What Is a Cross-Border Fee? Can You Avoid It? [2023 Update]

If you’re selling internationally, you can’t avoid paying cross-border credit card fees. Our experts explain these fees and how to minimize them.

The internet has made the world a much smaller place. From your business in one country, you can easily sell to people way across the world. While this is exciting, you’ve probably noticed a “cross-border fee” line item on your billing statements from the credit card companies.

Credit card associations such as Mastercard and Visa charge these fees to cover the extra costs involved in international transactions. As a business owner, you need to understand these charges and learn how to manage them so that you can benefit from selling to an international market. 

Fortunately, with a little knowledge and an understanding of relevant solutions, it’s easy to minimize the pain and maximize the gain of being a global commerce player. By the time you’re done with this article, you’ll understand what cross-border fees are, how they’re calculated, and, most importantly, how you can easily manage and reduce them – creating benefits for both yourself and your customers. 


What Are Cross-Border Fees and When Are They Charged?

A cross-border fee (which may show up on your bill as “international service assessment” or “foreign transaction fee”) is a fixed, non-negotiable processing fee that the credit card companies charge whenever a business in one country gets paid by a customer who uses a card issued in another country. 

For example, let’s say a chocolate lover in America buys a couple of their favorite slabs from an online shop based in Switzerland. While this seems like a relatively simple transaction, there’s actually a complex behind-the-scenes process involving different currencies and banking networks.

The number of digital steps required as part of this process increases the risk for the credit card companies, and so they charge this cross-border fee in order to cover the extra costs and effort involved. 

So when exactly do these cross-border charges kick in? This can get a little confusing because it’s less about the geographical location of the buyer or seller, and more to do with where your business is registered and the buyer’s bank is located. 

If your business is registered in the same country where the buyer’s card was issued, then the transaction is considered domestic and there’s no cross-border fee. If, on the other hand, the card was issued in a different country from your business’s place of registration, then you'll have to pay the cross-border fee. 

Going back to our chocolate-loving American buying chocolate from a Swiss-registered company: if they use a card issued by a Swiss bank, they can buy as much of their favorite treat as they would like without triggering any cross-border fees for the chocolate seller. If they use an American credit card, though, the Swiss company will be charged.

Who Has To Pay Cross-Border Fees?

While international sales do create extra work for the parties involved, who ends up paying? Cross-border fees are determined by the card associations and charged to the card processors who are kind enough to pass those costs on to the business owner. 

Bottom line - as the business owner, paying the cross-border fees falls on you. Consider it the expense of reaping the great benefits of opening your digital doors to all clients, regardless of their location, and to be able to conduct business in any currency. 

Fortunately these costs can be managed and minimized (as I’ll explain below), particularly if you have the right payment service provider (PSP). 

How Are Cross-Border Fees Calculated?

The exact amount of the cross-border fee is determined by the fee structure of the card association and the currency in which the transaction takes place. It sounds complicated, but it’s actually easier than you think to calculate the cross-border fee. 

Each card association sets its own fee structure, but all charge cross-border fees as a percentage of the sale. Visa and Mastercard, for example, charge one “base rate” for any transactions in US dollars and an “enhanced rate” for any other currency. The enhanced rate is always slightly higher than the base rate. 

You should always read the fine print and understand what fees you’ll be charged by each type of credit card that you accept. For example, Mastercard charges a .6% cross-border fee for international transactions in US dollars, but if the transaction is in any other currency the fee goes up to 1%. 

Remember that these fees are in addition to the regular transaction fees. Also keep in mind, however, that these percentages are still a relatively small amount in the grand scheme of things, especially if you have a high volume of international transactions. 

How Can You Minimize Cross-Border Fees? 

Though credit card companies will not negotiate on the cross-border fee amounts and there’s no way to completely avoid them if you want to sell internationally, there are some ways in which you can both minimize and manage them. 

If you have a lot of customers in a certain country, it’s worth using a PSP that lets you accept common local and alternative payment methods in order to reduce cross-border fees. For example, Pay.com enables businesses to accept a range of payment methods, and new methods are regularly being added. 

You might also consider opening a branch of your company in a country where a large number of your customers live, making your business local to that market. That way, transactions using cards issued in that same country will be considered domestic with no cross-border fees. 

Of course, this only makes sense if the volume of business you do in that country is high enough to generate revenue greater than the fees! An easier option could be creating relationships with local banks that allow you to route payments via their networks in order for purchases to be considered local. 

Another option, if setting up a local branch isn’t viable, is partnering with local distributors who bank with a local institution. They can sell your products on your behalf, using their local financial infrastructure to deflect cross-border fees. You may need to offer them a cut of your profits, so factor that into your consideration. 

Scrutinizing cross-border and other fees can help you identify opportunities to reduce these costs. With Pay.com’s user-friendly Pay Dashboard, you can keep track of the status of all transactions and view reports and analytics that can inform your cost-reducing strategies and make sure you’re not overpaying. Click here to get started now.

The Bottom Line: Cross-Border Fees 

While globalization and new technologies are creating great opportunities for online businesses, these benefits come at a cost. Cross-border fees are one of the costs that you can’t avoid. 

You should, however, monitor and manage these fees carefully, and decide on strategies – including the possibility of establishing local branches or partnerships – which could minimize the impact of cross-border costs on your business. 

A sensible route is to choose a PSP that can facilitate your particular business strategy. Pay.com is a secure PSP offering a user-friendly dashboard to help you track and analyze sales and payment information. This will allow you to minimize the impact of cross-border fees on your business and take advantage of the exciting opportunities of international commerce. Find out how you can get started.


Why am I being charged a cross-border fee?

When a customer makes a purchase with a credit card issued in a foreign country (i.e. not the same country where the business is registered), the credit card companies and banks take on a greater risk and have to deal with a more complicated transaction. They charge a cross-border fee to cover the extra costs involved.  

How can you avoid cross-border fees?

Cross-border fees can’t be avoided, but there are some ways you can minimize and manage them. Registering branches or merchant accounts in locations where you do a lot of business or creating distribution partnerships with local businesses are effective ways of lowering the cost of cross-border fees. Also make sure you use a PSP like Pay.com that offers a wide variety of payment options

How much are cross-border fees?

Cross-border fees are calculated as a percentage of the sale. The exact percentage is determined by the card association and is affected by the currency used in the sale. Generally, transactions in US dollars incur a lower fee than those in other currencies.

What's the best way for my business to accept payments?

You’ll need an online payment infrastructure in order for your business to accept payments. Pay.com is an easy and convenient option that allows you to get set up quickly and accept a wide variety of payment methods, either online or over the phone.

Meet the author
Emily Kirschenbaum
Emily is a content writer with a special interest in fintech and business. She loves sharing her knowledge to help small businesses take their first steps towards success.
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