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How to avoid cross border transaction fees?

Wednesday, October 21st, 2009

Visa and MasterCard now charge a cross border transaction fee even when no currency conversion occurs. This relatively new fee - “cross border transaction fee” (MC) or “International Service Assessment (ISA) fee” (Visa) – was initiated by Visa and MC to ‘fight’ usage of the international credit card processing network when no currency conversion occurs.

Many on-line merchants make their best effort to enhance the shopping experience. By Geolocation they identify the shopper’s location and offer a local shopping experience, including local currency pricing. This is now supported by acquirers enabling multi-currency processing.

In such international transactions, no conversion occurs and the merchant receives the foreign currency paid by the shopper. The merchant can either manage the FX in-house, use third parties which specialize in this field and can guarantee the USD amount, such as E4X or FXmicropay or use direct cross currency processing offered by acquirers, such as ChasePaymentech.

One way or another, due to these many bypass solutions, Visa and MasterCard added the new cross border transaction fee. The fee applies when a shopper makes a single-currency purchase at a foreign country merchant, or in other words, when the issuing bank of the shopper is located at a different region than the merchant account of the seller.

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.

The workaround is relatively simple and should be applied when possible. Merchants may open local merchant accounts once establishing a local presence. Many of the merchants operating internationally already have international presence and those who do not can easily obtain one. Now that Europe is one big region, researches show that most US merchants can cover over 80% of their international sales by opening one Canadian entity and one EU entity only.

As shoppers origin is already identified (Geolocation – remember?), any international transaction is automatically routed to the relevant local merchant account. Issuer and Acquirer are now in the same region and no cross border transaction fee applies.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

Tags: Credit Card Processing, Credit Card Processing Fees, International Merchant Account, Merchant Account
Posted in Credit Card Processing, Domestic Merchant Account, High Risk Merchant Account, Intl Merchant Account, Offshore Merchant Account | 23 Comments »

Credit Card Processing is Magic

Monday, August 10th, 2009

Nowadays, when kids are using plastic debit cards, loaded with their weekly allowances by their parents, people are taking credit card processing for granted, yet that wasn’t always the case.

Credit cards were invented less than a hundred years ago, and initially only used by individual firms and their customers. The first ones adopting this technique were the big oil companies. Still, the cards were only accepted by the issuing company and in very limited locations.

The first break through occurred around half a century ago, when the first bank card was issued. This ‘bank card’ could only be used by customers who had an account with the first issuing bank. These fortunate people could purchase goods from merchants maintaining an account with same bank. A very limited and local use, no doubt, yet the first break through enabling one to ’shop around’ using credit card processing.

We’ve gone a long way, and today each and every one of us has opened an account with an issuing bank and got that piece of plastic. All the merchants you can think of, around the world, have signed up for merchant accounts with acquiring banks and know what to do when presented with same cards.

All of us, though most of us tend not to think about it, are connected with binding legal agreements, which enable us to pull out our card, basically everywhere around the globe, in person or on the internet, and purchase any product we can think of, as long as our credit limit enables it…