You may pay a cross-border fee if you accept payments from customers in other countries. When processing credit card transactions, a cross-border fee is an additional charge applied when the card used was issued in a different country from where the merchant is based.
Before e-commerce became widespread, only the most prominent organizations typically had to deal with cross-border fees. However, with advances in digital technology and the flexibility of payment services offering numerous ways to transact, businesses of all sizes can now operate globally.
Understanding what this is, how it works, and how to avoid it is vital to protecting your company’s bottom line. Here’s everything you must know.
As the name suggests, a cross-border fee occurs when you accept payment from someone ‘across the border.’ It’s also known as the International Service Assessment (ISA) fees. It’s a charge for converting currency from another country to US currency.
All credit card networks charge cross-border fees (Visa, Mastercard, Discover, AmEx), but they charge them to the credit card processors—the company you signed up with. Some credit card processors pass the fee along to the merchant (you).
Even though the process may seem simple, it has a complex infrastructure involving multiple currencies and banking networks. Every digital step increases the credit card companies’ exposure to risk, pushing them to impose a cross-border fee to compensate for the added costs and effort required (more on this later below).
Not exactly. While they are related and are usually included under foreign transaction fees, they are not the same. A Cross-Border Fee or International Service Assessment Fee is charged by payment networks like Visa and Mastercard to the merchant’s bank when a transaction involves a card issued in one country but used in another. This fee is usually passed on to the merchant, though some card issuers may charge it to the cardholder.
On the other hand, a Foreign Transaction Fee is charged by the card issuer to the cardholder for purchases made in a foreign currency or processed through a foreign bank. This fee typically includes the cross-border fee and an additional percentage set by the issuer. While a foreign transaction fee may be a cross-border one, the two differ.
Cross-border fees and currency exchange fees are different. While cross-border fees relate to the costs of conducting cross-border transactions, currency exchange fees are incurred when converting one currency to another.
These conversion fees are linked directly to fluctuations in currency values and are charged in addition to any cross-border fees.
You pay cross-border fees any time you accept payment from someone living in another country. But it’s not always clear when this happens.
If you’re an online merchant, you probably accept international orders. It’s a way to grow your business, so you take them, but you’ll pay higher processing fees to process the transactions.
Finding the cross-border fee percentage is essential if you accept international orders. It’s charged on each international sale. If you do many international sales, it could eat into your profits, so it’s worth looking into ahead of time.
However, you may also run into this issue if you have a brick-and-mortar store. Even if you don’t operate online, you may unknowingly accept an international credit card if a visitor from another country comes to your store.
You may wonder why credit card networks don’t just absorb the fee since they charge merchants so many other fees to be able to accept credit cards.
Here’s why.
The cross-border fee started in 2005 when international sales increased significantly. Credit card networks, issuers, and banks had to perform extensive administrative work to handle these international sales.
Credit card companies must convert the currency since the payment is made in a different currency than you accept (US dollars). This costs money, and they take on a significant risk if the payment is from a country with an unstable currency.
The costs involved and the risks credit card companies take force them to pass the costs along to merchants since you’re making the sale. Some credit card processing companies eat the fees, but most pass them to the merchant. Look for it among your assessment fees and ask questions if you aren’t sure.
It may feel like you’re being hit with yet another fee that makes it difficult to accept credit card payments, but consider it from the credit card issuer’s perspective.
Doing business in other countries is risky. Just because you can advertise there and get business from them doesn’t make it safe. The credit card issuer runs the risk of the funds not holding their value during conversion, and then they are stuck with the loss.
To make up for it, they charge a fee. Think of it as an insurance premium paid to your life insurance company. You hope you don’t die, but you pay the premiums just in case. The cross-border fee is the same idea.
In the early days of e-commerce, most businesses relied on a simple, flat-rate pricing model where each transaction had the same discount rate, regardless of risk or location. Over time, however, the payments grew more complex. Much of that complexity now revolves around credit card interchange fees, which factor in variables like transaction risk, currency conversion, and regulatory requirements.
An interchange is a fee the acquiring bank pays the cardholder’s bank to compensate for processing expenses. It’s a structure set up by card networks (like Visa or Mastercard) to ensure that the costs—and benefits—of accepting credit cards are shared equitably among issuers, acquirers, and merchants. Since each region around the globe has unique financial regulations, currency considerations, and marketplace dynamics, interchange fees and related assessments differ widely from place to place.
In the United States, two main cross-border fees apply to transactions where a card is issued in one country but used in another. These are often lumped together under a broad label like “foreign transaction fees,” yet it’s vital to remember that cross-border assessments are only one element of those broader fees. Card issuers may layer on additional surcharges for international purchases, reflecting the costs of conversion and processing and the added risk inherent in cross-border payments.
When Visa and Mastercard assess cross-border fees, they typically evaluate two main factors: the country where your business is registered and the location of your customer’s card-issuing institution. These considerations ensure that each transaction is classified as either “domestic” (same country) or “international” (different countries), which triggers the relevant fees.
The first criterion is the country where you, as a merchant, have officially set up your business. You must disclose this location when you sign up for a payment processing service.
Any transactions from customers within your registered country are treated as domestic, meaning no cross-border fee applies. However, if a purchase comes from a country different from where you’re registered, that sale often incurs a cross-border fee.
After determining your business’s registered country, credit card networks look at where the customer’s card-issuing bank is located. If the bank is outside your home market, the transaction typically qualifies as cross-border, which means an extra fee is tacked on.
In some cases, the cardholder may also face a foreign transaction fee from their issuer, though it is separate from your merchant cross-border assessment.
Issuing banks outside a merchant’s home market implement fraud protection measures and currency conversion processes, which increase payment networks’ expenses. The payment processor may apply additional conversion fees if a transaction involves converting one currency into another, such as Euros to US dollars. Additionally, different card issuers impose varying foreign transaction fees on cardholders. These extra costs can influence customer purchasing decisions, making it essential for merchants to understand how they impact overall transaction expenses.
When an order crosses borders—physically or merely due to the card issuer’s location—Visa and Mastercard treat it as higher-risk, leading to supplemental fees. Understanding these two criteria can help you streamline costs by opting for local acquiring partners, establishing a legal presence in major markets, or otherwise minimizing your transactions’ “international” aspect. Ultimately, being aware of how card networks classify cross-border purchases empowers you to strategize your pricing, optimize your payment setup, and potentially lower fees over time.
Every credit card issuer charges a different amount for the cross-border fee. Mastercard, for example, charges 0.6% of the transaction if it is settled in US dollars and 1% if it’s settled in another currency. Discover charges 0.8% of the transaction in either situation, and Visa charges 1.0% if it’s settled in US dollars and 1.4% if it’s settled in another currency.
Don’t just look for the name “cross-border fee.” It can also appear under other names, including foreign transaction fees and Global Acquirer Program Support Fee.
American Express differs somewhat from Visa and Mastercard regarding cross-border or foreign transaction fees. While their cross-border fee typically sits at 0.40%, it’s frequently rolled into the international assessment fee.
Checking your specific card’s terms for details is always a good idea.
Imagine you run a small online gift shop in the United States and regularly ship orders worldwide. One day, a new customer in Canada purchases a handcrafted candle for $100 (USD). The transaction is considered cross-border because this customer’s credit card was issued outside the United States. If you use a payment processor tied to Mastercard, you might see a 0.6% cross-border fee—around $0.60—on your statement if the purchase is settled in US dollars.
For Visa, the cross-border rate could be 1.0%, while Discover’s fee is closer to 0.8%. American Express often bundles its 0.40% charge into an international assessment fee. These charges generally appear in your monthly processing statement, sometimes labeled as a “foreign transaction” or “international service assessment” fee.
On the customer’s side, if their Canadian bank charges a foreign transaction fee, it may include part of the cross-border fee or reflect additional costs the issuer imposes for international purchases or currency conversion. While this fee doesn’t directly affect your bottom line, it underscores the overall complexity: the credit card networks manage additional currency exchanges, compliance checks, and fraud risk when payments cross borders. If, for example, you allowed the customer to pay in Canadian dollars, your gateway or bank might impose yet another currency conversion fee to settle the transaction in US dollars.
Credit card networks impose these fees to mitigate higher risk and administrative overhead from international transactions. As a merchant, you can’t avoid cross-border fees entirely, but you may have some room to negotiate with your payment processor—mainly if you process substantial transaction volumes.
In cases where a significant share of your sales comes from a single foreign country, you might even consider setting up a local entity there to bypass these fees. However, that approach brings its own regulatory and operational complexities. By reviewing your processing statements carefully and clarifying how fees are labeled, you can make more informed decisions about pricing and negotiating your rates.
It would be nice if there were ways to avoid the cross-border fees, but there aren’t. The costs are the way credit card issuers protect themselves. Processing funds from another country is risky, and they need to defend themselves against that risk, just like an insurance company charges higher premiums or a mortgage company charges higher interest rates for risky borrowers.
But are there ways to avoid it? Avoiding it but negotiating can be a better word.
Find out precisely what the credit card processor charges for international transactions. Some processors charge excessive fees, which you may be able to negotiate. While you can’t get the Visa, Mastercard, or Discover fees, you can get around other miscellaneous fees by asking.
A more flexible payment service provider (PSP) can significantly reduce—or even eliminate—the need to process payments as “cross-border.” Many countries use popular local or alternative payment methods that bypass standard card networks altogether. If you sell frequently to Canada but your business is in America, partnering with a PSP that has local acquisition in Canada lets you process payments domestically.
This often eliminates the cross-border fee because the acquirer and card issuer are based in the same country. If your PSP only has partners in your home country, you’ll still pay cross-border fees for international transactions. But shopping for a provider with broader global coverage—or specialized local solutions—can lead to substantial savings over time.
Set up business in the country you do business in—If, after doing business for a while, you find that a lot of your business comes from one country, you can set up a business in that country, registering it there so you don’t have to deal with the cross-border fees.
Suppose you operate in the Netherlands, for instance, and your customers’ cards are also issued in the Netherlands. In that case, you’re no longer considered a “foreign” merchant, reducing or eliminating cross-border fees.
However, setting up a legal branch in another country involves added tax, regulatory obligations, and ongoing administrative expenses. Carefully weigh the cost of those logistics against what you stand to save in cross-border fees before leaping.
If establishing a local entity seems too complex or expensive, partnering with distributors in key international markets can be a middle ground. A distributor in your target country, which already has local acquiring, sells or delivers your products. The transaction is processed locally, potentially sidestepping your cross-border charges.
You must ensure brand consistency, shipping logistics, and customer support meet your standards. While the distributor arrangement can cut fees, you lose some direct control over the customer experience and may need to split profits or pay additional service charges.
Just like with any credit card fees, ask questions, see what you can negotiate, and don’t get taken advantage of. Most companies pass cross-border fees to merchants but may not stop there. Find out exactly what they charge so you know what you’re paying and if anything is negotiable.
Just because you accept international payments doesn’t mean you should have to pay excessively. Do your research, ask questions, and get professional help if you aren’t sure what’s right or wrong.
Merchants can lower fees by using local acquiring banks to process payments as domestic transactions, accepting multi-currency payments to avoid conversion costs, and offering alternative payment methods like Alipay or SEPA. Negotiating with payment processors and establishing a local business entity can further reduce transaction costs.
Yes, higher processing costs may lead to increased prices, discouraging international buyers. Foreign transaction fees on customer cards and limited local payment options can also result in cart abandonment. Merchants can improve conversions by offering transparent pricing and multiple payment methods.
Visa and Mastercard charge 0.60%–1.40% based on settlement currency, while Discover applies a flat 0.80% fee. American Express fees vary by region and are often bundled into assessment charges. Merchants should review processor fees and negotiate better rates when possible.
