B2B Transactions
There are many different types of transactions and many different types of credit cards. When an individual is buying something online or in a store then they have the option of using a consumer credit card, which is issued by a company like Visa or MasterCard. And typically they have to provide their ZIP Code in order to make the transaction. Most people are familiar with these types of transactions, but transactions between merchants and other businesses that they sell products and services to are processed differently. These transactions tend to come with much higher processing fees due to the higher risk that the issuing credit card company takes on. This is called the interchange fee.

What some business owners don’t know, however, is that they can save money on those interchange fees. If you are a business owner who sells to other businesses (B2B business) and you are looking for ways to save money, then look no further. This guide will tell you how you can make your transactions eligible for reduced rates.

What are credit card processing fees?

Someone has to provide the service that allows everyone from the independent gas store owner to the Amazon Prime member to use their credit card to purchase goods and services, and they expect to be paid for that service. It’s actually not a “someone”; instead, it’s the credit card company that issued the card to the specific business. These credit card companies charge you, the merchant, for using their services to conduct business.

Each of the major credit card companies set their own rates. For example, Visa charges 2.4% plus $.10 per transaction just for using the card, depending on the type of card. Some charge as low as 1.95% plus $.10 per transaction, or even as low as 1.8% with a $.10 cost per transaction. On a consumer purchase of an item that costs $20, this may not be a significant amount. But when you calculate this percentage against $2,000 or $20,000, the costs start to add up.
  • Level 1 processing is only available to consumers. This is why you only input your zip code on card readers sometimes - because that’s all the information that’s asked for.
  • But once you get to Level II, more information is needed, such as your Tax ID, amount and tax indicator.
  • By contrast, Level 3 processing requires all of that information as well as the product code, item quantity, unit of measure and debit or credit indicator.

Lowering Your Rates

In order for a business to take advantage of these low rates, they must be set up so they not only accept the data that is necessary to qualify for level three processing, but they also need the software to process that data. This is where the help of a professional level three processor comes in handy as they assist you with updating your point-of-sale and accounting systems to accommodate for this extra required data, and to submit it successfully. While this may sound like a lot of confusing work that could be disruptive to your business, it actually is a lot easier and smoother of a process than it seems. And in the end, you can enjoy bigger savings and bigger profits.