What are Level 2 and Level 3 data in credit card processing?

Level 2 and Level 3 credit card processing data are line-item pieces of information about a payment. They’re extra fields within a payment message which give a fuller picture of exactly what the payment is for.

Credit card companies introduced these extra data fields to facilitate more descriptive (and, therefore, more reliable and secure) payments. In exchange for entering this data, certain merchants can benefit from discounted processing fees for US domestic payments. Level 2 and Level 3 data are generally included in business-to-business (B2B) or business-to-government (B2G) transactions. They are rarely, if ever, used in consumer payments.

What are the credit card processing levels?

There are three main credit card processing levels, which are the categories of information included in a payment or capture request. Sometimes you’ll see these abbreviated to L1, L2, L3 data. Mastercard refers to these categories as Data I, Data II, Data II, whereas Visa refers to the latter two as Level II and Level III.

Card networks’ specific requirements per category can vary, so the data fields below are provided as a general indication.

Level 1

At this level, only standard cardholder information is required for the transaction. Examples of this data include: the card number, card expiration date, transaction value, date, and the merchant’s doing-business-as (DBA) name, and the Merchant Category Code (MCC). 

This level of information is the bare minimum for a transaction to achieve authorization; that makes it quicker to collect from customers at checkout (since there are fewer data fields to fill out). However, these payments tend to result in the highest interchange fees because the issuer takes on a greater level of risk that the payment is fraudulent, compared with payments that include L2 and L3 data.

Level 2

To qualify for L2, you’ll need to include all of the L1 data, as well as fields such as sales tax, unit numbers, item descriptions, and the shipping address. You may need to include a Purchase Order number, too.

American Express only supports up to Level 2 data.

Level 3

For a Level 3 transaction, L1 and L2 data are required, as well as a longer list of additional fields. Examples include: ship-from ZIP/postal code, ship-to/destination ZIP code, invoice number, order number, item codes and description, freight amount, and duty amount. 

Level 3 interchange fee rates are among the lowest available in card transaction processing for commercial cards. 

Benefits of using Level 2 and Level 3 card processing

Providing L2 and L3 data enhances transaction transparency and security, reducing the likelihood of fraud and disputes. After all, it’s harder to raise a legitimate complaint about a payment which includes an invoice number, shipping destination address, item description, unit numbers, sales tax and import duties. That’s good evidence the payment was truly authorized by the cardholder for a specific (and real) purchase.

In exchange for this data, card networks offer lower interchange fee rates for domestic payments in the US. Interchange fees are settled to issuing banks to cover the costs of handling, risk, and fraud. 

It’s worth looking into whether you can submit such data for your payments, as interchange fees typically make up the greatest proportion of the Merchant Discount Rate (the fees you pay to process payments).

How to qualify for Level 2 or Level 3 card processing

To qualify for either level, you’ll need to provide different types of data. Card networks have specific requirements for each one. For example, specific merchant category codes (MCC) are excluded from Level 2 or Level 3 data processing eligibility. With Visa, Level 2 or 3 data only apply to commercial credit cards. For Mastercard, it applies to commercial credit, debit and prepaid cards.

You can find out how to submit Level 2 or Level 3 data, with more details on the data to include for various schemes, in our dedicated document.

Level 2 card processing explained

Processing a payment with Level 2 data can allow you to take advantage of lower interchange rates, if you meet the qualification criteria. It’s often used for business credit, prepaid or debit card payments.

Data requirements can vary between card networks, but generally, to qualify for Level 2, you’ll need to provide: 

• Sales tax indicator and amount
• Merchant tax ID
• Merchant postal code
• Invoice number
• Order number
• Customer code (only for government/purchasing cards)

As with data requirements, qualification for Level 2 processing differs from network to network. Here are the qualification requirements for each:

• Mastercard and Visa: more than one million but fewer than or equal to six million transactions annually. Visa also requires businesses to complete an Annual Self-Assessment Questionnaire (SAQ), an Annual Attestation of Compliance (AOC), and a Quarterly Network Scan by an Approved Scan Vendor (ASV)
• American Express: businesses must be pre-approved for Level 2 processing. This means they have to submit Level 2 Merchant's Validation Documentation, which should include summaries of the Quarterly Network Scan and a PCI Self-Assessment Questionnaire

Level 2 card processing with Visa US

You will notice that for qualifying transactions, interchange fees are reduced compared with the typical L1 equivalents.

Here are the interchange fees for cards on various card programs including Level 2 data:

• Visa US Business Level II credit fee program: between 1.90% + $0.10 and 2.25% + $0.10. 
• Purchasing (including fleet cards) and corporate travel and entertainment cards on the Commercial Level II program: 2.50% + $0.10
• Purchasing (including fleet cards) and corporate cards on Commercial Level II – Fuel: 2.20% + $0.10

Given that the commercial card-not-present rate is 2.70% + $0.10 for corporate and purchasing cards, you stand to save between 0.2% and 0.5% on each transaction. For Business cards it is a saving of 0.75%.

(Rates valid as of October 2023 through to October 2024)

Level 2 card processing with Mastercard US 

For Mastercard, specifically, merchants can achieve interchange fee savings of 0.75% per transaction.

Level 3 card processing explained

Level 3 data is required for the highest tier of credit card processing and is generally for large companies and government agencies that use corporate or government cards. Requirements vary by scheme, so the following are examples of data you may need to include.

• All data from Level 1 and Level 2 
• Product description
• Product code
• Unit price, unit of measure, unit quantity
• Discounts applied and line item total
• Debit/credit indicator
• Freight and/or shipping cost
• Duty and/or import taxes assessed
• VAT tax and tax rates (Visa only)
• Destination zip code 

Requirements for Level 3 data

To qualify for Level 3 commercial card processing, you need to meet the following criteria:

• Mastercard and Visa: between 20,000 and one million transactions annually, as well as, for Visa, completion of the same forms required for Level 2
• American Express: does not offer Level 3 commercial card processing

Savings from interchange rates for Level 3 are, of course, the most significant.

• Visa’s L3 commercial card interchange rates are 1.90% + $0.10. You can save 0.8% compared with typical card-not-present rates
• Mastercard savings are 0.80% with Level 3 data

You must adhere to all data entry specifications. For instance, with Visa transactions, the product code must be no longer than 12 characters.

Large Ticket program

Both Visa and MC have a Large Ticket program which can bring certain purchase types into a lower interchange fee bracket. The transaction must meet Level 3 data requirements in addition to the qualifying transaction amount. 

With Visa US, transactions must be greater than $8,000 and the interchange rate is 1.45% + $35 (commercial product large ticket on a qualifying purchasing or corporate card) for unregulated transactions.

With Mastercard US, commercial transactions greater than $10,000 fall under various Large Ticket interchange rates ranging from 1.2% to 0.7%. Certain merchants classified as Large Market businesses can benefit from a Large Ticket interchange fee rate of 1.45% + $35. 

Checkout.com can help you manage invoice payments and transaction data

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