That gap costs contractors real money, every single month, without most of them ever realizing it.

Why Government Contracting Content Skips Right Past This

A search for “how to win a government contract” turns up thousands of guides, courses, and consultants. A search for “how to get paid correctly on a government contract” thins out fast. The payments side of government contracting gets treated as an afterthought — something contractors set up once with whatever bank or processor is convenient, then never revisit.

That’s exactly the problem. Government purchase cards don’t process the same way as a typical retail transaction, and an incorrectly configured account pays more than necessary on every single transaction, every single month, indefinitely.

The Real Cost Isn’t the Processor’s Rate — It’s Interchange

Most contractors shop for a payment processor the same way they’d shop for office supplies: compare the rate, pick the lowest number. But the processor’s rate makes up the smallest piece of the total cost.

Every transaction has three components.

Interchange makes up roughly 80-90% of the total cost. Visa and Mastercard set interchange, the card-issuing bank collects it, and the rate stays the same no matter which processor a contractor uses.

Card brand assessments stay small and fixed, identical across processors.

Processor markup is the only negotiable piece, and usually the smallest slice of the bill.

A contractor negotiating hard on rate while ignoring transaction configuration is negotiating the tip on a restaurant bill while ignoring the cost of the meal.

What Level 3 Processing Actually Does for Government Contractors

Government purchase cards function as sophisticated procurement tools, not just plastic. They carry spend controls, reporting requirements, and — most importantly for the bottom line — access to special interchange categories that most vendors never use.

Visa and Mastercard created Level 3 interchange rates specifically to reward vendors who transmit detailed line-item data with each transaction: product description, quantity, PO number, freight amount, and more. Correct submission of that data qualifies the transaction for a significantly lower interchange rate. Missing or incorrect data sends the transaction into a much higher category, and the contractor pays the difference without ever seeing it explained on the statement.

According to Mastercard, 3 out of 5 vendors are not properly set up to accept government purchase cards — meaning the majority pay more than necessary on every eligible transaction, often without realizing it.

A properly configured account using Level 3 processing can reduce interchange costs by 30-40% compared to a non-optimized setup. On meaningful monthly volume, that adds up to thousands of dollars a month sitting unclaimed.

The Fastest Way to Know What’s Actually Being Paid

Confirmation that an account is “set up for Level 3” doesn’t guarantee it’s actually working. Required fields can go missing. Data can carry the wrong format. Settlement timing can fall outside the required window. Any one of these silently bumps transactions back into a higher-cost category, and only a look at the actual data behind the statement reveals the truth.

A government contractor who hasn’t had their payment setup reviewed since first accepting purchase cards likely leaves money on the table right now.

A line-by-line interchange audit shows exactly what a contractor pays, what they should pay, and where the gap comes from. Either everything checks out as correctly configured, or the audit reveals precisely how much the misconfiguration costs every month.

Questions? Call Revolution Payments at 301 790 3450 or email info@ revolution-payments.com

Level I, Level II, and Level III Credit Card Processing play a crucial role in defining interchange categories and qualifications for B2B and B2G credit card transactions. Implementing Level 3 credit card processing can significantly reduce the cost of accepting these transactions by up to 40% before the processor adds their fee.

Key Points:

Interchange Buckets

• Level 1
• Level 2
• Level 3
• Large Ticket

Level I Credit Card Processing

• Basic transactions between businesses and consumers.
• Includes minimal payment details: Merchant Name, Transaction Amount, Transaction Date.

Level II Credit Card Processing

• Similar to Level I but with additional details.
• Can reduce interchange costs by approximately 0.50% on certain card types.
• Tax exempt transactions are not eligible for Level II savings.
• Additional details include Tax Amount, Customer Code or PO number, Merchant Zip Code, and Transaction Date.

Level III Credit Card Processing

• Requires information from Level I and Level II.
• Additional fields include Ship From and Destination Postal Code, Invoice Number, Order Number, Freight Amount, Line Item Detail of Purchase.
• Qualifying for Level III rates requires sophisticated technology capable of capturing detailed information found on invoices.

Large Ticket Processing

• Eligible for transactions with Level 3 detail.
• Visa Commercial Product Large Ticket and MasterCard requirements outlined.
• Not eligible for certain categories like Travel and Entertainment, Restaurants, High-Risk Direct Marketing.

Important Note

• Authorizations must be settled within 2 days for Level III interchange qualification.

Revolution Payments Optimization Service

• Provides a cost-plus merchant account and a virtual terminal capable of capturing the required line item detail.
• Ensures every transaction qualifies at the lowest possible interchange rates.

For questions about Level I, Level II, Level III Credit Card Processing, or for a no-obligation Level 3 analysis and audit, contact us at 888-790-3450 or email info@revolution-payments.com. With over 15 years of expertise in Level III processing, we are dedicated to providing savings to our clients.

Interchange amounts to at least 80% of the fees you pay to accept credit cards.  Not only does interchange go back to the card issuing bank, not your processor, but Visa and MasterCard apply higher interchange rates 80-150 basis points to transactions to commercial and government cards that Do Not include level 2 and level 3 detail.   When most people review their rates, they generally only look at a processors rate, even though interchange amounts to bulk of their fees.

Given the current low profit margin derived by processors today the focus should be to better manage the interchange cost and human error cost directly associated with payment acceptance.

Commercial and Government Credit Cards.

Commercial cards have the ability to qualify at lower interchange rates if, level II and level III detail is provided. Commercial cards qualify at 1 of 3 different interchange levels. Level 1, level II or level III. The higher the level, the lower the interchange cost.

Think of level II and level III detail as additional information regarding a sale.  Level II, is sales tax and invoice/customer code. Level III is like item detail. Think of information you might find on an invoice.

Visa Level III Requirements

Mastercard Level III Requirements

When this information is summitted with a transaction, interchange is lowered by 30%-40%.  I will use Visa as an example.  Accepting a commercial card without level 3 detail will cost you anywhere from 80 to 150 basis points depending on the type of card and size of the transaction.  This happens before your processor ads their fee.

Learn how to lower credit card processing interchange fees by reaching out to your processor to set up your merchant account to process level III processing information  You will need to use a level III capable gateway. Terminals do not support level III information however, there are some companies like revolution payments who provide an optimization service that runs behind the scenes and can automatically attach this information before transactions settle.

If you have questions about level III processing or how to lower credit card processing interchange fees. Give us a call at  888 790 3450 or email info@ revolution-payments.com

GSA Vendors

Why pay 2.65% vs 1.85%

to process a Government P-card?

With the many challenges facing contractors today, it’s no wonder so many are relying on their banks or existing credit card processors  to set them up to accept Government P-cards.

It’s regrettable that many in the contracting industry are unaware of the advantages available for accepting these cards correctly

To support acceptance of corporate & Government P-cards, MasterCard & Visa have reduced interchange rates associated with these cards if  Level-3 payment data is included in the credit card transaction.  These special rate can reduce a contractors processing costs by up to 40%.

This savings is available for any size ticket, HOWEVER savings can be further increased for contractors by enrolling in the special GSA Smartpay “Large Ticket” program.  This qualifies your  transactions of $5,984.61 and above at 1.2%

Statics show us that at least 3 out of 5 GSA schedule vendors have not been set up to accept Purchase cards correctly. Most have been set up to accept standard consumer credit cards vs commercial and purchase cards. This is unknowingly cutting into a vendors profit margin, on average by 1%-1.5%

One reason this is often overlooked is that Level 3 processing reclassifies a portion of the interchange fees businesses pay to accept credit cards, that is not related to the rates processors charge.

Interchange goes back to the bank that issued the credit card and amounts to 75%-90% of a businesses total expense for accepting credit cards

Credit card processors receive no incentive for offering you level 3 processing, nor are they required to make sure contractors are properly set up to accept credit cards in the most efficient and economical matter.

Revolution Payments developed technology to help contractors meet the requirements for qualifying for the reduced Visa & MasterCard processing rates.

This new revenue can easily add 1%-1.5% to your bottom line without having to increase your sales volume.

Most processors have the best intentions

Even if your processor has the best intentions and honestly trying to do a good job for you, their inexperience when it comes to setting your account properly to accept Government P-Cards may be driving your costs up.

Setting up a merchant account to accept commercial and government credit cards is different than setting up a traditional retail merchant account.

Questions?  Give us a call at 888-790-4350

Or visit www.revolution-payments.com  and click the Free Rate Quote tab at the top for your confidential analysis and rate review.

You can also email a recent statement to info@revolution-payments.com

Revolution Payments

A leading advocate and Level 3 credit card processor for government contractors and suppliers