We’ve all been there.
You open up your processing statement for the month, only to find it is much higher than you thought it would be. Where are all these annoying fees coming from? Why are they so high this month compared to last month? What can you do about it?
One of the best things you can do as a business owner is to understand why processing fees are charged and when, and a common fee that often comes as a surprise is what Visa calls an international assessment fee or ISA fee.
These fees are also known as international fees or international transaction fees, and the name and rate attached to these fees change according to the card issuer.
Ranging between under half a percent to over a percent, these fees can really add up — especially when stacked on top of other interchange and processing fees.
What is an ISA fee?
An International service assessment (ISA) fee is a processing fee charged by Visa to merchants whenever a customer chooses to use a credit or debit card issued by a bank outside of the United States. MasterCard, Discover, and American Express have similar international fees.
While interchange rates are always charged on international transactions and range between 1-2%, international service fees are additional fees on top of the interchange rates.
Visa and other cardmember associations/issuing banks set the rates, and they are the same for everyone. This isn’t based on a per-country rate, per transaction rate, or per business rate. ISA fees are charged when an international transaction occurs, regardless of the circumstances.
Many processors separate international fees from your normal interchange fees on your statement, but if they don’t you can estimate that any international transaction will cost you between 2-3% plus whatever your payment processor normally charges per transaction.
When are international service fees charged?
International service fees have to do with the relationship between the acquiring bank (the bank the business or merchant account is associated with) and the issuing bank (the card-issuing bank on the customer side.
If a transaction occurs in the U.S., and the customer uses a card issued by a bank registered or based out of a different country — even if the bank has a branch or what have you in the states, then the merchant will be charged an international service fee.
The most common example of an ISA fee in practice is when out-of-country tourists make a transaction at your business. They pull out their home country’s travel card and swipe/insert away, but you have to pay for that convenience.
This isn’t restricted to in-store transactions, either. eCommerce transactions are subject to this as well, even if that person uses a foreign card to ship to a U.S.-based address. Again, it’s about the bank’s relationship — not the transaction itself. There’s no way around this, so preparing for the fee is your best bet.
How much is the ISA fee?
The percent charged and unique names for ISA fees vary by bank.
Here are the rates that we know of. If you notice they’ve changed or are higher than normal, the cardmember associations may have upped them in 2019.
Visa charges two fees per foreign transaction:
International Service Assessment Fee (ISA fee) – 0.80% – 1.20%
The International Service Assessment Fee applies to U.S.-acquired transactions paid for with a card issued outside of the U.S, and this fee varies depending on what currency the transaction is settled in.
E.g. If the customer chooses to settle in U.S. dollars, there’s no currency exchange element involved and the fee stays at 0.80%. When a customer chooses to transact in a foreign currency, Visa tacks on another 0.40%.
International Acquirer Fee – 0.45%
The International Acquirer Fee applies under the same circumstances as the International Service Assessment Fee noted above.
Difference between the ISA fee and the IAF fee
International service assessment fees, international service fees, international processing fees, International acquirer fees… what’s the difference anyway?
Well… a lot of it is just semantics across cardmember associations, but Visa does charge both two separate fees — the international service assessment fee and the international acquirer fee.
These two fees are charged at the same time and stack on each other, so whenever you see the ISA you’ll see the IAF alongside it, unfortunately. Add up a potential currency exchange rate, and you’re looking at up to 1.65% in additional fees.
Mastercard’s international fees include both credit and debit cards issued outside of the states as well.
They charge two fees per foreign transaction:
International Cross Border Fee – 0.40%
This is essentially the same as Visa’s ISA, and it applies to anytime a card is used by a bank outside of the U.S.
Acquirer Program Support Fee – 0.55%
MasterCard’s cross border fee is stacked alongside a fee known as the acquirer program support fee. They charge the APSF when a customer settles in US dollars at a US business but paid with a Mastercard outside of the U.S.
So if a Canadian tourist uses his/her Canadian MasterCard at your U.S. business and settles in U.S. dollars, then you’d see the acquirer program support fee on your statement.
Discover’s international fees function similarly.
International Processing Fee – 0.55%
The International Service Fee applies to U.S.-acquired transactions paid for with a card issued outside of the U.S.
International Service Fee – 0.80%
The International Service Fee applies under the same circumstances as the International Processing Fee noted above.
And just like Visa, Discover’s fees stack on each foreign transaction. So you’ll be paying 1.35% per foreign transaction.
American Express’s fees are a bit more complicated and variable, but they always charge at least 0.40% for international transactions. Your best bet is to give them or your merchant services provider a call to figure out your AmEx fees on a particular statement.
Cross-border fee – 0.40%
This American Express international fee applies when a customer pays for an item with a bank located outside of the U.S.
Who is responsible for these fees?
One guess: the merchant.
Yep. International fees are riskier than domestic fees and the cardmember associations are going to make you pay for it. You may think the customer should have to eat this fee, but that’s not how the cardmember associations set it up. Typically the cardmembers charge this fee to your processor who then passes it on to you, but that also depends on the contract and payment setup you have with your processor.
There are three main payment pricing setups:
- Interchange plus: Since each transaction is analyzed individually, interchange plus pricing (which is Tidal’s preferred pricing arrangement), the fees are added to that specific transaction at cost. You’ll simply see the additional fee listed next to that transaction on your statement.
- Tiered: Tiered pricing can be a bit tricky depending on your processor, but the additional costs of international transactions may allow processors to charge you a higher transaction rate, allowing them to profit from your international transaction.
- Flat: Since flat pricing is usually a simple but inflated flat rate for processing transactions, many processors just bundle this into your plan. Whether they list the transactions that incur an ISA or not is dependent upon your processor, but if you see charges for “misc fees” or “other fees”, chances are international fees are bundled up into that. If they are substantial, make the call and get to the bottom of what those charges are.
Reducing the cost of the ISA fee
Besides switching to interchange plus pricing to evaluate each transaction individually and paying the minimum transaction rates per transaction, you’re out of luck reducing the costs of ISA and other cross border fees unless you refuse to take international payments altogether— which is never really worth it — or if you set up a specific branch in a country that you do lots of business in.
That can be a good move for people who have a substantial portion of their business from a particular foreign country, but other than that it’s just something you’ll have to account for depending on your mix of transactions each month.
Unfortunately, international service assessment fees and other fees when accepting foreign transactions are probably here to stay. With the increase in eCommerce/global transactions, there’s no incentive for processors and associations to work together to reduce these fees.
These fees are non-negotiable, so again, your best bet is to make sure you’re paying as little as possible for credit card processing in general. Tidal Commerce merchants save an average of 35% when they start working with us, and we love finding new, passionate business owners to work with.
If you’re ready to start working with a future-proof merchant services company that always has your back, let’s chat.