, but the qualifications are based on the amount of the sale, not the type of business.
While businesses are not required to employ programs to process at higher levels, the savings for businesses dealing with B2B transactions and large ticket transactions can be significant.
