What's the difference between payment data levels?

This blog has talked a lot about Level 3 interchange and has given a number of reasons why processing this information is such a smart move for merchant accounts. However, deductive reasoning will tell you that the interchange levels don't start at three. Now, you may be wondering, what the deal is with Level 1 and Level 2 interchange and how they differ from the all-important Level 3.

The major differences lie in the type of information that gets submitted with each payment. Because purchasing card payments cost vendors more to process, those that offer more information are able to receive a reduced fee. So, if a vendor is to accept a p card payment and process Level 1 data, it will receive the benefits of accepting this method - such as quick processing - but it will pay heavy fees. Level 2 data alleviates some of that, but still requires merchants to pay a hefty rate, and Level 3 reduces the charge by an even greater amount.

So, what's the difference between Level 2 and Level 3? The answer is the amount of information and the type of information that gets submitted by the merchant. Level 3 data includes the most information and breaks down a transaction by line-item detail. This is valuable information because it increases transparency, showing every single item that was purchased and how much was spent on each. 

One difference to keep in mind is tax rates. While Visa and MasterCard require a tax rate over 0 percent for Level 2 processing, that's not the case with Level 3. Organizations can process tax-exempt transactions and still pay Level 3 interchange rates as long as they provide the necessary information, such as line-item detail.

Working with a payment solutions provider will help vendors gain a better understanding of these differences and obtain the tools needed to process payments with Level 3 data. 

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