What to know about visa international service assessment (ISA)
How fees like this can affect your business
When it comes to your small business, keeping track of your expenses is one of the most important jobs. Besides your usual expenses, a surprising cost can come in the form of credit card processing fees. While you’re probably familiar with many of the typical processing fees, one you might not know about is the Visa International Service Assessment (ISA) fee. If you’re a business owner who does a lot of business with customers in other countries, knowing about ISA fees is crucial. So, in this article, we’ll explain ISA fees, including what they are, how a small business like yours pays for them, and the difference between an ISA fee and other fees you may see on your credit card processing statement. To start, let’s define ISA fees.
What’s an ISA fee?
The ISA fee is a specific fee that Visa charges merchants during card transactions when a merchant accepts a credit or debit card that was issued outside of the United States. While this ISA fee is only on Visa cards, other card brands like Discover, Mastercard, and American Express apply their own similar international fees. When a card issuer charges an ISA fee, it doesn’t matter which country the card is from, how much the transaction is for, or what type of business you are. These international fees are simply a set percentage. Keep in mind that whatever the fee percentage is, that’s on top of other fees you may pay, including the interchange rate. The reason Visa and other card companies charge this ISA fee is they have to coordinate with the card’s issuing bank in the other country in order to get the money. Now that you know what the ISA fee is, let’s see when it’s charged.
When is an ISA fee charged?
ISAs depend on the relationship between the merchant and the card-issuing bank. Visa imposes the ISA when someone uses a card that was issued outside of the United States at a U.S.-based merchant. While it seems like this fee is only charged when a customer uses a foreign card in a United States brick and mortar store, that’s actually not the case. Ecommerce transactions are also subject to the ISA, even if the cardholder uses the foreign card and ships the order to a U.S. address. Visa charges the ISA because when they accept foreign credit cards, they’re taking on more risk than domestic cards.
The most common example that your small business is likely to encounter, especially if you’re a retail business, is a customer who is visiting from another country. When they find something they like at your business and purchase it, they’ll likely use their payment card (whether credit or debit card) from their home country. Once they pay with this card, you can expect to pay the ISA fee for this transaction. So, how much is the ISA fee? That’s a great question, and one we’ll answer in the next section.
How much is the ISA fee?
When you accept foreign credit and debit cards, you can expect to see the ISA fee on your credit card processing statement. While it originally was 0.4%, it’s risen in recent years. At the time of writing, the fee is 1.0%. However, that is if the customer using the card makes the transaction in U.S. Dollars (USD). If they prefer to transact in a foreign currency, Visa charges an additional 0.4%, which means a total fee percentage of 1.40%.
However, that’s not the only fee that Visa charges for international transactions. They also charge a fee known as the International Acquirer Fee (IAF). This 0.45% fee is an additional fee on top of the ISA and any other fees included in the transaction. Visa charges this fee for any transaction in which the merchant is located within the U.S. and the card issuer or cardholder is located outside of the U.S.
As we mentioned, each of the other card networks has their own international processing fees (sometimes called foreign transaction fees). They are as follows:
There are two fees Mastercard charges per foreign transaction. The first is the international cross border fee and is comparable to Visa’s ISA. This fee could be one of two percentages. The base international cross border fee is a 0.6% fee and applies any time a non-U.S. card is used in the U.S. and the transaction is settled in USD. The increased international cross border fee is 1.0% and applies any time a non-U.S. card is used in the U.S. and the transaction is not settled in USD.
Mastercard also charges another fee, the global acquirer fee (formerly known as the acquirer program support fee), which is an additional 0.85%. This fee applies to any Mastercard sale transaction where the merchant is located within the U.S. and the card issuer or cardholder is located outside of the U.S.
Discover’s international fees also function like the fees from Visa and Mastercard. Their international processing fee is 0.55% and their international service fee is 0.8%, which means a total of 1.35% per foreign transaction.
American Express has a more complicated fee structure, but generally it’s at least 0.4% for international transactions. To fully grasp their fees, it’s best to talk to them or your merchant services provider directly.
So who has to pay these fees?
When it comes to international transaction fees, you’re probably curious about who has to pay these fees. And it's natural to assume a customer pays for these fees. Unfortunately for business owners, the answer is you. Because the card networks have no way of billing a business directly for these fees, they charge your payment processor, who then passes the cost on to you. Depending on your processing agreement with your payment service provider and their pricing model, how this cost shows up on your bill can differ. If your business is paying a lot of international fees, you may talk to your payment processing partner to see if switching to a different type of processing agreement is in your best interest.
When these fees occur, your first instinct may be to see what your business can do to reduce them. But unfortunately, this fee is not one that you can avoid. One way to lower these fees is by talking with your payment processor to revisit your processing agreement. The other way is to refuse to accept international transactions. And while that way is very appealing to many small business owners, you could cost yourself a lot of lost business by refusing these orders. The world is becoming more and more connected, and doing business across borders is easier than ever before. The Visa ISA and the international fees the other card networks charge is the unfortunate cost of doing business.
While you can’t prevent the ISA, after reading this article, you should have a better sense of what it is and why Visa and the other card networks charge these fees.
Ready to work with a payment processor who can help you navigate foreign transaction fees?
Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us.