Running a business is as challenging as it can be rewarding. Aside from making a profit, you’re also dealing with various fees that often can’t be avoided. While no one likes having to pay extra, arguably the least enjoyable type of fees are the ones that come as an unpleasant surprise at the end of the month.
As we all know, these little fees can accumulate fast. One such unexpected charge is Visa’s International Service Assessment (ISA) fee. The name implies that this fee will only occur during international payments, and while that is true, you might still find it being applied to purchases that were made within the United States.
In this article, I’ll explain why the ISA fee is charged and what your business can do to work around it. I’ll include some expert tips I’ve learned through my own experience.
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What Is the Visa International Service Assessment (ISA)?
If you’ve ever looked at your monthly statement and noticed an international fee payment that left you puzzled because all your business is domestic – it’s likely Visa’s ISA fee.
Payments to a business registered in the U.S. from a non-U.S. issued Visa debit/credit card holder are subject to the International Service Assessment (ISA) fee, payable by the merchant. This charge applies to both in-person and online purchases.
Seeing as ISA is applied whenever your customer uses a card that was issued outside of the United States, this charge might surprise you at the end of the month. All it takes is a customer paying with their non-U.S. credit card or someone making a purchase on your website, and an ISA fee will occur.
It’s worth keeping in mind that the ISA isn’t the only charge incurred on international card payments. Such transactions will also be subject to Visa’s standard assessment fee and International Acquirer Fee (IAF), as well as additional interchange fees if the transaction was paid in a foreign currency.
Other major card brands charge a similar fee for internationally-issued card purchases as well. Mastercard, American Express, and Discover all charge something resembling the ISA, but each has its own name for the process.
When Are ISA Fees Charged?
Anytime a customer with a Visa credit or debit card that was issued outside of the United States pays a merchant based in the U.S., the merchant gets an ISA fee. All the ISA fees that accumulate over the course of the month will show up in your monthly merchant account statement from your payment processor.
In practical terms, this could take place in an in-person store when a tourist visits and pays for their purchase with a Visa card issued in their home country. Online transactions are subject to ISA fees as well. As an example, when a customer in the United States uses a non-U.S. issued Visa card to make an online payment, an ISA fee will be incurred.
In short, the customer’s location or nationality isn’t what dictates whether or not the payment is subject to ISA fees. It's based solely on whether the card’s issuer is based outside the United States.
Even if the customer is paying for an item to be shipped to the U.S., the fee will still apply, because the fee itself is unrelated to your business and your services.
What's even more puzzling is that even if the card holder's bank has a separate branch in the United States, Visa's ISA is still applied as long as the card was issued outside of the country.
Who Has To Pay ISA Fees?
A common misconception among business owners in the United States is that they aren’t liable to pay ISA fees, but unfortunately, that's not true. The burden of paying ISA fees falls entirely on the merchant, which means that you will have to be the one to pay them.
The way this usually works is that Visa charges your payment processor, which then passes the costs on to you. This can vary slightly, however, depending on the agreement you have with your processor. It's important to remember that Visa can't charge you directly, so the final rate for the ISA fee will vary between different payment processors.
Some processors may charge you an additional transaction rate on top of Visa's bundle of fees. You'll find the details of this in your contract.
How Are ISA Fees Calculated?
The ISA fee is fixed at a flat rate depending on the type of card used. A credit card, a debit card, and an ecommerce bank card may all have different fees associated with them.
The ISA fee currently sits at a minimum of 1.1% for transactions settled in U.S. dollars and can go as high as 2% in some cases when the transaction is settled in a foreign currency. It's among the highest of all assessment fees.
Unfortunately, as I mentioned above, transactions that are subject to ISA fees are also subject to standard assessment fees (0.13% for debit cards and 0.14% for credit cards), as well as International Acquirer Fees (IAF) at 0.45%.
All these fees add up to 1.68–2.59% fees from Visa on each liable transaction. Keep in mind that if the customer pays in a foreign currency, you’ll receive an additional charge in the form of interchange fees.
How Can You Minimize Foreign Transaction Fees?
The best thing you can do to keep your foreign transaction fees to a minimum is to switch your business over to an interchange-plus pricing plan. This evaluates each transaction individually and ensures you pay the minimum rate for each one.
Other than that, you’ll be hard pressed to find a way to further reduce your foreign transaction fees, as most of these operate on fixed rates and can’t be whittled down anymore.
The only way to avoid these fees entirely would be to completely refuse international payments. However, this would likely hurt your business more than it would help, and it would only serve to limit your potential customer base.
One thing you can do, however, is to maintain a clear historical oversight of your fee payments to make sure you’re not overpaying. Keeping track of the state of your business accounts is crucial, and there are tools out there that make this easier to do.
Pay.com can make keeping records of your fee payments easy and convenient. Not only will you be able to track all your payments and fees, but you can also offer your customers a wider variety of payment methods to choose from.
The Bottom Line: ISA Fees
The Visa ISA fee is certainly something that many business owners are unaware of, but unfortunately, it's also something that is unlikely to go away. Global transactions will always be there, and there is no way to account for local customers who may use a foreign credit or debit card – it's just bound to happen sometimes.
The best way to go about handling your business' ISA fees is to be prepared for them and expect them to be added to each international payment.
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