Understanding the hidden costs of accepting credit card payments from international travelers

A strong recovery and demand for international travel is underway. Some 37% of US travelers told Expedia that they planned to travel both domestically and internationally this year. Bookings for intra-European travel in 2022 are up 250% for the Easter period and already up 80% for the summer. And in December 2021, 10 times more non-resident travelers arrived from abroad in Canadian airports than in December 2020.

When they’re ready to go, international travelers will increasingly pay for these trips by credit card. The details of the additional fees you’ll incur by enabling card payments aren’t always entirely clear to your business – and when you don’t know exactly what and who you’re paying, it can be hard to identify areas in which to save.

This situation is even more opaque for your clients. International clients often don’t understand how much they paid in additional fees until they get their bank or credit card statement.

And that doesn’t jive well with the ease of payment they’re looking for when choosing travel providers. Minimizing and giving international clients more visibility into additional fees they’ll pay to use a card can go a long way toward an overall favorable trip experience.

Why is it important to pay mind to credit card fees on the international payer end?

Not unlike how they are for your business, fees for payments made through credit cards are pretty clear for travelers when it comes to domestic payments. There’s typically no additional fees for the payer, and for your business, all fees for the many players that touch the transaction are bundled by your payment acquirer or processor as a clear, flat fee, and clear. But these fees get far more opaque when it comes to international payments – both for you and the client.

Let’s break down what you can expect for fees when accepting cross-border payments via credit card – and how to best minimize them.

Credit card fees travel providers can expect with domestic vs. international payments

When clients pay for domestic travel by credit card, you as the travel provider pay a fee to your payment acquirer or processor to accept those payments. That fee is bundled, but when broken out includes:

  • the acquirer or processor’s margin (for example, Stripe)
  • the fee from the card networks (such as Visa or Mastercard)
  • the so-called interchange fee from the issuer bank (such as Citi or Bank of America)

When accepting payment from a different country, you’ll pay all that plus:

  • an international card fee charged by the acquirer

That’s all typically made visible to you by the acquirer or processor. But for your clients using a card to pay for international travel, those fees are not.

Payers are often hit with fees totalling a minimum of 4% when paying for international travel on a credit card – and they don’t often know it until they get their bank or credit card statement. When a foreign payer uses their card, they’re paying:

  • FX fee or currency conversion fees charged by the issuing bank of 2% or more. There are cards available that carry no foreign transaction fee, but most travelers don’t have them. 70% of cards in circulation will require a foreign transaction fee.
  • Everyone, regardless of the card they hold, pays a Foreign Exchange Markup. This is an additional charge levied by the card scheme on top of the mid-market exchange rate that a payer may Google and see on sites like XE.com. FX markup can range from 1-3%.
  • It can be hard for payers to determine exactly what the FX markup is before they make the purchase, because regulations differ around whether it must be made known.

What can you do to reduce international credit card fees for travel payments?

Armed with the right knowledge, travel providers can accept credit cards from international payers on a fee schedule that is far better for both the payer and the travel provider.

Here’s what you can do.

  1. Pay attention to the fees not only you pay to the acquirer or processor, but the fees your clients will pay. This helps you answer client questions when they arise.
  2. Understand the total cost of payment so that you have the information to pick a payment provider with the most competitive processing rates.
  3. By securing the best rates and a high level of visibility into payment for your clients, you deliver a better payment experience, a key consideration in traveler’s choice.

What makes Flywire different from traditional payment processors and acquirers?

Payments providers like Flywire change the structure of fees incurred when credit card payments are international. The merchant gets the benefit of the rates we’ve negotiated through our global payment partners on all fees, and receives payment in their preferred currency - for a lower per transaction cost. And the payer receives lower fees and learns the total amount of the transaction the moment they make the payment – eliminating the unwelcome surprise of unknown fees.

Being ready to reap the full benefit from the international travel surge takes readiness to accept international card payments in a way that presents the least friction to your clients. Contact us today for a free travel payments assessment, and for a deeper dive into fees for credit card payments for international travelers, watch this webcast with Flywire’s Sydney Banks.