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 alone. If your business involves transactions from other businesses, you can lower your overall cost and increase profit by participating in Level 2 and Level 3 processing. 

The Basics Of Level 2 And Level 3 Processing 

When you charge your customer’s credit card, you pay processing fees. These fees include the interchange rate set by Visa, MasterCard, Discover, and AMEX (the rates are 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, business, or purchasing credit cards can have a much higher interchange rate than a consumer card. This is why it’s important to know about Level 1, 2 and 3 processing as it can lower the interchange 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.  

To process at Level 2 or Level 3, the business must collect additional information and these levels are only available to B2B and government transactions. 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.

Level 1 Processing Requirements

  • The card number
  • Expiration date
  • Billing address
  • Zip code

Level 2 Processing Requirements 

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: 


  • Customer code (for purchasing cards only)
  • Tax amount
  • Card acceptor tax ID 


  • Tax amount 

Level 3 Processing Requirements 

With Level 3 transactions, you will be required to collect even more transaction data and can save up to 1.2% 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. Aurora Payments offers a software that automatically populates Level 2 and 3 data on your behalf. You simply enter the Level 1 data and the Level 2 and 3 data is automatically populated for you. It is the simplest way to save .5%-1.2% on your processing costs.  

Looking For More Information On Everything About Merchant Services And Choosing The Right Solutions For Your Business? Request more information about Level 2 and Level 3 Processing, contact@risewithaurora.com