E-commerce transactions are global in scope. Many online payment gateway businesses sell to a significant number of foreign customers. When selling to these customers you may notice that you are charged a higher discount rate than for domestic sales. That occurs because of the way cross border fees work.
It used to be the case that credit card processing rates were not impacted by the location of the cardholder. This was in the earlier years of e-commerce. The reason why this has changed is because Visa and MasterCard now assess cross border fees to the credit card processor. Whenever you process a foreign transaction your credit card processor must either absorb the cross border fee that is assessed by the card brands, or pass it onto the merchant. When you look at your statement in some cases it will refer to a “foreign transaction fee”, in other cases a “cross border fee”, but they both mean the same thing.
In this article we will explore how much cross border fees are, when you should pay them and not pay them, and how to avoid them in some situations.