In the merchant account business, there are various data levels. The 3-level system determines whether a transaction is qualified or not. When there is implementation of changes in the credit card processing industry, changes also occur in the regulations regarding the processing of the data. It is a good idea to find out about the variation between the different levels when one considers PCI compliance and data security. Varied levels of data are needed by various merchants. Credit card processing happens to be classified into 3 different categories, Level 1, Level 2 and Level 3.
What is Level 2 Data?
The same information is comprised in Level 2 purchasing card data as in Level 1, along with:
- Tax ID number of merchant
- Accounting code of customers
- Sales tax amount
- Applicable minority (such as status of business owned by women)
- ZIP code of sales outlet
The elements of Level-2 data are advantageous to the industrial buyer / government / corporate entity. These may be transmitted often through a regular credit card point of sale terminal give that their capabilities are limited.
Level 2 credit card processing is akin to Level 3 processing, although the requirements are less. As in case of Level 3 data, it is necessary for merchants to enter extra data fields. However, the fields required are generally more convenient to enter and lesser number of fields has to be dealt with. There is still a rate reduction with Level 2 data processing, although not as much as in case of Level 3 processing.
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Level 2 data processing either needs a gateway that is capable of dealing with Level 2 data or requires a standalone credit card terminal. The common interchange reductions happen to be slightly less as compared to regular sales. Thus, in case you happen to be a B2B merchant and processing big sized orders, Level 2 data input can definitely be useful for you. To be eligible for Level 2 data processing, for each transaction you have to put in data such as:
- Merchant Name
- Merchant Zip Code
- Transaction Date
- Transaction Amount
- PO number or Customer Code
- Amount of Tax (0.1 - 31% of the whole amount)
What is Level 3 Data?
The same type of information as contained in Levels 1 and 2 is there in Level 3 purchasing card data, along with the following:
- Credit or debit indicator
- Tax type applied
- Tax rate applied
- Net/gross indicator
- Discount amount
- Discount indicator
- Extended item amount
- Unit of measure
- Order/ticket number
- Duty amount
- Freight amount
- Ship to ZIP
- Product descriptions
- Product codes
- Quantities
Level 3 data happens to be comprehensive line item information. The information is equivalent to the data that is present in an itemized invoice. It needs the system to be more capable, which is rendered through the payment applications.
The majority of merchants never get the chance to accept Level 3 cards. However, in case you tend to accept plenty of Government cards or are processing in an industry that is heavy on B2B, accepting Level 3 data can be useful in significant reduction of your interchange costs.
It is often that Level 3 interchange rates happen to be as much as 1% lower as compared to regular counterparts. However, to get Level 3 data access, you would need to enter a lot of data for every transaction. Also, Level 3 data is accommodated only by specific gateways. Some gateways populate all the fields needed for Level 2 automatically, along with:
- Duty Amount
- Freight Amount
- Item Extended Amount
- Item Unit of Measure
- Item Quantity
- Item Description
- Item Commodity Code
- Item Product Code
- Order Number
- Invoice Number
- Destination Zip Code
- Ship-From Zip Code
Level 2 and Level 3 Credit Card Processing - What are the Benefits?
With both types of processing, it is possible to reduce payment acceptance costs significantly. When a new merchant account is obtained, you would be put into any of these three levels. The interchange rates for your credit card processing depend on the level assigned to your merchant account. Every level is decided by how much data is collected for every transaction.
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Level 2 processing and other B2B credit card processing solutions can be assistive for B2B merchants in establishing robust relationships with clients, and also raise the number of big ticket transactions with government agencies and corporations. There are specific requirements for authorization and verification at each level of processing. Such requirements can vary from Level 1 (very limited) to Level 3 (very detailed). The kind of clients or type of customers served by your business happens to be part of the defining factors for this. This is essential, given that the more that there is need for data fields, the lower the processing rates happen to be.
Any transaction which is submitted with card data of Level 2 and Level 3 will be eligible for lower Interchange rates from Visa and MasterCard. Lots of institutional and government cardholders are beginning to need the submission of Level 3 Card Data by vendors. While commercial cards happen to be eligible for rates of Level 2 and 3, these might be charged at the rates of Level 1, in case not all of the data is offered. Consumer cards have Level 1 Card Data eligibility only.
Credit card processing of Level 2 and Level 3 happen to be simply as secure and safe. These are generally securer as there is need for an additional level of data, so as to ensure easy transaction processing. This can lower the risks of any possible fraud or any chargeback to the business that you have.
There is a need for most detailed data in Level 3 credit card processing. Transactions are made often with corporate or government purchasing cards. Purchasing cards are used by businesses and government agencies for improved reporting and higher control on purchases by employees.
But with all the fun running your own local store can bring, there are a couple of pitfalls that await if you rush into it without taking the time to do your due diligence first.
The risks of non-complianceDepending on the specifics of your business and the specific violation you make, you can be fined by the local regulatory body.
For example, if you’re planning to be hiring employees, you’re required to pay them at least a minimum wage, as well as respect their rights.
Compliance means protecting the customers as well as your company.
Furthermore, letting them know you’re compliant will increase the trust of your customers.
When a customer’s card is swiped, that’s the point where it’s most vulnerable to theft and interception.
