Why Canadian Companies Pay Cross-Border Fees On US Sales

Your US customers are next door. To the card networks, every one of their payments is international.

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If you're a Canadian company selling to US customers, those customers can feel close to domestic. Same time zones, same dollar sign, often a few hours' drive away.

To the card networks, they're international. A US-issued card charged through a Canadian acquirer is a cross-border transaction, and that shows up in five places: two you'll see on your statement, one you'll see when you get paid, one you won't see at all, and one structural fix.

Where Cross-Border Shows Up

1. The Network Fee

Visa and Mastercard both charge a cross-border assessment whenever the merchant and the cardholder are in different countries. It's set by the networks, not your processor, so it isn't something you negotiate away.

How much depends on the currency you charge in. When a US card is charged in USD, Canadian acquirers' published pass-through fee schedules put the assessment above 1% on both Visa and Mastercard. Many processors then add their own international-card surcharge on top of their standard rate.

There's often a third network line too: a non-domestic (or foreign) settlement fee, charged when the transaction settles in a currency other than CAD. It's smaller, but it applies to every USD sale.

What to do: Pull a recent statement and look for these lines. Labels vary by acquirer, but you'll usually see Visa's International Service Fee (IASF), Mastercard's Cross-Border Assessment, and a Visa or Mastercard non-domestic settlement fee. Then ask your processor whether network fees are passed through at cost or bundled into a higher rate.

2. The Currency Trap

Charging US customers in CAD lowers Visa's cross-border assessment. That sounds like a fix until you look at it from the customer's side: they see a foreign price at checkout, and their card issuer may add a foreign transaction fee to their bill.

Price in USD and the checkout looks domestic to the customer, but you pay the higher network rate, plus the non-domestic settlement fee. As long as you're processing cross-border, you're choosing which side absorbs the friction.

What to do: Price in USD for US customers, and work on the cost through the other levers below rather than by pushing friction onto the buyer.

3. The Conversion Home

If your USD sales settle into a CAD account, they get converted on the way home, and an FX markup comes off the top. Often it sits inside the exchange rate rather than appearing as a fee. We walk through how to measure it in How To Find The FX Markup In Your Exchange Rate.

This is the easiest fix in the post, and it doesn't need a US entity. Canada's major banks offer USD business accounts to Canadian companies, so most can open one with the bank they already use. Settle USD into that account and convert when, and with whom, you choose.

What to do: Check what currency your processor settles in. If it's converting to CAD by default, open a USD account and ask about USD settlement. FX doesn't disappear, since payroll and suppliers in Canada still need CAD, but the timing and the rate become yours to negotiate.

4. The Declines You Don't See

US issuers approve cross-border transactions less often than domestic ones, because a foreign-acquired transaction reads as higher risk to their fraud models.

That cost never appears on your statement. It shows up as customers who tried to pay and didn't, some of whom never come back.

What to do: Compare approval rates on US-issued cards against Canadian-issued cards. The gap is the part of the problem your fee schedule doesn't show.

5. The Structural Fix

A US entity with a US acquirer makes US cards domestic. That removes the cross-border assessment on those transactions and puts them on domestic approval behavior. It's also what most processors require: Stripe US, for example, needs a US entity.

Canadian companies have a head start that most foreign companies don't. Several Canadian banks run US banking arms, which can shorten the banking step, the one that tends to stall foreign-owned companies the longest.

The entity still carries ongoing cost: US tax filings, state compliance, accounting for a second legal entity. Whether it pays off depends on your US volume and how complex the build gets. We cover how to frame that decision in Set Up A Local Entity Or Endure Cross-Border Fees?.

What to do: Put your annual US card volume next to your all-in cross-border cost on it, including the declines. That's the number a US entity has to beat.

The Takeaway

The border is invisible to your customer. It isn't invisible to your statement.

Most Canadian companies selling into the US never decide to stay cross-border. They just never revisit it as US volume grows. Through the end of the year, we're offering free 20-minute contract reviews, including your cross-border and FX costs and whether a US setup makes sense at your volume. Get in touch or message Nick on LinkedIn to set one up.