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.

Should credit card processing literacy be taught in school?

My daughter recently graduated from high school and we just completed the college preview visit. Although she’s not going into the same field, it got me thinking. Why isn’t there more training for financial professionals and consultants with respect to credit card processing?

Samantha, Christine Speedy

Left to right: Samantha, Christine Speedy

There are  thousands of people providing advice and thousands of people selling solutions and services, yet there is no formal educational system. Isn’t it crazy, considering the billions of dollars in revenues they impact?

There are certification courses for PCI compliance, but what about subjects like interchange, negotiable and non-negotiable credit card processing fees, and interchange management? If you know of a professional education program that teaches these subjects, in-depth, suitable for CFO’s, please share with our readers.

If you need a speaker on these subjects for your symposium, organization, or professional association, please contact Christine Speedy.

Question on MasterCard rate COML LARGE TICKET 2 FLEET

Q&A with author Christine Speedy. This response is related to an excerpt from yesterdays enewsletter:

Subject: Business to business credit card rate reduction. Sending level 3 data can reduce interchange fees over 1%. Not all processors support level 3, and even if yours does, you may not qualify for them. Validate if you’re getting level 3 on your merchant statement with these examples:

  • NONQUALIFIED: corp data rate 1, corp data rate 2, bus std, EIRF.
  • BEST QUALIFIED: corp prd 3, EVPSCRPDATAR3, Commercial Data Rate 3

If not , it could be your processor, your price plan, your merchant account set up, or the terminal you’re using that is the cause. Contact your representative to find out which. Contact me if you want technology, not people, to manage how transactions qualify.
CenPOS has supported level 3 data for retail and key entered. NEW, CenPOS supports level 3 for customer initiated payments on our hosted pay pages, including electronic bill presentment and payment (EBPP). Call for help to take advantage of this service (no extra fee).

Customer Question: We have a customer who uses a level III card to pay multiple invoices at once. This charge is always relatively large, and we’ve noticed it’s categorized under the MasterCard section – “COML LARGE TICKET 2 FLEET”. Would you know what this category is, and if it is associated with level III at all?

Answer: Below is screenshot of  page 93 from the MasterCard U.S. and Interregional Interchange Rates and Criteria, effective as of October 2012. (That’s the most recent from  MasterCard.)

mastercard commercial large ticket 2

For the card presented, the interchange fees are the same for both large ticket sales. Large ticket 3 requires $100,000 sale minimum. The sale was between $25,000 an $99,999.99, thus the transaction qualified at the proper category. If the sale was $100,000 or more, then it would not be the lowest qualified interchange category. Since the rate is the same, there is no financial difference, however,  MasterCard could change the rates, so it’s important to always qualify for the right interchange bucket.