Credit Card Processing Levels: Levels 1, 2, & 3
Blog post from Basis Theory
Credit card transactions are classified into Levels 1, 2, and 3 based on the amount of payment data submitted to card networks, with each higher level requiring more detailed information and potentially qualifying commercial transactions for lower interchange rates. Level 1 applies primarily to consumer B2C purchases and requires basic merchant, date, and transaction amount information, while Level 2 is generally used for B2B commercial cards and adds fields such as tax details, merchant postal code, invoice or order number, and customer codes. Level 3, commonly used by government agencies and large businesses with purchasing cards, includes extensive line-item data such as product descriptions, quantities, tax rates, shipping information, freight, duties, and country codes; Visa and Mastercard also impose annual transaction-volume requirements for Level 3 eligibility. Merchants must provide every required field to receive Level 2 or 3 treatment, since incomplete records revert to Level 1 rates, making standardized data collection especially important for vendors serving government and institutional customers. Although merchants pay negotiated discount fees rather than interchange reimbursement fees directly, interchange-plus pricing may be more advantageous for businesses processing many Level 2 or 3 payments, as cited Visa rates show lower fees for Level 2 and especially Level 3 transactions than for non-qualified transactions.
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