Reduce Interchange Fees Associated With Government Purchase Cards

There are thousands of different types of credit cards available, from consumer cards to corporate cards and many types in between. But they are not all the same, and so they are not all treated the same when used in transactions. They are also not used for the same purposes. A consumer card can be used by almost any individual over age 18 who meets basic requirements. You may have one or more of your own that you are liable for and that you use to make personal purchases in-person or online, otherwise known as card-not-present transactions. And because they have the lowest security, consumers can find themselves victims of fraud. This is because these cards are usually processed with Level I data, which is minimal. 

But a company that is making transactions between itself and other businesses is also at risk like the average consumer. Generally, the dollar amounts are far greater, and there is a greater quantity of items being ordered. Thus, that means the credit card companies are taking on greater risk, so they charge a higher interchange fee to cover handling costs, fraud, and bad debt costs. Interchange Pros can help you reduce the amount you have to pay when you accept payments from a government purchase card.

What are government purchase cards?

There are a few main types of credit cards that your business most likely accept: business cards, government credit cards, and corporate cards. Business credit cards are issued to an individual who represents a business, and they are liable for the credit card debt. Corporate credit cards, by contrast, are issued to a corporation rather than an individual. That means individuals, such as the CEO, are not liable for corporate credit cards. Government credit cards are issued to the employee, who is the cardholder. They are given a purchase limit and 30-day dollar amount that is determined by their supervisor. Because of this, some business cards are not eligible for Level III processing, but corporate cards are. Certainly, consumer cards are not eligible for Level III processing. 

Who offers government purchase cards?

All of the major credit card companies offer purchase cards, as well as benefits and/or discounts, to governments. Major credit cards can offer appealing benefits to using their government purchase cards. For example, Visa’s purchase card comes with an auto rental collision damage waiver, travel, and emergency assistance services, emergency card replacement as well as emergency cash disbursement. Because of the attractiveness of these credit cards to the public sector, and their ubiquity, you want to set up your business to accept purchase cards.

What is Level II and Level III Processing?

These refer both to the level of security of a transaction and its corresponding rate. When you call your bank, for example, you usually have to answer several questions to verify your identity, which protects you from having someone else pretend to be you and get personal information. The more information the customer representative asks you, the more secure the call is. Similarly, during a credit card transaction, the more data that is asked for beyond the minimum – which is merchant name, transaction amount, the date, and sometimes the billing ZIP Code, all required for a Level I transaction – the more secure the transaction is. That also means that the credit card company is taking less risk because this is more likely to be a legitimate transaction. The amount they charge you for that risk is called the interchange rate. The more information you can provide during the transaction, the more of a discount the credit card company wants to give you. Thus, you will spend less on interchange fees and keep more of your profits. At Interchange Pros, we help you to set up a system that allows you to process transactions at Levels II and III. 

Generally, the transactions that occur between businesses are for large amounts of money, so even a small percentage can be a lot of money paid to a processor. If you want to save money on transaction fees, then contact us today.

What information do I need to save on rates? 

In order to qualify for lower interchange rates, Visa and MasterCard will generally ask for the following, though the requirements are subject to change at the issuer’s discretion:

• Duty amount
• Destination country
• Discount amount
• Item commodity code
• Item descriptor
• Discount per line item and the line item total
• Freight/shipping amount
• Quantity
• Product code
• Tax amount
• Tax ID
• Unit of measure
• Product description

Call Interchange Pros to set up your new system to save your business money on interchange fees.