What are These International Fees?
Your monthly credit card processing statement can be filled with various fees and charges, making it a daunting and confusing task to try and keep straight. You may even find yourself looking at an international processing fee and not knowing what that’s about.
Interchange has specific rates for international cards — cards issued outside the U.S. and processed by a U.S.-based merchant. Beyond just those interchange rates and other processing fees charged for international cards, every card issuing network adds two fees to these international transactions.
How do These International Processing Fees Work?
Here’s a quick guide to understanding how those international fees work:
Interchange rates for international cards typically range from 1.10% to 1.98% for Visa, MasterCard and Discover without a per-item-fee. The specific rate within this range largely depends on card type and processing method. In addition to this interchange and routine set of fees (assessments, network dues and acquirer fees) imposed on every transaction, each card network also adds two fees to every international transaction you process with one of their cards.
Visa:
- International Acquirer Fee (IAF) of 0.45%
- International Service Assessment of 0.40%
Visa implemented an international service assessment (ISA) fee of 40 basis points (0.40%) in April of 2008. This fee applies to all transactions involving a U.S. based business and a credit or debit card issued outside of the U.S. The ISA is also separate from interchange rates and from Visa’s standard assessment fee, which is currently 11 basis points (0.11%).
For example, the ISA fee of 0.40% will be added to a transaction where a customer uses a Visa-branded card issued out of the United States to buy something here in Delaware.
Visa has a brief online statement about the ISA fee.
The ISA is one of two fees Visa currently charges for international card usage, the other is the International Acquirer Fee, a separate 45 basis point fee (0.45%), which applies under the exact same circumstances as the ISA. Visa began charging the IAF in October 2009.
The total fees Visa charges for a transaction involving an international card processed in the U.S. is the sum of the ISA fee (0.40%), the Visa standard assessment (0.11%), and the International Acquirer Fee (0.45%), which comes to almost a full percent above interchange, 96 basis points (0.96%).
MasterCard:
- Acquirer Program Support Fee at 0.55%
- International Cross Border fee at 0.40%
MasterCard charges an additional fee to merchants for all transactions acquired in the United States that involve a credit or debit card issued outside of the United States. For example, if a cardholder uses a Canadian-issued MasterCard to make a purchase from a business here in Delaware, that merchant will be assessed a cross border fee for accepting an international card.
Introduced in 2006 by MasterCard, the fee was originally 10 basis points. Since then, it has been raised to 30 basis points in 2007, and then to the current level of 40 basis points in 2008. The cross border fee is initially charged to acquirers, who then pass the fee on to merchants.
If the transaction is settled in U.S. dollars, the cross border fee is 40 basis points (0.40%) above the interchange rate for that card. If settled in a foreign currency however, the fee is increased to 80 basis points (0.80%).
This fee typically combines with MasterCard’s acquirer program support fee. Currently set at 0.55%, the Acquirer Program Support Fee for Domestic or Foreign currency brings the cost of the transaction to 0.95% above the normal card rate on transactions involving MasterCards issued abroad. These are the only two volume-based fees that MasterCard charges on transactions involving credit cards issued in another region than where they are acquired.
Discover:
- International Processing Fee at 0.40%
- International Service Fee at 0.55%
In October, 2009, Discover introduced both its International Processing Fee and its International Service Fee. The International Processing Fee is processed on all transactions, including Cash Advance, conducted at a merchant location in a country other than the country the card was issued in. And the International Service Fee is assessed on transactions conducted at a merchant location in the United States where the issuer of the card is a country other than the United States.
In Conclusion
For Interchange Plus merchants, some processors will separate the interchange and international fees on your monthly statement, while others will group the fees together. In either case, a good rule of thumb is that international credit cards will cost a merchant about 2.5% to 3,0% plus the processor fees.