Have you ever tried to swipe your American Express card only to receive an error message that says “sorry, American Express not accepted”? For the past few decades, the Amex card was declined at many stores, while the Visa and MasterCard were easily accepted. So, why is Amex not accepted everywhere?
Store owners want to keep the maximum profits from each sale. American Express, however, has historically charged a high fee on every transaction. While each credit card company charges transaction fees, it usually has been perceive to be lower than the Amex card processing charge. To maximize profits and spend only a small portion of the transaction amount on the card processing fees, many small businesses accept only Visa and MasterCard.
The fee Amex charges to businesses depend on the nature of your store, the number of transactions processed annually, and the size of each transaction. The company charged significantly higher swipe fees than Visa and MasterCard in 2017, with some outlets reporting nearly twice the fees – one of the clear reasons some retailers do not accept Amex for retail, virtual or contactless payments. Of course, every retailer wants to retain the maximum profit while paying the lowest possible fees to credit card companies. This is especially true for the small retailers selling products and services with a small profit margin.
Swiping an Amex Credit Card – How Much Does it Cost?
Credit card companies make profits through interest and annual fees charged to the customers. But that isn’t the only source of revenue for these companies. The merchant is also charged a small portion of the fee on every transaction made through the credit card. For example, every time a user swipes the Visa or Discover card at the retail POS, a 1.5% to 3.5% of the amount of the transaction goes to the credit card company.
As mentioned earlier, the transaction fees depend on a few factors, but it mostly ranges from 2.5% to 3.5% for those using Amex cards for payments. The good news, however, is that the company has recently announced a reduction in its fee structure by 2.37% internationally, according a report by Financial Times.
So, Why the High Fees?
In the past, American Express lost a large number of merchants (especially small business owners) because of its high fees. They charged a higher fee because their structure is completely different from that of the Visa and Mastercard’s business model. However, today American Express has adjusted their rates to be more in line with other card brands and their fees are now more comparable to their competitors. As a result, Amex acceptance has greatly increased and it is now accepted in over 99% of merchants, however this is a newer development.
Many Amex credit cards are charge cards with a 0% APR, which means customers are not charged any interest on the amount they charge. However, they are supposed to pay their balance every month. Since they company is earning little from the interest, it’s obvious they need to charge merchants more to maintain profits. Other credit card companies generate a major portion of their revenues from the interest income, which is why more and more buyers use Amex credit cards while a smaller number of retailers have accepted it.
Where is American Express not Accepted?
There are a number of places that don’t accept Amex, especially mom-and-pop stores and other independent businesses due to the perception of higher fees, even if this is no longer the case. Now more than ever, Amex cards work at restaurants, cafes, hotels, and other stores of all sizes. In the past it was only companies that could afford to pay a high transaction fee accept American Express for transactions.
Stores selling expensive and luxurious items have usually accepted American Express. In addition, businesses that report a large number of transactions annually are likely to accept Amex cards. The larger the business, the more payment methods it accepts. These stores are may be willing to pay a higher transaction fee if it means more customers. In the past, independent business owners and international brands did not accept American Express. Other large organizations allow Amex payments, however one exception is Costco that accepts Visa only.
Why You Should Use American Express?
Despite the fact that it has a lower acceptance rate, many people prefer to use American Express since it comes packed with many interesting rewards. For starters, you are charged a reasonable interest that is lower than the fees charged by other credit card companies (or no interest in the case of Amex charge cards). Secondly, American Express offers exciting rewards every time you make a purchase. You can redeem these points into free hotel stays, free flight tickets, and free purchases at Amex partner companies.
For most people, the annual fee of American Express is small compared to the volume of transactions they process through Amex cards. As far as the merchant is concerned, it is totally up to them whether or not they want to incorporate American Express into their payment system, but the new pricing structure has made it much more attractive. For some businesses, accepting Amex cards is a must. If you sell expensive items, cater to high end customers, or receive a large volume of transactions annually, you should accept American Express credit and charge cards.
What if the Store Doesn’t Accept Amex Credit Cards?
Even though American Express has taken measures to improve its services and lower its fees, chances are you may run into a store that does not accept Amex payments. So, it is better to ask ahead, especially if you are making a big purchase. Ask the company whether they accept Amex cards to make your shopping easier and hassle-free. This is especially important for customers who have Amex cards only. Whether you are going grocery shopping or buying a cool pair of shoes or accessories, ask about the payment methods the retailer accepts so you can plan your shopping accordingly.
In addition, you should carry a backup card if possible, although that is becoming less necessary with rising american express acceptance rates. Visa and MasterCard are good options since they still have the highest acceptance rates. The best thing you can do is research the retailers that accept American Express before heading out for shopping. You could also try American Express Virtual Credit Card for online purchases and services. The card is accepted by Netflix, Amazon Prime, and other subscription-based services.