While many of us use credit cards in our daily lives for purchases at grocery stores, gas stations and other consumer venues, a number of businesses have begun to use and accept credit cards for payment. Over the past several years, business credit card use has ballooned and a number of companies are making the change to cash in on the benefits.
“So many more companies are using them,” said Robert Day, Commercial Merchant Analyst for Fifth Third Bank Processing Solutions. “It’s practically doubled in the past years.” Day noted that the use of credit cards in business transactions is ultimately a cheaper way of doing business. It also cuts back on the paperwork and printing hassle that goes along with the use of checks.
Most business conducted with credit cards is done at the second level, which is a level of security that requires a business that accepts credit card transactions to provide certain information prior to approval. Information like merchant zip code, location, description and tax info is included on the second level. There is, however, a third level of transaction, which is increasingly being used, and often required in order to do business, by larger corporations. Level three transactions not only provide the buyer with general information, but also a line item guide of what was purchased with the credit card. Currently, only about 1% of business is conducted at level three.
However, the higher the level of your transaction and the greater amount of data a merchant provides, the lower the interchange rate. Interchange rates are fees levied on a merchant after a transaction is completed—and how credit card companies make their money. The more information you provide, and the more you accept credit cards at level three, the less money you need to give to a credit card company.
On January 10, Day will deliver a teleconference on credit card processing in business-to-business transactions. The presentation will focus on both payment and acceptance of business credit cards and will, most importantly, give you tips as to how you can lower your interchange rates and save your company money.
Source: Jacob Barron, NACM Staff Writer and Robert Day