FeeFighters recently spoke at a utility conference about how its participants can save money on credit card processing. After analyzing one of the participants’ credit card processing statements, we realized they could save 25% or about $30,000 annually on their credit card processing fees.

Here’s how:

This utility company had a monthly credit card volume of about $650K.  The first thing we checked on their statement was to see if they were being charged on an interchange plus basis.  They were, and the markup $0.30 / transaction, with no % volume fee, was reasonable for a merchant of that size.  Interchange plus is especially important for utilities companies because they benefit from much lower interest rates than most businesses and interchange plus ensures that the provider is passing along the savings to the customer.

The next thing we checked was to ensure that the customer was qualifying for those special utility rates.  And they were, which was good, with interchange rates as low as $0.45 / transaction.

However, the customer was getting terrible rates on their business/corporate/purchasing card transactions, as high as 2.65% + $0.15.  Those transactions made up ~30% of their volume.  For those transactions they should have been paying a rate of ~1.8% rather than 2.65%.

	Level 1	Level 3
Visa Corporate Card (Card not present)	2.1% + 0.10	1.8% + 0.10
Visa Purchasing Card (Card Not Present)	2.3% + 0.1	1.8% + 0.10
Mastercard Purchasing Card	2.65% + 0.1	1.8% + 0.10
Mastercard Corporate Card	2.65% + 0.1	1.8% + 0.10

What does level 3 mean anyway?  Basically it means that more detail about the transaction was submitted.  Visa and Mastercard like to incentive that data because it is a feature they use to attract corporate and government clients to use their cards.

Level 1– Merchant Name, Transaction Amount, Date

Level 2- Above +Tax Amount, Customer Code (16 characters), Merchant Postal Code, Tax Identification, Merchant Minority Code, Merchant State Code

Level 3- Above+Item Product Code, Item Description, Item Quantity, Item Unit of Measure, Item Extended Amount, Item Net / Gross Indicator, Item Tax Amount, Item Tax Rate, Item Discount Indicator, Ship from Postal Code, Freight Amount, Duty Amount, Destination Postal Code, Destination Country Code, Alternate Tax Amount

How big of a difference will making this switch make?

For this company, one of the most often charged kinds of cards was Commercial Data Rate 1 with about $200,000 in volume (and about 100 transactions) that was being charged 2.65%+-$0.10 per transaction. This calculates to about: $5,300 in interchange fees.

With Level 3 data, that rate would drop down to 1.8%+$0.10 per transaction, or about $3,600. That’s a difference of 32% just by switching gateways and gathering more data.

The savings are enormous, compared to the hassle of entering slightly more data about the transaction.  Sometimes using Level 3 can require a gateway switch, since many gateways do not support it.

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