What Is A Cross Border Fee?

What Is A Cross Border Fee?
By alphacardprocess December 25, 2021

Cross border fee is a term commonly used to describe an additional charge associated with using your credit or debit card from outside the country. A cross border fee varies from bank to bank, and will usually be listed as a separate line item on your statement. The reason cross border fees exist is due to the complex international banking system that has been established to protect against fraud.

How To Avoid A Cross Border Fee?

The easiest way to avoid a cross border fee is by contacting your bank and asking them not to charge you the fee when using your card abroad. Your bank should be able to provide information regarding other methods of payment such as traveler’s cheques, which do not incur the cross border fee. If you are not able to avoid the fee, it can be negated by informing your bank that you plan on using your credit card while traveling – this will effectively block the transaction from being processed and prevent a fee from being charged.

Why Are There Cross Border Fees For Some Transactions And Not Others?

The reason some transactions are processed as cross border fees and other aren’t is down to the merchant. If a merchant processes your credit card transaction as an international charge, at the point of sale they will be required to let you know what percentage of that purchase price is being charged in foreign fees. If no information regarding foreign fees is provided, or if all of the information regarding foreign fees is hidden at the point of sale – this could constitute merchant fraud.

What If I Don’t Want To Use ATMs?

If you are using your credit card to withdraw cash from an ATM abroad, it’s possible that you will be charged both a cross border fee and a transaction fee by your bank. As ATMs are not controlled by banks, the transaction fee charged by your bank will be higher. This means that it’s possible to be hit with a $1 fee from your bank and $3 to $5 in foreign ATM fees.

If you do not wish to use an ATM, you can always withdraw cash at a currency exchange location. Most money exchangers are equipped with ATMs, which will provide you with cash at local market rates – this is typically cheaper than using your card to process transactions abroad.

Do I Have To Pay The Cross Border Fee?

The only way to avoid the cross border fee is by informing your bank prior to traveling that you plan on using your credit card abroad. If you do not let them know in advance, the cross border fee is mandatory – there are no exceptions.

What Is A Merchant Identification Number?

The merchant identification number (MID) is a unique identifier assigned to each merchant processing transactions internationally. This is how banks are able to identify international transactions, as well as identify which cross border fees are being deducted from the transaction. If you do not see an MID assigned to your merchant, this is most likely because they have not processed your transaction as an international charge – so it will be treated as a standard purchase and no cross border fee will be applied.

Do I Have To Pay Taxes?

When traveling abroad, it is common to be charged taxes and other charges on your credit and debit card transactions. These charges are applied by local governments and can vary depending on which country you’re in. Sometimes these charges will be included within the cross border fee that has been charged to your card, but other times it will appear as a separate transaction on your account at a later date.

If you do not want to pay the taxes, contact your bank prior to traveling and ask them what percentage of your transaction value they will cover as it is often possible for them to waive these fees if requested in advance. Be sure that you understand the terms and conditions of this agreement before signing up for this service, as it is not always available.

Why Are Foreign Transaction Fees So High?

The foreign transaction fee charged by the card issuer is not limited to your bank – any company authorized to process credit card transactions on behalf of the bank will receive a percentage of that cross border fee. This means that money exchangers and ATMs that process your credit card transactions will also receive a percentage of the cross border fee. This is why it’s so important to shop around when traveling abroad – some money exchangers and ATMs charge exorbitant fees, while others offer lower rates.

Are Foreign Transaction Fees Going To Increase?

Foreign transaction fees are here to stay – they are not going anywhere. However, there has been a motion to reduce the fees on cross border transactions in some countries. In Canada, for example, regulation limiting transaction fees was put into place in 2013 – which reduced costs for consumers who were using their credit cards abroad.