23 Responses to “How to avoid cross border transaction fees?”

  1. Tali says:

    Great advice for international merchants. If all merchants would have followed this advice the life of on-line shoppers would have been much easier.
    Until such happy days, shoppers should purchase on local platforms when such are available, i.e. if you live in the UK and buy on Amazon, use amazon.co.uk for your local purchases…

  2. Richard says:

    WOW – though I’m familiar with the ISA fee from my personal Visa credit card statements, I never realized it costs us more to process those transactions through our merchant account.
    Had to run and check – I now confirm that as a merchant we pay additional 0.4% on any Canadian cross border transaction and additional 0.8% on any European or Asia Pacific cross border transaction – Amazing! Already working on implementing your suggestions – thanks!

  3. Dan says:

    Good post – thanks!
    One paragraph is not clear-
    “Many travelers and on-line shoppers are already familiar with this fee, yet only few merchants are aware of the higher discount rates associated with such transactions, as well.”
    I also think the fact that in Europe one does not pay the fee –is worth emphasizing and not left to the understanding of the reader.

  4. CCPrUs says:

    Dan, shoppers traveling abroad or shopping at foreign online websites, see the fee as a separate line item and are (becoming) aware of this new fee.
    Merchants, on the other hand, who already have a hard time following the endless transaction types and different discount rates per transaction/card/debit/credit/time of authorization/etc. do not necessarily catch up with these fees in specific.

    Not sure I’m with you on Europe. As long as issuer and acquirer are located at the same region (regardless if this region is in Europe, the US or Asia Pacific) the fee does not apply.
    Gidi.

  5. Dan says:

    Took me time to realize that the associations apply the cross border transaction fee on issuers and acquirers both. Now I get it. Thanks!

  6. Debitcard & Creditcard News says:

    Was posted on: http://debitcardcreditcard.net/2009/10/how-to-avoid-cross-border-transaction-fees-%c2%ab-credit-card/. Thanks! The DebitCardCreditCardTeam.

  7. paynetsystem says:

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  8. MerchantAccountsLLC says:

    The fees that are at the centre of the issue are known as multilateral interchange fees, and charged to retailers when international transactions are conducted. However, it is usually the consumers that ends up footing the bills due to prices that are then inflated by the retailers.

  9. You may find “Pick an international merchant account provider” interesting. Physical good merchants may outsource the global activity all together and choose a partner who’s already walked the extra mile… :)

  10. Akashar says:

    I don’t quite agree. But basically you’re right.

  11. Luigi Fulk says:

    Great information! Thanks!

  12. Fred says:

    Thank you – this one sounds like it could actually work!!!
    I’m gonna give this interesting idea a chance, and tell you how it works.
    Keep on posting – Already waiting for your next article…

  13. Brian says:

    I always thought that “cross border” = “cross currency”
    Learning that the associations charge this fee even when no currency exchange occurs is unbelievable!
    What on earth can justify such a fee, and why is it legal?

  14. anobEagerbHar says:

    Hi guys,

    I know this might be a bit off topic but seeing that a bunch of you own websites, where would the best place be to host. Someone recommended I use Blue Host for $6.95 a month which seems like a great deal. Anyone here on http://www.creditcardprocessing-r-us.com using them?

  15. CCPrUs says:

    It is off topic… yet the answer is absolutely YES – Highly recommended!

  16. Max DeWine says:

    Avoiding cross border transaction fees is less trivial than it might sound. Opening a merchant account isn’t easy and getting the best deal, in a non residence country is ever harder.

    Processing with a couple of acquirers complicates the processing flow. Different: terms, settlement dates and rolling reserves make accounting and funds follow up difficult to manage.

    Yes, the end result is indeed preferred, yet very few merchants will be able to cross the ocean and get there…

  17. Nick says:

    Does American Express charge similar cross border transaction fees?

  18. CCPrUs says:

    As long as no conversion takes place, no cross border fees are currently imposed by American Express.

  19. John says:

    hi Gidi,

    I read your article of avoid crossborder fee.

    We are a Canadian company in Vancouver, BC, Canada.
    We are expanding our business into US, we just set up a warehouse in US but no rep in US.

    We want to accept US credit card, take US dollar into our bank account. (We have US dollar account in Canadian bank).

    We plan to use Virtual Terminal to charge US credit card, and the location is in Canada.
    We are contacting a US credit card processor, Fast Transaction, they said, I may need to open a bank account in US soil, then the crossborder fee can be avoided.

    Is that right?

    You said “Merchants may open local merchant accounts once establishing a local presence. ”
    What does it mean ” local merchant account”? Do we have to register an US business, pay tax to US gov?

    Thanks a lot for your time.

    John.

  20. CCPrUs says:

    Hi John,

    A US legal presence is indeed required for obtaining a US merchant account.

    Regardless if you end up setting a US merchant account or not, If you wish to avoid paying taxes in the US, I strongly suggest you verify that the warehouse you already set, does not create a US “Permanent Establishment” (PE) and exposes your company to US taxation.

    Just so you know, due to the US-Canada tax treaty, paying taxes in the US should not generate double taxation, and as you need to pay taxes somewhere, paying some of your taxes in the US – those directly generated by your US activity – might end up being the right thing to do.

    One way or another – best of luck with expanding into the US!

    Gidi.

  21. Toks says:

    Hi Gidi,

    I have 2 websites- same name different countries. One in The UK (where I live) and the other in the USA. My merchant processing is done by a UK company (HSBC) but I also have a US dollar account so dollar transactions can be processed in dollars. Sadly my customers still get charged foreign transaction fees. While I have a US Merchant account, I have been unable to get approved for card processing in the US and can only use my UK virtual terminal. Are you then saying that the reason my customers get charged is because the funds go into a UK account? Can I counteract this by processing with my UK terminal but having the funds deposited into my USA account? Apologies for being so long winded :~

  22. CCPrUs says:

    Hi Toks,

    Summarizing the facts – you have a USD merchant account with a UK acquirer through which you process USA buyers, and getting charged cross border fees on the process.

    Most chances are your UK acquirer will be reluctant to remit your USD funds into a USA bank account, yet unfortunately, even if it would, the answer to your question would still be “No”.

    You can’t avoid cross border fees by changing your remittance instructions. The only way to avoid cross border fees is to process cards in the region your buyers are coming from. In your case you are using a UK acquirer, operating within the EU region, for processing USA cards issued in the US.

    As it sounds like you’re almost there, don’t give up! You already have a US bank account and a US site. Incorporate in the US, get a US merchant account and bypass these cross border fees.

    Best of luck!

    Gidi.

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