International Credit Card Processing: How It Works

multiple credit cards with flags from different countries

We live in a globalized world. Odds are that wherever you’re reading this article from, there’s an airport not too far away offering flights to places like London and Shanghai. You can probably name a few friends who’ve spent a year or two abroad, and online commerce has brought the world to everyone’s doorstep, with freight making the trip from Bangalore to Baltimore in just a matter of days. In the 21st century, the internet offers us a way to explore the entire world from the comfort of our very own home.

It’s safe to say the world has changed, and many of us—whether we like it or not—live international lives. This means exchanging goods with people from around the world, and one of the things that helps us buy and sell across continents is international credit cards.

How Do International Credit Cards Work?

International credit cards work like any other credit card for the most part. Because the major card brands, like Visa and Mastercard, offer their services globally, most international customers you’ll run into either in-person or online will carry a card that operates on one of these networks. As long as your card reader is set up to accept Visa and Mastercard, it doesn’t matter where the customer is coming from or what issuing bank the card is attached to: they can pay like anyone else!

When cards are used across borders, currency exchanges are automatically calculated by the card brands based on the current exchange rate. (i.e. the value of the currency where the card originated and the value of the currency where the card is being used to pay). In exchange for offering this convenient way to pay to cardholders, the card issuer will usually charge a fee (of between 1-3% of the transaction value) which is reflected in the cardholder’s total purchase cost.

International Credit Card Fees for Merchants

One thing to be aware of as a merchant when accepting international payments is something known as cross-border fees. These are fees charged by the card brands and are passed down to merchants, and are usually around 1-3%, depending on the type of credit card your customer used for a transaction. Cross-border fees exist simply because of the extra steps involved for processors and acquirers processing a transaction where currency conversion is required.

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Accepting International Credit Cards Online

With the popularity of online shopping on the rise, customers are no longer paying as much attention to where businesses are located when making online purchases. This means that if you run an online business, there is a high chance you’re going to encounter customers from other countries who want to make purchases on your site.

Credit cards make international purchases fairly easy. A customer can use their credit card, issued to them in their home country, to make a purchase virtually anywhere in the world via the internet. As a business owner, you don’t even need to worry about exchange fees. The customer will pay your listed price, and the exchange fee is calculated by the credit card company. The foreign exchange fee is charged to your customer by the credit card company, and merchants just pay any applicable cross border fees.

Real World Example:

If a customer from Europe wants to purchase a product that is listed on your website for $100 USD, they can simply enter their credit card information and complete the purchase just like they would with any other online store. Once the purchase is complete, your business receives the funds in USD to your business bank account, without any currency conversion fees.

Accepting International Credit Cards In-Person

If you’re accepting payments in person from customers who are on vacation from their home country or who happen to have an international credit card, you can easily accept their cards as long as your terminal is set up to accept the card brand the customer wants to use. 

As mentioned above, many customers will have a Visa or Mastercard, but some customers may have Discover or Amex credit cards, both of which are popular in the United States. In these cases, you would need to ensure your terminal is able to accept their card brand in order to successfully process the transaction.

Final Thoughts

Being able to accept international credit cards opens your business up to the world. By allowing customers to use the same credit cards that they would use at home, you can welcome customers into your brick and mortar location with ease. In addition, in accepting international credit cards online, you also open your store up to customers from around the globe. In both cases, either in-person or online, you get paid in your local currency, and yet widen the range of consumers you can do business with. All thanks to the magic of credit cards!

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