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A comprehensive guide to cross border fees for merchants

Whether you sell to an international clientele online or in a touristy area to which many tourists flock, as a merchant, it’s important to be aware of some fees that will (and we emphasise will and not may) arise because of transactions accepted with foreign cards.

In particular, we’re referring to cross-border fees. But what are they, and why are they charged? Read below to find out more.

What is a cross-border fee?

A cross-border fee applies to transactions where the customer’s card is from a foreign bank, different from the country in which the merchant operates. This is especially the case with merchants who service tourists in person or those who sell online. They are also commonly called assessment fees, an International Service Assessment (Visa), a foreign transaction fee.

What makes them difficult to navigate is that they are a non-negotiable base figure, and they’re implemented by card networks such as Visa, Mastercard, and other main global players.

So, what factors come into play when determining whether a cross-border fee applies?

The first is the location of the registered business. When first registering for payment processing services, a business needs to show in which country their business is registered. If sales are made within that country, they will be considered domestic.

On the other hand, if they make the sales outside this country of registration, the result will be cross-border fees being charged. The second variable relates to the location of the card-issuing institution. 

Is this the same as a currency conversion fee?

The quick answer is no. The latter fees are separate and can be charged together with cross-border fees. In addition, the value of the currencies is related to the exchange rates. However, these fees are implemented for the act of transacting itself.

When a tourist hands you their foreign-issued card and wants to make a purchase in your country, or you’re making an online sale to an international customer, you’ll be charged a cross-border fee.

How do cross-border transactions work?

In order to fully understand the need for cross-border fees, it’s key to assess the whole process and how cross-border transactions work.

The main difference between a standard, domestic payment and cross-border payments is that the latter requires a currency conversion, international transaction costs, and compliance with local tax regulations

The process goes through the following steps:

  • A customer makes a payment via an online shop or website;
  • If applicable, the shopper selects a currency option at checkout;
  • The consumer inputs their payment information;
  • A payment gateway transfers the provided data for verification to a processor, card network, the shopper’s issuing bank, and the acquiring bank;
  • When the selected currency is different from that of the merchant, a currency conversion takes place. At this stage, any exchange rates and conversion fees are applied;
  • After authorisation and verification, the payment is processed and completed.

Thanks to cross-border payments, businesses can tap into new markets and increase their exposure, positively influencing sales.

Examples of cross-border fees

There are a range of different cross-border fees that you can encounter as a business.

Some of the most popular ones include:

  • Cross-border online payment processing fee – accumulated when a business uses an international payment gateway or service provider to conduct online payments;
  • International wire transfer fee – a fee that is paid when funds are transferred from one bank account to another in a foreign country; 
  • Foreign currency exchange fee – currency exchange fees accumulate when there is a conversion from one currency to another in order to enable cross-border payment;
  • International credit card transaction fee – fees that are paid once a customer shops from a business with a credit card in a different currency from that of the merchant. 

When considering cross-border payments as a business, make sure to research the fees associated with the process.
For example, MasterCard charges fees between 0.6% and 1% for cross-border payments. The MasterCard cross-border fee varies based on the type of transaction conducted and other factors.

How much are cross-border fees?

Card networks started the cross-border fee in 2005. They vary depending on the card issuer and the currency in which they settled the transaction.

The typical range for a cross-border fee is between 0.4% and 1.2%.

Can you avoid them?

Although the general discussion around avoiding cross-border fees is that they cannot be circumvented simply because they are non-negotiable, there are some steps you might take to avoid such fees. 

The first step is to use an acquiring bank that supports business accounts with multi-currency processing. Second, consider directing your customers to purchase your wares from local distributors. The third option is to register a branch of your company in the country where you’re expecting to do large volumes of business. 

However, you should only aim to avoid cross-border fees if your business is expanding, you’re expecting a higher sales volume from a particular country, if you can actually afford it and if the benefits outweigh the cons.  

How to prepare for cross-border fees

It’s fundamental for a merchant to be aware of all applicable fees for your business to prepare for cross-border fees. 

Make sure you’re aware of how cross-border fees are calculated and have detailed information about the accumulated charges for your payment processor based on the transaction amount on each payment. 

Where possible, discuss any opportunities for better rates on cross-border transactions with your payment processor. Depending on your business type and expected transaction volumes, you can enjoy lower fees and promotional rates. 

Don’t forget to stay informed about exchange rates and monitor how any changes might affect your business. 

Challenges of cross-border payments

Cross-border transactions in a different country have drawbacks and potential challenges compared to payments performed in the same country.

The following obstacles make international transactions intimidating for some businesses.

High costs

One of the main things to understand about cross-border payments is that they come with extra costs

This is because different cross-border fees are accumulated for sending money to another geographical location.

As a business, you may be obliged to pay cross-border fees, like a currency exchange fee, a foreign transaction fee, regulatory fees, and more. You are likely to also pay intermediary fees to financial institutions and any other third parties involved in the process of collecting and transferring funds from foreign customers to your local bank account.

To reduce cross-border fees, be fully aware of your partners’ fee structures and understand how they charge you in detail. 

It’s also important to note that having your business registered in multiple countries can also help lower transaction fees. For example, if shoppers use a credit card issued in the same country as the business’s bank will allow reductions in transaction costs. 

Slower transaction process

Payments with international banks can often be a time-consuming endeavour

For instance, in most cases, it’s expected that payments to a foreign country may take up to five working days to complete. 

This is much slower when compared to settling online shopping payments on a local or national level. 

Local payment regulations compliance

In addition, it’s also worth considering the regulatory implications of cross-border payments as they can create challenges for business owners.

Taking your e-commerce business on an international level is more than translating your website and adjusting your messaging. 

Businesses must abide by regulatory requirements in the country where they sell products or services to take advantage of cross-border payments. One example is the mandatory Strong Customer Authentications (SCA) application according to the Payment Services Directive 2 (PSD2). 

Other regulatory examples include the PCI DSS laws and 3D Secure 2.0 (3DS2) protocols

These regulations are put in place to protect customers and your business. A reliable payment service provider can inform you of the essentials and help you stay compliant with all legal requirements of the international market. 

How to make international payments work for your business

As noted above, one of the ways to facilitate international payments and make the process seamless for your customers and your business is by partnering with an experienced payment service provider.

In a nutshell, some of the options to explore for making cross-border payments work for your business are as follows:

  • Provide convenient payment methods – offering a flexible way for customers to pay can bring in great benefits for your business. Apart from exploring popular credit card companies in the market you’re selling in, you can also consider alternative payment options, like local card schemes, bank transfers, digital wallets, buy now pay later, and prepaid cards. 
  • Partnering with local banking networks or a local branch – you can also make cross-border payments more successful by working with local banks. This means your customer’s bank and the bank processing the payment are in the same country. This setup makes payments quicker and helps you manage your money more effectively. It also reduces extra fees for both you and your customers, enabling you to gain a competitive advantage. 
  • Explore local acquiring – local acquiring is a great way to increase payment acceptance. In this case, the business can receive and route payments with acquiring banks based on the shopper’s location and working with their issuing bank.
  • Minimise international payment costs – as a business owner, you may notice that your merchant account is charged foreign exchange fees based on exchange rate conversions. This takes place when there are different currencies involved in the transaction process, or when the customer’s currency is different from yours. 

By implementing these tips and best practices, you can make cross-border payments easy, convenient, and efficient for your business.


Although unavoidable when it comes to accepting payments with foreign-issued cards, cross-border fees, introduced in 2005, are an important factor to consider when deciding to trade abroad online or accept in-person payments from cards issued in another country.

These costs can add up, and it’s worthwhile considering whether your business can weather them or whether you wish to avoid them altogether.

In this article, we covered a cross-border fee, explained the differences between it and currency conversion fees, and mentioned whether cross-border fees can be circumvented. We hope this will help with your decision-making process and ensure that you run your business smoothly.

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