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What Is Level 3 Payment Processing?

If your business is selling a product or service directly to a customer, then you’re operating a Business to Consumer (B2C) company. This means that when it comes to processing credit card payments, Level 1 processing is sufficient. However, if you’re selling products or services to other businesses (B2B), or to government entities (B2G), then the ideal and most cost-effective solution is Level 3 Payment Processing.

Don’t worry if you’re not familiar with the term Level 3 payment processing. After all, it’s a solution that isn’t used by the average merchant. It’s a unique payment processing solution used specifically for B2B and B2G transactions in order to optimize interchange rates and save the most amount of money in processing fees.

Level 3 Processing Explained

For every type of credit and debit card that Visa, MasterCard and Discover issues, there is an interchange rate that is assigned to each card type. The interchange rates are the base processing rates that determine how much your business has to pay to the card issuing bank each time you process a credit card payment.

Interchange rates for corporate, business, and purchasing credit cards are broken down into three processing categories – Level 1, Level 2, and Level 3 — with Level 1 having the highest rates and Level 3 having the lowest rates.

Unlike Level 1 processing, which only requires the card number, CV2 code and expiration date of your customers credit card, both Level 2 and 3 processing requires more payment details to be entered at the time of the sale. Such as:

  • Tax IDs
  • Customer codes
  • Tax amounts
  • Item descriptions
  • Freight amounts

While this additional required data may seem like a deterrent, we offer a virtual terminal and online payment gateway that will automatically fill-in the required Level 3 data using a customized template that we setup for you.

This will allow you to reap the substantial benefits and lower rates that Level 3 payment processing provides, without doing any additional upfront work. It's a true win-win for your business!

Learn more about our customized Level 3 payment gateway HERE

The Benefits of Level 3 Processing

Because Level 3 processing provides Visa and MasterCard with additional information about the sale, they deem the transaction far less likely to be fraudulent. In turn, they provide substantially lower interchange rates than they do for Level 1 or Level 2 processing.

In fact, Level 3 transactions cost 0.65% to 1.50% less than standard Level 1 transactions. And, it’s been proven that Level 3 processing can reduce your overall monthly processing fees by up to 46%. This means that your business can save thousands of dollars in processing costs annually!

Another major benefit of Level 3 processing is that it provides enhanced transaction reporting which is becoming a requirement for most government contracts. This enhanced reporting will make the reconciliation process a lot quicker for both you and your clients.

Finally, Level 3 processing gives you the opportunity to attract more high-profile clients and settle accounts faster. Both of these are a nice perk if you’re experiencing cash flow problems or you're ready and wanting to rapidly grow your business.


Level 3 payment processing isn’t for everyone. If you’re strictly a B2C company then Level 1 processing is sufficient.

However, if you’re conducting business with other businesses or government entities, then Level 3 payment processing is a MUST if you want to obtain the lowest interchange rates and save the most amount of money each month.

Tailored Transactions specializes in setting up Level 3 payment processing for B2B and B2G businesses. We process payments for some of the largest wholesale distributors and manufacturers in the United States, and have helped these companies save hundreds of thousands of dollars in credit card processing fees. We can do the same for your company!

Contact us for a no-obligation free rate quote and we will show you how much money your business can save on a monthly basis by implementing Level 3 payment processing.

Contact Us Today

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