Can I Accept Foreign Issued Credit Cards?

In short, yes. Once you have a merchant account, you can process credit cards from just about any issuing bank, regardless of where it is located.

Now for the long version. . .

Unless you have a business in a tourist area or operate an ecommerce business, chances are you’ll rarely have the need to process a foreign credit card. In those rare instances, your present credit card processor is able to handle transactions with cards carrying the logo of the major global credit card brands. Just be aware that these transactions are subject to higher transaction fees, including conversion fees or a cross border fee when a customer uses a credit card as payment for purchases or services from an issuing bank not located in the same country as your merchant processing account.

If you expect to process a large amount of international payments, it’s best that you include that information when applying for your merchant account. Processors have different rules and guidelines for accepting international transactions. Some won’t accept foreign transaction at all, while others will only accept a certain percentage of foreign transactions per month. And other processors will not accept recurring foreign transactions. It’s important to gauge your need for processing foreign transactions before you apply for your merchant account.

Most credit card processors include MasterCard and Visa as part of what is considered their default set of credit card brands that they can process. These brands are recognized and accepted around the world. However, there are other global card brands, and depending on where and what you sell, you may want to add these brands to your merchant account.

So you have your product or service, you have a merchant account, and your marketing is bringing in customers from all over the world. Now what?

Now you need to know your options for settling these transactions. In other words, these are your basic options for how you receive your proceeds from the sale:

1. Only accept payments and receive funds in your local currency.

2. Accept payment in the currency used by the issuing bank, but only receive funds in the currency used by your merchant account bank.

For Example: You own and operate a souvenir shop on the US side of the Niagara Falls. In such a popular tourist area, you may process hundreds of international credit card transactions in a month, along with your US dollar transactions. It’s for certain that you will process plenty of Canadian bank issued credit cards. But people from all over the world come to see the natural beauty of the falls and want to take home a little something to remember their trip.

One afternoon a couple from Rome, Italy, comes into your shop. They pick out two tee shirts for a total of $30.00, and pay for them with a credit card carrying the MasterCard logo, issued from their local bank. Here’s how your options work:

With option #1, the transaction is authorized in USD and you are paid in USD. When this couple gets home and checks their credit card statement, they will see the exact charge in USD and the equivalent in euros, along with the conversion rate at the time of the sale. They pay their credit card company the amount of the sale in euros plus the cost of conversion, and you get your $30.00 in USD. However you will pay a higher fee for this transaction, and a cross-border fee charged by the card brand.

With option #2, the transaction is authorized in euros, but settled in USD. This option can be a little more risky for the merchant because of fluctuating conversion rates. That $30.00 sale at a conversion rate of 1.5 would be €20.00. That’s what would be charged against your customer’s card. But what if the conversion rate drops to 1.3 before the transaction settles? €20.00 x 1.3 only nets you $26.00 on your original $30.00. You’d lose $4.00 on the sale, plus pay the higher transaction fees.

So why do merchants take the risk of authorizing charges in the currency of the issuing bank when they have to pay the conversion rate? People can better judge the value of an item in their own currency. By choosing to pay in euros, that couple knew exactly how much the tee shirts would cost them and decided they were worth the money.

There is another processing option available. International companies may choose to open merchant accounts in one or more foreign countries. By doing so, they can authorize and settle transactions in the currency of that country and use this money to pay business expenses incurred locally. When you consider that conversion rates fluctuate constantly, this can be quite the cost saver for a large, multi-national merchant.

Are There Obstacles To Accepting Foreign Issued Credit Cards?

Yes, the difference in technology. Europay, Mastercard and Visa have developed a technical standard for processing credit card payments that is being adopted around the world. This technology, called EMV, uses a chip embedded in the credit card that stores the cardholder’s information and personal identification method. In Europe and other countries around the world, on-line access is not always available, or affordable to merchants, so most credit card payment transactions are done off-line. These chip-embedded credit cards allow a merchant to verify card holder information right at their own point-of-purchase terminal. These point-of-purchase terminals operate different from the ones used to read the magnetic stripe found on the back of most credit cards issued in the US.

Although EMV technology has been a standard in other parts of the world for a number of years, to date it has not been widely used in the US. However, that is about to change. By October of 2015, merchants in the US must be prepared to accept chip-embedded credit cards. To be in compliance with this mandate, merchants are required to replace all their credit card payment terminals with new terminals that are EMV technology compatible. But until then, you may run into some problems trying to accept some foreign credit cards.

Once you understand the different ways to settle foreign credit card transactions, you will be better able to select the processing method that’s right for your business model. With this information in hand, you can find the credit card processor that best meets your needs.