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Avoiding International Payment Fees

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Last editedMay 20222 min read

Sending and receiving money across borders can be costly. Betweencurrency exchange rates, international bank transfer fees, and credit card interchange fees, you might end up paying significantly more than intended. Is there any way to avoid these international payment fees? Yes – if you’re willing to shop around.

Currency exchange fees

As any traveler knows, there can be a steep mark-up when you exchange currency. This not only applies to physical cash, but also to online transactions for businesses. Exchange rates fluctuate according to current FX market trends as well as by provider. The difference between providers might only seem like a tiny fraction of a percentage point, but it really adds up for larger quantities or regular international transfers.

While you can’t avoid paying a currency exchange fee entirely, you can shop around to find a provider that offers real-market rates. Payment platforms like PayPal are often the costliest choices when it comes to currency exchange fees. Another thing to keep in mind when using your own credit card is to choose the local currency option. This sometimes helps you bypass the automatic conversion fee mark-up.

Cross-border interchange fees

Another common international fee payment to be aware of relates to card processing. Card processing fees typically include an interchange fee as standard, but cross-border payments can tack on an additional 1% charge. When a customer makes a payment in a different region from where the card was issued, this qualifies as a cross-border transaction. For example, if a US-based business makes a sale to a customer located in France, the business will be charged an additional 1% fee because the card is issued in a different country.

To get around the burden of cross-border interchange fees, you need to use a payment gateway that processes card transactions as local. The network must connect to local banks in different regions and route the transaction using a location that matches where the card was issued. There are several payment gateways and apps that can do this for you, including digital wallets and platforms like Wise.

Bank fees on international payments

Currency exchange rates and interchange fees are an issue specifically for cash and credit card payments, but what aboutinternational bank transfers? Bank fees on international payments will vary widely depending on the type of account you hold, the transaction value, and their terms and conditions. However, these fees can be a significant amount and are applied as a flat rate whenever you send or receive money from an international bank account.

Banks will often charge an added percentage fee for large sums, which might vary depending on the type of account you’re using. To reduce or even eliminate bank fees on international payments, speak to your local bank first. Business account holders might be eligible for accounts with more favorable rates. There are investment accounts that come without any foreign transaction fees or account minimums, which are a good choice for businesses without a fixed location.

The bottom line

As you can see, there are numerous types of fees involved when it comes to cross-border transactions. You can avoid many of these by simply reading the fine print and selecting a card or bank account without added per-transaction international fees.

Another option is to use a global payments platform like GoCardless. GoCardless offers international recurring payments at real-time exchange rates, all with transparent pricing.  You can collect recurring payments from your customers’ bank accounts in a selection of supported countries, settling the payments back in your own business’s home country. This eliminates many of the issues associated with international fee payment mentioned above.

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