What is MasterCard new Business Level 3 and Level 4 interchange program?

I was confused enough by wording in a recent email newsletter regarding July 2013 interchange updates that I wanted to share an explanation regarding Small Business Spend Processing and the impact on merchants, not to be confused with Level 3 data and level 3 processing.

Here’s an excerpt of the email. The key July changes include:

  • MasterCard will introduce new Business Level 3 and Level 4 interchange programs to support the new Small Business Spend Processing program.

Interchange is the main component of merchant credit card processing fees. Each credit card issued (card type) has multiple rates associated with it, with the best rate, or qualified interchange rate, achieved only by meeting all the criteria required. Merchants can influence which of the typical 3-4 rates associated with each given card type their transactions qualify for.

For business, corporate, and purchasing cards, the criteria for the lowest qualified rates includes providing enhanced data, also known as level 3 data. This is not to be confused with the new Business level 3 and 4 interchange rates, which are dependent on how much the cardholder spends.

Transactions on Business cards that participate in Small Business Spend Processing will qualify for programs based on annual cardholder spend, reviewed quarterly. Spend amounts are reviewed quarterly and updated annually.

  • $25,000-49,999 = Business level 2
  • $50,000-99,999 = Business level 3
  • $100,000+ = Business level 4

Merchants do not need to do anything to qualify for the new interchange rates. It’s business as usual.

Example: A participating small business paying with MasterCard Elite Worldcard could result in these interchange rates for a merchant, plus $.10 per transaction:

  • Business level 3, World Elite Data Rate I, 2.86%
  • Business level 3, World Elite Data Rate II, 2.16%
  • Business level 3, World Data Elite Rate III, 1.96%
  • Business level 4, World Data Elite Rate III, 2.06%

3 critical elements to qualify for Data Rate III are:

  1. sending level 3  enhanced data
  2. authorization and settlement amount are equal
  3. transaction is settled within required timeframe, usually 72 hours from the initial authorization

A lot of business to business companies don’t have transactions that meet all three criteria, so even though they’re set up for level 3 processing for credit cards , the transactions don’t all qualify.*

DISCLAIMER: The information in this article was scoured from the internet and may contain forward information subject to change, or erroneous data. Conceptually it’s accurate, however, specific numbers and rates may not be.

* Contact us for solutions to the level III qualification problem.