- December 21, 2011
- Posted by: anand
- Category: Analysis, Education, General
Interchange rates for international cards (cards issued outside the U.S. and processed by a U.S. based merchant) can be very confusing. Beyond the interchange rates and other processing fees charged for international cards, every network adds two fees to every international transaction. Here’s a quick guide to understanding these fees.
Interchange rates for international cards typically range from 1.10% to 1.98% for Visa, MasterCard and Discover (V/M/D) without a per item fee.1 The specific rate within this range largely depends on card type and processing method. In addition to this interchange and routine set of fees (assessments, networks dues and acquirer fees) imposed on every V/M/D transaction, each card network also adds the following two fees to every international transaction.
So Visa’s interchange rate of 1.80% for an Interregional Premium Card is only the start…when all of the other fees are added, the cost to the merchant is 2.76% + $0.02 for this international card. And these are just the interchange pass-through fees and do not even include the acquirer/processor fees.
For interchange pass-through merchants, some processors will separate the interchange and international fees, whereas, others, will group these fees together. In the example above, some processors will show the 1.80% interchange rate, 0.45% International Acquirer fee, and 0.40% International Service Assessment fee. And some processors will sum these fees to show 2.65%.
In either case, a good rule of thumb is that international V/M/D credit cards will cost a merchant about 2.5% to 3.0% plus processor fees.
1With exception of Discover’s International Base Submission rate of 1.70% + $0.10, all other international interchange rates do not have a per item fee.
2MasterCard imposes an additional 0.40% fee if a transaction goes through Dynamic Currency Conversion.
3Visa imposes an additional 0.50% fee for certain high-risk MCCs, including e-commerce stores and e-commerce adult entertainment.