Understanding Credit Card Processing Fees for Overseas Transactions

Navigating the world of international payments can be complex, especially when it comes to understanding the various fees associated with overseas credit card transactions.

For businesses and individuals engaging in global commerce, terms like credit card processing fee, foreign currency conversion fee, and cross border fee are critical to grasp. These fees can significantly impact the cost of transactions, whether you're paying for media buying, booking international travel, or managing supply chain expenses.

This article breaks down the key fees involved in overseas credit card payments, compares major card networks, and highlights the best solutions for cost-effective global transactions.

What Fees Are Included for Overseas Credit Card Payments?

When using a credit card for international transactions, several fees may apply, each triggered by specific circumstances. Understanding these fees—such as credit card handling fees, foreign currency conversion fees, and others—can help businesses and individuals make informed decisions to minimize costs.

Cross Border Fee (CBF)

A cross border fee(CBF) is a surcharge applied by card networks when a transaction involves parties in different countries. This fee is typically a percentage of the transaction amount, often ranging from 0.8% to 2%, depending on the card issuer and network.

Under What Circumstances Do You Need to Pay for It?

You’ll encounter a cross border fee whenever you use your credit card in a country different from where the card was issued. For example, if a U.S.-issued card is used for a purchase in Europe, the card issuer may charge this fee to cover the costs of processing an international transaction. This applies to both online and in-person purchases, such as booking hotels through an overseas OTA or paying for services abroad.

Foreign Currency Conversion Fee (FCC)

The foreign currency conversion(FCC) fee is another common charge, typically applied when a transaction is processed in a currency different from the card’s base currency. This fee is usually 1% to 3% of the transaction amount and is added to cover the cost of converting the payment into the cardholder’s home currency.

When Do You Need to Pay for FCC?

You’ll face a foreign currency conversion fee whenever you make a purchase in a foreign currency. For instance, if you’re a U.S. cardholder buying from a European merchant whose transactions are processed in euros, your card issuer will convert the amount to USD and add the FCC. This fee is common in scenarios like international e-commerce, travel bookings, or B2B procurement from foreign suppliers.

Exchange Rate Discrepancies

Exchange rate discrepancies occur when the exchange rate applied to a transaction differs from the mid-market rate, resulting in additional costs. Card issuers often use a slightly adjusted rate, which includes a small markup, to account for fluctuations and processing costs.

Under What Circumstances Do You Need to Pay for It?

These discrepancies arise in any transaction involving currency conversion. For example, when paying for a service in a foreign currency, the card issuer may apply an exchange rate that’s less favorable than the real-time market rate. This is particularly relevant for businesses handling frequent overseas credit card payments, such as those in media buying or supply chain management, where even small rate differences can add up.

Dynamic Currency Conversion (DCC)

Dynamic Currency Conversion (DCC) is an optional service offered by some merchants, allowing cardholders to pay in their home currency instead of the merchant’s local currency. While this may seem convenient, it often comes with a high markup, sometimes as much as 5% to 7% above the standard exchange rate.

Under What Circumstances Do You Need to Pay for It?

DCC is typically offered at the point of sale, either in-store or online, when a merchant detects a foreign-issued card. For example, a U.S. traveler in Japan might be asked if they’d like to pay in USD instead of yen. Choosing DCC often results in higher costs due to the merchant’s inflated exchange rate, making it a fee to avoid for cost-conscious users.

Cash Advance Fee (CAF)

A cash advance fee(CAF) is charged when a credit card is used to withdraw cash or for transactions treated as cash advances, such as funding certain digital wallets or peer-to-peer payment platforms. This fee is typically a flat amount (e.g., $10) or a percentage of the transaction (e.g., 3% to 5%), whichever is higher.

When Do You Need to Pay for CAF?

You’ll incur a cash advance fee when withdrawing cash from an ATM using a credit card or when using the card for quasi-cash transactions, such as funding online accounts or paying for certain services abroad. This fee is particularly relevant for freelancers or businesses using cards for quick cash access while traveling internationally.

Compare Overseas Credit Card Transaction Fees

Different card networks—Visa, Mastercard, Discover, and American Express (AMEX)—have varying fee structures for international transactions.

Below is a comparison of typical fees associated with overseas credit card payments:

💳 Visa: Charges a cross border fee of approximately 0.8% to 1.5% and a foreign currency conversion fee of 1%. Visa’s exchange rates are generally competitive, but discrepancies can still occur.

💳 Mastercard: Similar to Visa, Mastercard applies a cross border fee of 0.9% to 2% and a foreign currency conversion fee of 1%. Mastercard’s rates are often close to the mid-market rate, but dynamic currency conversioncan inflate costs if opted for.

💳 Discover: Discover’s fees are competitive, with no foreign currency conversion fee on many cards, though a cross border fee of around 1% may apply. Discover’s network is widely accepted in sectors like travel and hospitality, particularly through partnerships like Diners Club International.

💳 AMEX: AMEX typically charges a higher foreign currency conversion fee of 2.7% and a cross border fee of up to 2%. While AMEX offers premium perks, its fees can be less cost-effective for frequent international transactions.

For businesses managing high volumes of credit card handling fees, choosing a card network with lower fees, like Discover, can lead to significant savings, especially for scenarios like media buying or B2B procurement.

The Best Card for Overseas Transactions

Selecting the right card for international payments involves balancing low fees with global acceptance and robust features. Cards that minimize credit card processing fees, foreign currency conversion fees, and cross border fees are ideal for businesses and individuals engaged in global commerce. Additionally, features like expense management, real-time monitoring, and compliance with global standards are critical for seamless operations.

This is where innovative solutions like PhotonPay’s global card issuing capabilities shine. PhotonPay offers multi-currency cards through the Mastercard and Discover networks, designed for both online and offline consumption. With dedicated card BINs from Discover, PhotonPay ensures stable and reliable payments, particularly in sectors like travel, hospitality, and B2B procurement. Their cards support a wide range of use cases, from media buying to supply chain management, making them versatile for global businesses.

PhotonPay’s cards come with advanced features to streamline international payments:

✅ Expense Management: Businesses can set unique spending policies, enforce limits, and monitor transactions in real time, reducing the risk of overspending. This is ideal for managing employee expenses like hotel stays, flights, or transportation.

✅ Smart Reconciliation: Automated transaction records, spend alerts, and expense reports simplify month-end accounting, saving time for finance teams.

✅ Just-in-Time Funding: PhotonPay’s cards connect to global accounts, allowing real-time balance conversions for instant use, subject to transaction limits.

✅ Security and Compliance: With PCI-DSS Level 1 certification and 3DS 2.0 authentication, PhotonPay ensures secure and compliant transactions. Their partnership with leading global banks further enhances reliability.

✅ Digital Wallet Integration: PhotonPay cards can be tokenized for use in digital wallets like Apple Pay and Google Pay, offering flexibility for modern payment needs.

For businesses, PhotonPay’s Regular Card is perfect for managing employee expenses, while the Shared Card allows spending directly from account balances. The ability to freeze or cancel cards anytime, anywhere, adds an extra layer of control, making PhotonPay a top choice for minimizing credit card processing fees and optimizing overseas credit card payments.

FAQs about Credit Card Processing Fees

Who pays the 3% credit card fee?

The 3% credit card processing fee or foreign currency conversion fee is typically paid by the cardholder, whether an individual or a business. This fee is charged by the card issuer to cover the costs of processing transactions in a foreign currency or across borders. For example, if a U.S.-based business uses a credit card to pay a European supplier, the cardholder (the business) incurs the fee, which appears on their statement. In some cases, merchants may pass on a portion of credit card handling fees to customers, but this is less common in international transactions.

How do I avoid 3% foreign transaction fee?

To avoid the 3% foreign transaction fee (which includes foreign currency conversion fees and cross border fees), consider the following strategies:

Choose Cards with No Foreign Transaction Fees: Opt for cards, like those from Discover or select Mastercard issuers, that waive foreign currency conversion fees. For example, PhotonPay’s multi-currency cards, issued through the Discover network, often have competitive fee structures.
Pay in the Local Currency: Avoid dynamic currency conversion by choosing to pay in the merchant’s local currency, as DCC often includes high markups.
Use Multi-Currency Accounts: Platforms like PhotonPay allow you to hold and spend in multiple currencies, reducing the need for conversions and associated fees.

Why are credit card processing fees so high?

Credit card processing fees can seem high due to several factors:

Operational Costs: Card networks and issuers incur costs for secure transaction processing, fraud prevention, and currency conversion, which are passed on to cardholders.
Risk Management: International transactions involve higher risks, such as fraud or currency fluctuations, leading to fees like cross border fees or exchange rate discrepancies.
Merchant and Network Charges: Merchants pay interchange fees to card networks, and some of these costs may be reflected in higher credit card handling fees or surcharges for cardholders. Solutions like PhotonPay mitigate these costs by offering transparent fee structures and tools like just-in-time funding, which streamline currency conversions and reduce exchange rate discrepancies.

Conclusion

Understanding and managing fees like credit card processing fees, foreign currency conversion fees, cross border fees, dynamic currency conversion, exchange rate discrepancies, and cash advance fees is essential for cost-effective international transactions.

By choosing a card with low fees and robust features, businesses and individuals can save significantly while ensuring seamless global payments. Solutions like PhotonPay’s multi-currency cards, with their advanced expense management, smart reconciliation, and global compliance, offer a powerful way to navigate the complexities of overseas credit card payments.

Whether you’re a freelancer, a global enterprise, or an individual traveler, PhotonPay’s cards provide the flexibility and control needed to thrive in today’s interconnected economy.

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