Understanding ISA Fees: What You Need to Know

What is an ISA Fee?

An International Service Assessment (ISA) fee is a processing fee that Visa charges merchants when a customer uses a credit or debit card issued outside the United States. The rate is between 0.8% and 1.20% per transaction, depending on whether the customer uses US dollars or another currency.

The Visa ISA fee compensates Visa for the need to communicate with an international institution to verify the transaction, which is more time-consuming and challenging than working with a US-based financial institution. If you have numerous customers making international payments, you’ll need to be aware of how much this will cost you and incorporate it into your budgeting.

How ISA Fees Work

This international processing fee applies whenever a customer pays with a foreign credit card. This is true even if the issuing bank has a branch in the United States. For example, assume that you have a shop in a tourist town. A customer chooses to pay with a credit card issued in their home country. Visa will charge you for communicating with the card-issuing bank registered in a different country. These same costs apply to online payments.

The percentage of this international service fee depends on the currency in which the transaction is settled. If the payment is made in US dollars, then the percentage is 0.8%. If the customer pays using a currency other than the US dollar, the percentage goes up to 1.2%.

While ISA is unique to Visa transactions, this does not mean that you can prevent fees by not accepting Visa for international consumers. Visa International Service Assessment fees are similar to those charged by other US credit card companies, including MasterCard and American Express. The name of the fee and the percentage are different, but the principle is the same.

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Credit: Adaptiv Payments

How Do ISA Fees Affect Your Investments?

It is not possible to avoid ISA fees if you want to accept international payments. These expenses and others, like the International Acquirer Fee (IAF), are always passed onto you any time that a customer uses a card issued by a foreign bank. It also doesn’t matter where the product is being shipped to, only that the customer’s bank is outside of the US.

For example, assume you have a foreign national who has not gotten a US bank account. They purchase a product worth $100 to be shipped to their home in America, and they pay with a credit or debit card from their country of origin. They use US currency, so you’re charged 0.8% for the transaction. You will have to pay an extra $0.8 in addition to any other processing fees.

This can add up quickly, especially as the charges are often hidden in your payment processor’s statement at the end of the month. You must remain aware of the ISA fees calculated per transaction and budget for these costs.

ISA Fee vs Other Cross-Border Fees

Other types of cross-border fees may show up on your statement, making it essential to understand which is which. These are some of the others that you will need to consider as well.

International Acquirer Fee: This is charged by the bank under the same conditions as an ISA fee. For Visa credit cards, this is typically 0.45% per transaction.

Foreign Transaction Fees: This is charged to consumers for transactions settled outside of their home country or in a different currency. It is usually between 1% and 3%.

Exchange Rate Adjustments: When a transaction occurs in a different currency, the credit card processing company must calculate the exchange rate. It will add a convenience charge for the service.

Base Interchange-Related Fees: These are charged whenever a bank transfers money to an institution outside of its card network. Major processors like Visa and MasterCard determine the interchange rate.

Comparing ISA Fee Structures

While the Visa ISA fee is unique to this company, other major companies have similar charges. The percentages vary, but the principle behind it is the same. These are some of the common equivalents.

Mastercard: The International Cross-Border Fee is 0.4% and is equivalent to the International Service Assessment Fee charged by Visa. The Acquirer Program Support Fee is used when a customer uses a foreign card but settles in US dollars, such as a Canadian using a Canadian Mastercard but paying in US dollars. This is 0.55%.

Discover: The International Processing Fee, set at 0.55%, covers any purchase with an international card. There is also an International Service Fee, which is 0.8%, so any purchase with a foreign card will have 1.35% in fees.

American Express: Amex’s Cross-Border Fee is 0.4%, but there may be additional charges depending on specific circumstances.

In general, you can expect to pay two fees any time your business accepts a card issued from outside of the United States, whether that is a Mastercard or Visa card.

ISA Fees for Merchants

The Visa ISA fee, or similar fees like the Mastercard Acquirer Program Support Fee, are charged to acquiring banks, who then pass the cost onto merchants. You will see the ISA fees charged per billing cycle on your fees line, such as “Intl Service Assessment 0.8%.”

You will also have to consider the difference between a card-present and a card-not-present scenario. Card-present transactions are less risky, so they typically have lower service fees, while card-not-present (CNP) ones may be fraudulent and therefore incur even more fees. A CNP international purchase is going to be much more expensive for you than a card-present purchase with a US-issued card.

Working with a savvy merchant services provider can make a major difference in fee burdens. For example, Adaptiv Payments works to lower your expenses by improving transaction routing, using domestic acquiring options, and minimizing cross-border volume.

Contact us today to learn how we can streamline your international business processes and reduce your fee burdens.

Calculating the Impact of Fees

To get an idea of how much you should budget for ISA fees, you’ll need to know the average foreign sales volume, both by transaction and revenue. You’ll also need to assess whether foreign customers typically use US or foreign currency, as this influences how much you will pay.

Let’s assume that you have an average of 100 foreign transactions per month that use Visa, with an average sale of $50. 90% of these customers use US dollars, while 10% use foreign money.

This means that $4,500 of your revenue would be taxed at 0.8%, so a total of $36. The other 10% would be taxed at 1.2%, meaning $6. Overall, you’re paying $42 just in Visa International Service Assessment fees, which is only a segment of all your transactions and the associated fees.

Strategies to Minimize ISA Fees

The International Service Assessment fee is a necessary evil of doing business, for both consumers and merchants. However, it’s possible to minimize the costs through smart payment choices.

Consumers can use specialized travel cards that don’t charge foreign fees or use domestic payment gateways when traveling. Using local currency, such as with cash, can also reduce the expense.

Merchants have other options, which include partnering with a domestic bank and optimizing their payment processing. Another option is to select a processing contract that meets your needs. There are several pricing structures that may work best depending on your needs.

Interchange Plus Pricing: The Interchange Plus Pricing structure processes each transaction individually. This is a good option if you don’t have many foreign customers.

Tiered Pricing: You will be charged based on how many transactions are processed per month. However, this pricing structure may allow companies to profit more from your international expenses.

Flat Pricing: This is a simple but inflated flat cost for all transactions, whether they are foreign or domestic, and may be a good option for very large businesses that take cards from many countries.

Common Misconceptions About ISA Fees

Companies may not fully understand what an international service fee is or how it works, leading to common misconceptions like the following.

ISA Fees Are Optional or Negotiable

The Visa ISA fee is non-negotiable and is always required when a customer uses a card from an institution outside of the US. While you cannot negotiate away these costs, you can mitigate them through smart payment decisions.

Only Merchants Pay ISA Fees

Consumers may also have to pay ISA fees because merchants pass the cost onto them through higher product pricing or checkout surcharges. This depends on the merchant’s pricing model or surcharge regulations.

ISA Fees Are the Same Across All Card Networks

Visa, Mastercard, Discover, and American Express have different rates and fee names. The Visa International Service Assessment is between 0.8% and 1.2%, but other companies have similar rates.

ISA Fees Only Apply to Online Businesses

Brick-and-mortar stores also have to pay these fees, such as if they have a foreign tourist using a non-domestic card to pay for their groceries.

Conclusion

The Visa International Service Assessment fee is a charge imposed on merchants who accept payment methods that are issued from outside of the United States. While they are unavoidable, you can limit the frustration by using domestic banks, smart routing methods, and the appropriate pricing structure. Check your statements for these line items, and contact us to mitigate potential risks associated with this common expense.

FAQs about ISA Fees

What does “ISA fee” mean on my processing statement?

ISA fee means that you are being charged a percentage of a transaction because a customer used a Visa card that was issued outside of the United States.

When is an ISA fee applied to a transaction?

This is charged when a customer uses a card that was issued by a bank in a different country. For example, if a Canadian tourist uses a Canadian Visa card, then you will have to consider ISA.

How much does Visa charge for ISA fees?

The percentage is between 0.8% and 1.2% depending on whether the transaction was done in US currency.

Can merchants pass ISA fees to customers?

Yes, you may charge surcharges or raise prices if you have a significant number of foreign transactions that are causing high processing fees.

Is ISA the same as a foreign transaction fee?

No. That fee is charged directly to cardholders who buy products while outside of their country or in a different currency.