This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. We want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: we deliver personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access.
Today we will define the MasterCard Cross Border Fee. 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, along with MasterCard’s acquirer program support fee, are the only two volume-based fees that MasterCard charges on transactions involving credit cards issued in another region than where they are acquired.
