What it means
Mastercard is a network. Your bank or card provider issues the card, so the liability in the books carries the issuer's name and the charges come through the issuer's feed. Most charges are plain expenses on the charge date. Foreign charges take more care, because a vendor's invoice and your statement can show different amounts.
The London agency billed £1,000. Whatever rate you'd find for the invoice date, the company owes what the card billed: $1,270. If nothing was booked before the charge, that's the expense. The issuer's $38.10 foreign transaction fee shows as its own line on the statement and goes to bank fees, which takes the card payable up by $1,308.10 in total.
If the agency's invoice was already entered as a bill in accounts payable, paying it by card settles that bill rather than adding a second expense. The debit goes to accounts payable and the credit to the card, and any difference between the bill at its invoice-date rate and the $1,270 charged is a realized FX gain or loss, not extra expense. Book from the posted charge rather than a pending one, since the posted figure is what the statement will show.
Tie the card payable to the statement, fee lines included. Missed foreign transaction fees are the usual reason a card is off by a few dollars. Look over the bank fees account too. If one vendor keeps generating fees, it may be worth paying them another way.
Wise covers holding and paying in other currencies. Visa cards book the same way, issued by your bank on a different network.
Why it matters. When you pay a vendor abroad, the statement shows the charge in dollars and often a separate foreign transaction fee. Both belong in the books at the amounts on the statement.
MasterCard isn't a ledger, and we don't connect to it. We work only in QuickBooks Online and Xero. This page covers how MasterCard shows up in the books kept there.
The entry, worked
A London design agency's £1,000 invoice is paid on a Mastercard. The statement shows $1,270 for the charge and a separate $38.10 foreign transaction fee from the issuer.
| Account | Debit | Credit |
|---|---|---|
| Design and creative | $1,270.00 | |
| Bank fees | $38.10 | |
| Credit card payable | $1,308.10 | |
| Total | $1,308.10 | $1,308.10 |
The expense is what the charge actually cost in dollars, the fee is kept apart, and the liability matches the statement.
Common questions
What exchange rate do I use for a foreign card charge?
The dollar amount on your card statement. That's what the company owes, so it's what the expense cost.
When do I record a credit card expense?
On the date of the charge, not when the card is paid. That puts the cost in the month it was incurred.
Why doesn't my card statement match the vendor's foreign invoice?
The vendor billed in pounds and the card network converted at its own rate on the day the charge settled, then the issuer added a foreign transaction fee, often around 3%. The statement is what the company owes, so book from it and keep the invoice as support.
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.