Last editedAug 20234 min read
International card payments have their advantages and disadvantages for cross-border transactions. Benefits include ease of global commerce and increased consumer convenience. Drawbacks encompass risks of fraud, unstable exchange rates, and potential extra bank charges. Thus, international card payments offer vast opportunities, but caution is needed due to inherent risks and costs.
Credit cards are the preferred payment method in many countries. As your business expands its global reach, you might wonder whether the familiarity of international card payments outweighs the high fees and other disadvantages. Here’s a closer look at the pros and cons of accepting international card payments to help you decide.
How to accept international credit card payments
Before comparing the pros and cons, it’s first helpful to understand how to accept international credit card payments. Most businesses use a third-party international payment gateway to authorize customer card details. These are suitable for online and offline transactions, working with a payment processor and merchant account for authorization, processing, and settlement.
In the case of accepting international payments, you’ll need a payment gateway that can handle multiple currencies. It will also need to automatically convert prices into these various currencies with a multilingual interface.
Advantages of international card payment
The biggest advantage of international card payments is their widespread recognition. Credit and debit cards are used throughout the world via international networks like Visa and MasterCard. This means they’re trusted by customers in different countries who know their purchases are protected by their card issuer or bank.
Another advantage is that online payment gateways are easily integrated into your website. You’ll be able to get set up and start accepting payments immediately with all-in-one processors like PayPal or WorldPay. By removing geographic barriers to payment, you’ll increase revenue and sales. With the help of online gateways, you’ll only need to wait a few days for funds to reach your business account. This, in turn, ensures a healthy cash flow.
Disadvantages of international card payment
On the other hand, international card payment processing isn’t cheap. Domestic card processing includes transaction fees as a percentage of the total sale. You'll pay even more when you add the currency exchange element. Some credit card processors charge monthly fees as well as other expenses, so you’ll need to compare costs very carefully to get started.
U.S. credit card interchange fees – which average 1.80% are some of the highest in the world.
Another potential issue is the risk of chargebacks and disputes. When customers ask for a refund, they’ll turn to the credit card company, which passes this cost on to your business. This comes with an additional chargeback fee on top of the refund cost. Finally, you’ll need to consider the added security and fraud cost. You’ll be responsible for maintaining online security systems to protect your customers from hacks and data breaches.
Even though international card payment might expand your reach, it is always better to offer local payment methods for your customers, which provide higher trust levels and result in higher conversion rates, generating more sales.
What is the best credit card for international payments?
The best credit card for international payments will depend heavily on customer payment preferences. Card networks like Visa and MasterCard are widely recognized at home and abroad. Most payment gateways facilitate multiple types of credit card payments. To choose the best international gateway, you’ll need to think about factors including:
Your budget (both monthly and per transaction)
How soon do you need to start
The level of support you will need
The integrations you’ll need
The user-friendliness of each platform
The payment methods offered
For your business, there isn’t a “best credit card” but a best payment provider instead. Each provider has their payment network and specific fees for processing international payments. With card-based providers fees paid will depend on the terms set by each intermediary in the network, which explains the considerably higher fees. For that reason, depending on your requirements, you should review all the terms and conditions offered by each provider to find the one that best suits your business.
There is no doubt that card payments have issues, especially when talking about international payments, but a more cost-effective and reliable option is available.
Is there an alternative to international card payment?
One of the main downsides of international card payments is their costly fees. This is because international card payments require multiple third-party intermediaries, each of which takes a cut out of the total. A simple solution is to bypass these card networks altogether, using secure bank payments instead.
By opting for bank payments, you will be able to skip most of the drawbacks imposed by international card payments, such as high fees imposed by multiple middlemen, currency exchange fees, and costly chargeback processes.
GoCardless offers a secure bank pay solution for ad-hoc and recurring payments across 30 countries worldwide. Customers can pay in their local currency, which is transferred at real exchange rates for processing in their own currency without any need for a third-party foreign bank account. Customers and businesses get the best currency conversion rates on international payments, all without the hassle and expense of card fees.
With a quick head-to-head comparison, you can see that bank payments will eliminate high fees and provide more confidence for your customers while saving you time and money.
Re-Leased case study
The case study highlights the transformative role of GoCardless, a direct debit provider, in optimizing the financial operations of Re-Leased, a cloud-based platform for managing commercial real estate. With its international reach spanning the UK, Australia, the US, and Canada, Re-Leased encountered significant challenges with cross-border transactions, including costly bank fees and a protracted payment cycle that required arduous manual tracking.
Re-Leased's CFO, Sam Caulton, stated,
I could see instantly that we needed to eliminate international transfers, where payments are made from customers in one country to a bank account in another. These transfers come with significant foreign exchange risk. Bank transfers also add significant costs in time and money. International payments were taking between 3-5 days to land in Re-Leased’s account in New Zealand, and up to 25% of the transaction value was being taken in bank fees and FX.
The integration of GoCardless with Xero, an online accounting platform used by Re-Leased, streamlined their invoicing process. Sam explains,
Before GoCardless, our payment process was slow and expensive. But now it’s streamlined and cost-effective – we’ve saved $10,000 a month on bank transfer fees. GoCardless enables Re-Leased to collect automated international payments through Direct Debit,
Significant operational improvements include decreasing Days Sales Outstanding (DSO) from 45-50 days to 30 days, implying prompt invoice settlements. The finance team also spends less time on invoicing as payments received are automatically reconciled with the invoices, reducing manual errors and freeing up time for other tasks.
Sam shared his satisfaction with GoCardless's efficiency, stating,
We have billing targets every month and cash targets, let’s call it a $1 million cash target for the month. I know $500,000 of that is going to be collected through GoCardless. That’s hugely powerful as a CFO.
This case demonstrates how Direct Debit, through a platform like GoCardless, can mitigate challenges posed by cross-border transactions in businesses with a global clientele.
GoCardless offers transparent pricing & no hidden charges. Quickly & easily collect international payments without a foreign bank account or expensive foreign exchange fees.
We can help
Setting up international payment collection is fast, affordable and efficient with GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking payments for your team.
GoCardless makes it quick and easy to get started with no contracts or long-term commitment required. You can set up one-off or recurring payments in the merchant dashboard in just a few clicks. GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can connect to GoCardless via over 350 partner apps like Xero and Salesforce.
Discover how GoCardless can automate payment collection, making it easier to concentrate on what matters most - your business growth.
