cross border fee for credit card processing

What Is a Cross Border Fee for Credit Card Processing?

Whether you are a merchant looking to accept credit card payments through your online store, or an individual who is selling something on eBay with plans to ship it across the border, you will need to consider cross-border processing fees.

When accepting credit cards as a form of payment for goods or services purchased from another country (i.e., the U.S. from Canada), there is a fee that will be incurred each time you process such transactions. This foreign transaction fee (sometimes called cross-border processing fees) is charged by your credit card processing bank and can add up quickly if you do not know what to expect in advance of accepting international orders.

There are two stages of foreign transaction fees:

Variable Fee – This is a percentage fee charged by the credit card processing bank, typically 2-3% of the total charge. In most cases, this fee will be assessed on any international charges no matter where they originate from. Fixed Fee – In addition to the variable fee, there may also be a flat fee imposed by the credit card processing bank. This fee might be $1 or $2, depending on the provider you use.

Merchants with an online presence may benefit most from the increased cross border activity through their ecommerce website due to the higher volume of transactions they conduct each month. This provides an opportunity to offset some of the fees associated with foreign transactions, offering a competitive advantage against local competitors.

How Can I Avoid Foreign Transaction Fees?

Many merchants are not aware of the foreign transaction fees they incur when processing credit card payments through their account, until they receive an unexpected or unexplained charge on their processing statement which totals 3% or more of the total purchase price.

For example, if you are a U.S. merchant receiving an order for goods or services from outside the country, it is likely that your credit card processing bank will process that charge as a foreign transaction. If you have not signed up for the right service plan, any international orders might be assessed at 3% of the total purchase price as a foreign transaction fee.

There is a way to avoid this and other fees that your credit card processing bank might charge: by establishing an account that offers the lowest cost for all international transactions, and then monitoring your processing statement closely to ensure there are no unexplained charges.

Establishing an international merchant account does not automatically mean that you will be charged the lowest possible international rates. There are multiple variables that can affect your processing cost, including:

  • The volume of international orders you receive each month;
  • The countries from which those orders originate; and, The payment methods used to process those transactions (e.g., debit cards vs. credit cards).
  • The fee structure for international merchant accounts can be quite complicated and confusing, which is why we recommend that you speak with a credit card processing specialist who will review your business and payment history and provide recommendations based on what products or services would best meet your merchant needs.

One of the primary reasons merchants choose to do business online is because they can enjoy a greater selection of customers from around the world. If your business is international in nature, you should have an account that enables you to accept orders from customers on six continents without incurring additional fees.