What Are Level 2 and Level 3 Data?

Credit card brands divide their fee structure into three groups: Level 1, Level 2, and Level 3. The higher the level, the lower the interchange fees for the merchant. While a majority of businesses may only qualify for Level 1 processing, which is the level appropriate for B2C, or business to consumer, transactions, some businesses are exclusively B2B, or business to business, merchants, which can take advantage of the Level 2 and Level 3 interchange fee discounts. In this article, you will learn the differences in the different levels of data and how to use level data to reduce your business interchange fees.

The More Data, the Higher the Level

Level 1 Data

The amount of data determines the level. The more data a merchant provides, the higher the level the transaction achieves. Level 1 is the most basic level requiring a minimal amount of data, namely the merchant name, the transaction amount, and the transaction date. As an example of Level 1 pricing, the Visa Commercial Card Present Level 1 fee is 2.50% + $0.10. If a majority of a merchant’s business is handled via consumer credit cards, that merchant only needs to provide Level 1 data.

Level 2 & Level 3 Data, B2B & B2G

Level 2 and Level 3 require significantly more data in exchange for a significant reduction in transaction fees. A merchant qualifies for Level 2 interchange fees if a majority of its business is B2B. If a merchant engages in mostly B2B or B2G, business to government, transactions, they can take advantage of the Level 3 interchange rates.

Credit card brands use these discounts to incentivize businesses to allow credit cards for use in major transactions, versus other forms of payment. Thus, the credit card brands require a minimum amount for the transaction. Or they offer a tiered discount, increasing in proportion to the size of the transaction.

Level 2 transactions require the following data in addition to all Level 1 data:

• Tax ID
• Merchant minority code
• Merchant state code
• Merchant ZIP code
• Sales tax amount
• Customer reference number

In exchange for this level 2 credit card processing data, credit card brands reduce the interchange rate by roughly 0.50% for the transaction.

Level 3 data includes the following in addition to both Level 1 and Level 2 data:

• Invoice Number
• Order Number
• Ship-From Zip Code
• Destination Zip Code
• Freight Amount
• Duty Amount
• Item Extended Amount
• Item Product Code
• Item Commodity Code
• Item Description
• Item Quantity
• Item Unit of Measure

In exchange for this level 3 credit card processing data, credit card brands reduce the interchange rate by up to 1.00% for the transaction.

Services that Support Merchants

Standard credit card processing terminals do not have the capacity for either inputting the data or forwarding the data to the credit card service. While Level 2 data is easy to enter, a separate credit card terminal or software can automatically populate the Level 2 data. Only certain gateways can process Level 3 data. Merchant credit card processing services can support merchants in handling Level 2 and Level 3 data through gateways and separate credit card processing terminals. Merchant support services also help businesses configure their information before sending Level 2 and Level 3 data to the payment provider.