Lower Credit Card Processing Fees with Level 2 and Level 3 Processing

The cost of accepting credit cards is one of the biggest expenses a business faces. It is an unavoidable cost of doing business in a society that rarely carries cash anymore. For any business processing more than $100,000 a month in credit card transactions, the cost to process cards can approach $4,000 in fees.

If your business involves transactions from other businesses, you can lower your overall effective rate and increase profit by participating in Level 2 and Level 3 processing. We will explain below:

The Basics

When you charge your customer’s credit card, you obviously pay processing fees. These fees include the interchange rate set by the card brands (the same for all processors) plus a fee from your credit card processor. Interchange rates vary based on your customer’s card brand and card type. Accepting corporate cards or business credit cards can have a much higher interchange rate than a consumer card. That’s why you need to know about Level 1, 2 and 3 processing as it can lower the rates when transacting business to business (B2B) sales.

The Levels of Processing

The card processing level your business uses is relative to how much information you collect about your customer at the time you charge their card. All merchants can process at Level 1 which includes capturing the card number, expiration date, billing address, and zip code. This is about as basic as it gets.

To process at Level 2 or Level 3, the business must collect additional information and these levels are only available to B2B businesses or the government. Please note that Discover cards do not offer any enhanced data programs for Level 2 and Level 3 processing. American Express offers Level 2 processing but does not offer a Level 3 program. Level 3 programs are most beneficial for merchants that process mostly MasterCard and Visa cards.


With Level 2 processing, you can achieve an interchange reduction of up to .50%. To qualify, transactions must be taxable and the tax rate must be between 0.1% and 30%. Level 2 transactions include:

  • All the information in Level 1, plus:
  • Mastercard:
    • Customer code (for purchasing cards only)
    • Tax amount
    • Card acceptor tax ID
  • Visa:
    • Tax amount


With Level 3 transactions, you will be required to collect even more transaction data and can save up to 1% in fees. You just have to be willing to enter all of this information into the transaction to achieve the savings. Level 3 transactions must include:

  • All the information from Level 1 and Level 2
  • Discount amount
  • Freight/shipping amount
  • Duty amount
  • Item Sequence Number
  • Item commodity code
  • Item product code
  • Item quantity
  • Unit of measure
  • Unit cost
  • Discount per line item
  • Line item total

Mastercard required fields:

  • Product code
  • Product description
  • Extended item amount
  • Debit or credit indicator

Interested in Level 2 or 3 Processing?

Level 2 and Level 3 transactions can be performed with card present or card-not-present transactions. However, they are most likely to be used with card not present transactions such as invoice payments, recurring billings, and/or website payments. In order to use these enhanced levels, you need to be processing with the correct integrated software that is built to require the necessary fields to be populated before you submit the transaction through your credit card processor. Remedy merchants simply need to contact their Account Executive or call us at 714-461-2200 to see if they qualify for Level 2 or 3 processing.

Remedy is powered by Chosen Payments whom is a registered ISO and FSP of Wells Fargo Bank, N.A., Concord, CA and BBVA USA, Birmingham, AL., and Elavon, Inc., N.A., Atlanta, Georgia, and Evolve Bank & Trust; Memphis, TN., and Merrick Bank, N.A., Draper, UT.